NAME : RHEEIMA A/P HARI KRISHNAN

MATRICS NUMBER : A182088

Chapter 3 – Overview of accounting analysis

Question 3.1 The statement of financial position summarises:

A. The resources and obligations of a firm at a point in time.

B. The revenue and expenses of a firm at a point in time.
C. The equity and revenue of a firm at a point in time.
D. The resources and obligations of a firm over the financial period.

Question 3.2 Which of the following are not elements of the statement of financial position?

A. Assets and equity.

B. Revenue and expenses.
C. Liabilities.
D. None of these choices.

Question 3.3 Financial statements group financial transactions and events into economic
characteristics called:

A. Revenue.
B. Comprehensive income.
C. Elements.
D. Activities.

Question 3.4 In which financial statement would you see income and expenses?

A. Balance sheet.
B. Statement of comprehensive income.
C. Statement of financial position.
D. All of these choices.

Question 3.5 Which of the following would you expect to see in the notes which accompany
the financial statements?
NAME : RHEEIMA A/P HARI KRISHNAN
MATRICS NUMBER : A182088

A. Accounting policies.
B. Other comprehensive income.
C. Segment information.
D. Both accounting policies and segment information.
E. Both segment information and other comprehensive income.

Question 3.6 Management commentary refers to:

A. The opinion of managers on whether the financial statements are presented in

accordance with generally accepted accounting standards.
B. Managers distinguishing between clean surplus and dirty surplus.
C. Managers discussing the performance of the firm.
D. None of these choices.

Question 3.7 Calculating profit for the year includes which of the following elements?

A. Other comprehensive income.

B. Revenue.
C. Expenses.
D. Both revenue and expenses.
E. All of these choices.

Question 3.8 Transactions reflected in the financial statements include:

A. Transactions that occur within the firm.

B. Transactions that occur between the firm and external parties.
C. Transactions that occur both within the firm and between the firm and external
parties.
D. Every transaction that has occurred regardless of its origin.

Question 3.9 Consider the following information ‘a company losing two ships during a
storm’. This is an example of an:

A. Underlying condition.
B. Event.
NAME : RHEEIMA A/P HARI KRISHNAN
MATRICS NUMBER : A182088

C. Internal transaction.
D. External transaction.

Question 3.10 The financial statements should reflect which of the following?

A. Conditions.
B. Events.
C. Transactions.
D. All of these choices.

Question 3.11 The IASB has created accounting standards that are:

A. Comparability-based.
B. Rules-based.
C. Transactions-based.
D. Principles-based.

Question 3.12 An effective audit must be conducted by:

A. The governance committee.

B. The audit committee.
C. An independent expert.
D. Both the governance and audit committees.

Question 3.13 Which of the following is responsible for enforcing IFRS?

A. The IASB.
B. The accounting profession.
C. The country’s standard setter.
D. All of these choices.

Question 3.14 Corporate governance is a matter for:

NAME : RHEEIMA A/P HARI KRISHNAN
MATRICS NUMBER : A182088

A. The board of directors.

B. The IASB when creating principles-based standards.
C. The Australian Accounting Standards Board.
D. All of these choices.

Question 3.15 The audit committee oversees:

A. The report on whether the firm has presented their financial statements in a fair
manner.
B. The process of financial reporting.
C. Communication with external auditors.
D. Both the process of financial reporting and communication with external auditors.

Question 3.16 Which of the following would be an objective of an accounting analysis?

A. Give an opinion on whether the financial statements are fairly presented.

B. Undo accounting distortions.
C. Reverse any internal transactions undertaken by the firm.
D. All of these choices.

Question 3.17 What is the first thing an analyst should consider when conducting an
accounting analysis?

A. What information can be used.

B. The end goal or purpose of the analysis.
C. If the firm had an auditor change.
D. None of these choices.

Question 3.18 Who has the primary responsibility for the financial statements?

A. The external auditor.

B. The board of directors.
C. The audit committee.
D. Both the external auditor and the board of directors.
NAME : RHEEIMA A/P HARI KRISHNAN
MATRICS NUMBER : A182088

Question 3.19 Accruals link which of the following?

A. Transactions and cash flows.

B. Cash balances and cash flows.
C. Income and cash flows.
D. Unusual transactions and cash flows.

Question 3.20 Which of the following would indicate that financial reporting has become
more aggressive?

A. Negative disclosures and an increase in everyday transactions.

B. Conflicts between the external auditors and the audit committee.
C. An increase in reported income relative to tax income.
D. An increase in tax income relative to reported income.

Question 3.21 A related party transaction could involve:

A. A transaction between the firm and one of its managers such as the CEO.
B. A transaction between the firm and a major shareholder.
C. A transaction between the firm and one of its directors.
D. All of these choices.

Question 3.22 Which of the following would be an unusual transaction or event?

A. A one-off transaction that significantly increases non-operating profit.

B. Three out of the five directors on the board have resigned.
C. A change in auditor.
D. All of these choices.

Question 3.23 A new CEO significantly writes down the value of assets which drastically
reduces profits and then blames this on the previous CEO. This is an example of:
NAME : RHEEIMA A/P HARI KRISHNAN
MATRICS NUMBER : A182088

A. Related party transaction.

B. Opinion shopping.
C. Off-balance sheet structuring.
D. Taking an accounting bath.

Question 3.24 When conducting an accounting analysis the ownership of the firm is:

A. Only important if the firm is listed on the ASX.

B. Is irrelevant when there has been no change to the board of directors.
C. Only important if there has been a recent change to the board of directors.
D. Always important.

Question 3.25 After determining the objective and gathering information, what is the next
step in an accounting analysis?

A. Assessing accounting policies.

B. Assessing accrual quality.
C. Examining the audit report.
D. Looking for unusual transactions and events.