CONTEMPORARY ISSUES FOR ACCOUNTING M

EXAM – STUDY PERIOD 2 2020

Exam information
 The exam is to be completed under closed book conditions. The only materials
you are permitted to access are the exam paper. As the exam is unsupervised
this will rely on all students acting with honesty and integrity and not accessing
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breach this trust and use the exceptional circumstances to gain an unfair
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students with access plans, and reading time). This additional time takes account
of the exceptional circumstances and should help support students to download
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PLEASE COMPLETE THE STUDENT DECLARATION ON THE NEXT PAGE

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Student Declarations
I declare that I have completed this examination in compliance with closed book conditions as
outlined on the course learnonline site via the News Forum postings.
I declare that the work contained in this examination is my own and I have received no
assistance in completing this exam.
I declare that I have not accessed any materials (electronic or print) other than this exam
paper during the scheduled exam time.
I declare that I have not used translation tools.

I declare that during the scheduled exam time I have not provided any assistance to any other
student.
I declare that during the scheduled exam time I had no contact (either in person or by any
other means – e.g. electronically, text) with any other person in relation to this exam.
I declare that during the scheduled exam time I have not accessed any online sites, except to
download and upload this exam paper
I understand that this work will be checked using text comparison software (i.e. Turnitin).

I understand that I cannot distribute this exam paper (or any copy or part of it) in any form to
any persons as this is copyright of the University of South Australia.
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Section A: Twenty multiple-choice questions. Answer all questions.
Section B: Reflective Writing (compulsory)
Section C: Four discussion questions are provided. You must answer three questions.

SECTION A (20 marks)

Instruction: Type your answers to SECTION A at the top of your word document placing
the question number against your answer.

Question 1

Accounting theories that are developed on past observations are described as being:

a. Historically based
b. Research based
c. Empirically based
d. Reason based

Question 2

When determining which accounting method should be used for a particular event,
Positive Accounting Theorists question whether the majority of accountants will be:

a. Subjective
b. Understood
c. Objective
d. Biased

Question 3

Under the political cost hypothesis of Positive Accounting Theory, a politically sensitive
firm is likely to adopt accounting methods that:

a. Increase net assets

b. Decrease net assets
c. Increase profits
d. Decrease profits

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Question 4

The 'debt hypothesis' proposes that organisations close to breaching accounting-based

debt covenants will select accounting methods that lead to:

a. An increase in losses and assets

b. A decrease in losses and assets
c. A decrease in profits and assets
d. An increase in profits and assets

Question 5

When historical cost accounting is used profits will effectively be:

a. Understated in times of rising prices

b. The same in times of rising prices
c. Overstated in times of rising prices
d. Over or understated in times of rising prices

Question 6

In capital markets research what is the name for an event or occurrence which
influences the expected relationship between the dependent variable (often the share
price) and the independent variable (for example, a particular earnings announcement)?

a. Conflicting event
b. Confounding event
c. Complicating event
d. Distorting event

Question 7

It is often argued that markets do not operate efficiently in the presence of what?

a. Goods in high demand

b. Regulated goods
c. Free goods
d. Marketed goods

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Question 8

Which of the following regulators has effectively taken over the accounting standard-
setting process of many countries?

a. FASB
b. AASB
c. IFRS
d. IASB

Question 9

The economic interest group theory of regulation is also known as:

a. Public interest theory of regulation

b. Free market theory of regulation
c. Economic market theory of regulation
d. Private interest theory of regulation

Question 10

Which of the following is not a disadvantage of a conceptual framework?

a. Conceptual frameworks help resolve disagreement

b. Conceptual frameworks focus on economic performance alone
c. Development of conceptual frameworks can be subject to political interference
d. Development of conceptual frameworks is costly

Question 11

A social audit can help organisations:

a. Assess the needs and expectations of stakeholders

b. With the preparation of their sustainability or CSR report
c. Ensure social sustainability targets are met
d. All of the above

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Question 12

In institutional theory what is the term used to describe the situation where formal
organisational structures or practices put in place to appear legitimate do not match the
organisation’s actual practice?

a. Disconnecting
b. Decoupling
c. Detaching
d. Disengaging

Question 13

Which statement describes the relationship between Institutional Theory (IT), Legitimacy
Theory (LT) and Stakeholder Theory (ST)?

a. IT is a normative theory while LT and ST are positive theories.

b. IT is a more detailed version of LT, and is broadly consistent with ST.
c. The mechanisms IT suggests firms will use to align the perceptions of their
performance with society's values could include the mechanisms suggested by LT
and ST.
d. The mechanisms IT suggests firms will use to align the perceptions of their
performance with society's are different from the mechanisms suggested by LT
and ST.

Question 14

The limitations of traditional financial accounting when dealing with social and
environmental performance include:

a. Issues with materiality

b. The need to discount non-current liabilities to present value
c. The nature of the ‘entity’ assumption
d. All of the above

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Question 15

A social contract is:

a. A legal contract
b. An organisational document
c. A formal agreement
d. A theoretical construct

Question 16

When an organisation changes its institutional processes as a result of actions

undertaken by leaders in the industry this is an example of:

a. Mimetic isomorphism
b. Normative isomorphism
c. Coercive isomorphism
d. Positive isomorphism

Question 17

What is the objective of general purpose financial reporting based on according to the
current IASB Conceptual Framework:

a. Decision usefulness
b. Stewardship
c. Stakeholder engagement
d. Sustainability

Question 18

Which of the following phenomena has been suggested as one of the most puzzling
anomalies in accounting research and calls into question the efficient markets
hypothesis?

a. Income smoothing
b. Post-earnings announcement drift
c. Signalling theory
d. Big bath write-offs

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Question 19

Which of the following is NOT a conclusion of capital markets research?

a. Accounting earnings are poor measures of relevant events that are incorporated
into share price.
b. Investors react more quickly to bad news than to good.
c. Accounting information is not used by investors.
d. Forecasts of future performance are core to valuation.

Question 20

Since 2006 most European countries have adopted what type of corporate governance
approach?

a. Non-negotiable
b. Comply or else
c. Comply or explain
d. Recommended
END OF SECTION A

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SECTION B (20 marks)

Reflective writing

Please present a summary of approximately 500 words addressing the following points:

 Description: Reflect on your experience with ACCT 5015 and what have you
learnt during this course.
 Analysis: Reflect on the ways in which your study in the course ACCT 5015
connects with your previous learning, study and work experience.
 Evaluation: Reflect on the ways in which you think the course ACCT 5015 and the
information taught within ACCT 5015 is important to you in terms of your
academic endeavours and future career? (hint: where possible provide specific
examples of topics or areas and why you feel they will be relevant)

END OF SECTION B

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SECTION C

There are FOUR sets of questions in this section. YOU MUST ANSWER THREE OF THESE
FOUR SETS OF QUESTIONS. Each set is worth 20 marks. In total you will answer 3 sets of
questions x 20 marks = 60 marks

QUESTION 1 – Answer all of the following

1. Explain the political cost hypothesis of Positive Accounting Theory (hint: you will
need to define what a political cost is) (5 marks)
2. Some people argue earnings management is always unethical. Using examples
explain whether you agree or disagree with this statement (hint: be sure to
explain what earnings management is in your answer) (5 marks)
3. Organisational legitimacy is often described as perceptual. What does this mean
in relation to an organisation’s actions? (hint: You will need to define what is
meant by legitimacy in your answer) (5 marks)
4. Under current purchasing power accounting (CPPA), explain why holding
monetary assets will lead to a purchasing power loss, but holding non-monetary
assets not lead to a purchasing power loss. Include a basic example in your
answer. (5 marks)

QUESTION 2 – Answer all of the following

1. How would institutional theory explain an organisation’s decision to voluntarily

disclose social and environmental information (hint: be sure to mention the
different forms of isomorphism)? (5 marks)
2. Describe some of the strategies a business organisation might use to improve a
weak ethical culture? (5 marks)
3. If you were undertaking capital markets research in relation to a particular
company and the release of some previously private information was not
associated with a change to the organisation’s share price, how might you explain
this lack of impact? (5 marks)
4. Some have argued for a free market approach in relation to the provision of
accounting information. Explain what this means. Discuss the key arguments in
favour of this approach. (5 marks)

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QUESTION 3 – Answer all of the following

1. It is often difficult choosing a theory to apply when conducting academic

research. If you were undertaking an academic research project, how would you
determine whether a particular theory is suitable to use? Explain your answer
using at least five examples. (5 marks)
2. Different approaches to measurement incorporate different approaches to
capital maintenance. Explain the difference between the financial capital
maintenance approach and the physical capital maintenance approach. (5 marks)
3. Explain the difference between the efficiency and opportunistic perspectives of
Positive Accounting Theory. How do these perspectives relate to agency theory?
(5 marks)
4. Explain the basis of the ‘market for corporate takeovers’ argument in relation to
the provision of accounting information (5 marks)

QUESTION 4 – Answer all of the following

1. Theory can be developed by either induction or deduction. Explain these two

approaches providing an example of theory developed under each approach. (5
marks)
2. How does national culture impact the implementation of corporate governance?
Provide two examples of how corporate governance standards differ across two
different countries. (5 marks)
3. Do you think having a conceptual framework is important to the development of
accounting? Explain your answer. (5 marks)
4. How would the managerial branch of stakeholder theory explain a company’s
decision to voluntarily disclosure social and environmental information? Explain
how a company could go about identifying and prioritising stakeholder interests.
(5 marks)

END OF EXAMINATION

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