FSA 1 SASB EXAM QUESTIONS WITH
CORRECT ANSWERS
US Supreme Court Justice Louis Brandeis - Answer- said that public exposure and
transparency are key to monitoring companies and investors that collectively shape
capital markets
The US SEC demonstrates two equally important purposes for the US SEC's existence
- Answer- 1. to protect investors
2. to influence corporate behavior
the 1930s regulatory reforms catalyzed - Answer- seminal values of transparency,
corporate governance, and informed decision-making at the service of market efficiency
and price discovery
2 functions of the "concept of materiality" - Answer- 1. provides a framework through
which companies can differentiate information that should be disclosed from that which
is not necessary to disclose
2. helps regulators determine whether enforcement action is appropriate for false,
misleading, or incomplete disclosures and helps courts make final decisions in cases of
disclosure based litigation
US Supreme court definition of materiality - Answer- information is material if its
exclusion would have altered the "total mix" of information considered by a reasonable
investor. information if it is significantly likely to be considered by a reasonable investor
in investment decisions.
materiality can also be assessed by the probability that an event may take place and the
magnitude of impact of the event on the company
probability and magnitude test - Answer- the determination of materiality should also
consider the probability that an event will occur and the magnitude of the occurrence of
the event
Generally Accepted Accounting Principles (GAAP) - Answer- a set of accounting
standards that is used in the preparation of financial statements aimed at improving the
consistency and comparability of financial reporting procedures. created by the
American Institute of Accountants' Committee on Accounting Procedure (CAP)
historical cost accounting - Answer- accounting in 1930s which measures an assets
value as the actual cost paid for the asset at the time of purchase
Accounting Principles Board (APB) - Answer- established in 1959 to replace the CAP.
resolved tensions, reduced variation in accounting practices, and established one
standardized practice
, A Statement of Basic Accounting theory's definition of accounting - Answer- the
process of identifying, measuring, and communicating economic information to permit
informed judgements and decisions by users of the information. shifted the view of
accounting to provide forward looking information rather than just historical accuracy
International Accounting standards committee (IASC) - Answer- est. 1973 to develop
international accounting standards
International Accounting Standards Board (IASB) - Answer- previously the IASC,
established in 2001 - an independent standard setting organization with robust
governance and due process. Oversees the development of the International Financial
Reporting standards (IFRS)
Sustainability Accounting Standards Board (SASB) - Answer- founded in 2011, industry
specific standards that help companies disclose financially material, decision-useful,
and cost-effective sustainability information to investors. The standards facilitate the
collection, management, and reporting of sustainability information that is relevant,
reliable, and comparable
sustainable development (Brundtland Report 1987) - Answer- within the natural limits of
earth and the economic limits of society. "Meets the need of the present without
compromising the ability of future generations to meet their own needs"
3 ways investors use sustainability information - Answer- 1. improve their ability to
achieve above market returns
2. reduce risk and volatility, and protect against diminished returns
3. improve environmental and social investment outcomes, with financial returns as an
equivalent or a secondary consideration
ESG impact on price volatility - Answer- companies with higher sustainability or ESG
ratings have lower price and earnings per share (EPS) volatility than those with low
sustainability performance
ESG performance can influence a company's - Answer- cost of capital, risk exposure,
financial performance, competitive advantage, costs (reduction), strategic decisions,
and long-term success
European Commission's Action Plan for Financial Sustainable Growth - Answer- multi-
faceted policy directive that sets forth a comprehensive strategy and action plan to
"further connect finance with sustainability". 10 key initiatives in 3 core categories:
1. reorienting capital flows towards a more sustainable economy
2. mainstreaming sustainability to risk management
3. fostering transparency and long-termism
CORRECT ANSWERS
US Supreme Court Justice Louis Brandeis - Answer- said that public exposure and
transparency are key to monitoring companies and investors that collectively shape
capital markets
The US SEC demonstrates two equally important purposes for the US SEC's existence
- Answer- 1. to protect investors
2. to influence corporate behavior
the 1930s regulatory reforms catalyzed - Answer- seminal values of transparency,
corporate governance, and informed decision-making at the service of market efficiency
and price discovery
2 functions of the "concept of materiality" - Answer- 1. provides a framework through
which companies can differentiate information that should be disclosed from that which
is not necessary to disclose
2. helps regulators determine whether enforcement action is appropriate for false,
misleading, or incomplete disclosures and helps courts make final decisions in cases of
disclosure based litigation
US Supreme court definition of materiality - Answer- information is material if its
exclusion would have altered the "total mix" of information considered by a reasonable
investor. information if it is significantly likely to be considered by a reasonable investor
in investment decisions.
materiality can also be assessed by the probability that an event may take place and the
magnitude of impact of the event on the company
probability and magnitude test - Answer- the determination of materiality should also
consider the probability that an event will occur and the magnitude of the occurrence of
the event
Generally Accepted Accounting Principles (GAAP) - Answer- a set of accounting
standards that is used in the preparation of financial statements aimed at improving the
consistency and comparability of financial reporting procedures. created by the
American Institute of Accountants' Committee on Accounting Procedure (CAP)
historical cost accounting - Answer- accounting in 1930s which measures an assets
value as the actual cost paid for the asset at the time of purchase
Accounting Principles Board (APB) - Answer- established in 1959 to replace the CAP.
resolved tensions, reduced variation in accounting practices, and established one
standardized practice
, A Statement of Basic Accounting theory's definition of accounting - Answer- the
process of identifying, measuring, and communicating economic information to permit
informed judgements and decisions by users of the information. shifted the view of
accounting to provide forward looking information rather than just historical accuracy
International Accounting standards committee (IASC) - Answer- est. 1973 to develop
international accounting standards
International Accounting Standards Board (IASB) - Answer- previously the IASC,
established in 2001 - an independent standard setting organization with robust
governance and due process. Oversees the development of the International Financial
Reporting standards (IFRS)
Sustainability Accounting Standards Board (SASB) - Answer- founded in 2011, industry
specific standards that help companies disclose financially material, decision-useful,
and cost-effective sustainability information to investors. The standards facilitate the
collection, management, and reporting of sustainability information that is relevant,
reliable, and comparable
sustainable development (Brundtland Report 1987) - Answer- within the natural limits of
earth and the economic limits of society. "Meets the need of the present without
compromising the ability of future generations to meet their own needs"
3 ways investors use sustainability information - Answer- 1. improve their ability to
achieve above market returns
2. reduce risk and volatility, and protect against diminished returns
3. improve environmental and social investment outcomes, with financial returns as an
equivalent or a secondary consideration
ESG impact on price volatility - Answer- companies with higher sustainability or ESG
ratings have lower price and earnings per share (EPS) volatility than those with low
sustainability performance
ESG performance can influence a company's - Answer- cost of capital, risk exposure,
financial performance, competitive advantage, costs (reduction), strategic decisions,
and long-term success
European Commission's Action Plan for Financial Sustainable Growth - Answer- multi-
faceted policy directive that sets forth a comprehensive strategy and action plan to
"further connect finance with sustainability". 10 key initiatives in 3 core categories:
1. reorienting capital flows towards a more sustainable economy
2. mainstreaming sustainability to risk management
3. fostering transparency and long-termism
