Financial Accounting Theory Study Set 1

Which of the following best describes the process of setting accounting standards?

Which of the following is not an example of a qualitative characteristic guiding the production of financial accounting information?

The free market perspective of accounting regulation suggests that accounting information:

According to some free market theorists,there are private economics-based incentives for the organisation that will ensure that credible information will be provided.Which of the following assumptions is not consistent with this?

Which of the following is a valid criticism of the economics-based rationality argument that asserts that credible information will be supplied in the absence of regulation,by aligning management's self-interest with that of the owners and lenders,thereby reducing the cost of capital?

Which of the following is not a valid criticism that management will enter performance-based contracts that will reward or constrain their behaviour,to maximise the value of the firm?

Which of the following would be required if we accepted the private contracting argument that managers' interests can be aligned with the maximisation of the wealth of the firm,through contracting arrangements that reward or constrain their behaviour?

Which of the following is not assumed by the 'market for managers argument' for reducing or eliminating regulation?

Which of the following assumptions of the market for corporate takeovers can be criticised for being unrealistic in practice?

In the absence of regulation,the 'market for lemons perspective' (Arkerlof,1970)assumes that:

A pro-regulatory perspective would argue that accounting information will be provided.

It is argued by the pro-regulation supporters that accounting information is a free or public good.What is the characteristic of a free or public good?

Which of the following is not an argument for regulation of accounting information by pro-regulation proponents?

Which of the following is not a cause or result of 'information overload' or standards overload?

Proponents of the free market approaches to accounting regulation use Adam Smith (1937)as a basis for support.Which of the following is not associated with Adam Smith's writings on the workings of the free market?

Regulators often cite investor protection as a basis for more stringent regulation and financial reporting requirements enacted after a financial crisis.What is not a reason for this?

Which of the following was not one of the pieces of evidence put forward by Walker (1987)to argue that the ASRB had been captured by the Accounting Profession?

Which of the following is a valid argument against regulatory capture?

Which of the following may be the result of direct or indirect economic and social consequences of a proposed accounting standard?

Which of the following is not true about the economic (private)interest theory of regulation?