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Download Financial Accounting Theory 3rd Edition Deegan Test Bank all chapters
Download Financial Accounting Theory 3rd Edition Deegan Test Bank all chapters
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Deegan_FAT3e_chapter_07
Student: ___________________________________________________________________________
3. To test whether accounting information is useful, researchers such as Ball and Brown tested whether share
prices responded to:
A. Expected earnings announcements
B. Agency theory
5. The principal's expectation of opportunistic behaviour by his or her agent results in lower payments to:
A. The agent
B. The principal
6. According to agency theory, contracts that align the interests of the principal and agent primarily benefit:
A. The agent
B. The principal
B. Necessary, because agents know that principals may not act in their interests
C. Unnecessary, because principals know that agents may not act in their interests
D. Unnecessary, because agents know that principals may not act in their interests
8. The 'political cost hypothesis' of Positive Accounting Theory suggests that:
A. Large firms are more likely to use accounting choices that reduce reported profits
B. Small firms are more likely to use accounting choices that reduce reported profits
C. Neither large nor small firms are more likely to use accounting choices that reduce reported profits
D. Both large and small firms are more likely to use accounting choices that reduce reported profits
9. The 'bonus plan hypothesis' of Positive Accounting Theory suggests managers of firms with bonus plans
tied to reported income are more likely to use accounting methods that:
A. Increase prior period reported income
B. The lower the firm's debt/equity ratio, the more likely managers are to use accounting methods that increase
income
C. The higher the firm's debt/equity ratio, the more likely managers are to use accounting methods that
increase income
11. The "efficiency perspective" of Positive Accounting Theory suggests that firms will:
A. Adopt the accounting methods that require the least resources to implement
B. Adopt the accounting methods that result in the highest reported earnings
C. Adopt the accounting methods that result in the lowest reported earnings
D. Adopt the accounting methods that best reflect the underlying economic performance of the entity
12. In respect of Positive Accounting Theory:
A. The opportunistic perspective is ex-post ,and the efficiency perspective is ex-ante
13. A manager electing to adopt a depreciation method that increases income, but does not reflect the actual
use of the asset, is consistent with:
A. The efficiency perspective of Positive Accounting Theory
C. Both the opportunity and the efficiency perspectives of Positive Accounting Theory
D. Neither the opportunity nor the efficiency perspectives of Positive Accounting Theory
14. Which of the following parties desire the firm to take the most risks?
A. Managers
B. Debtholders
C. Owners
D. All parties desire the firm to take the same level of risk
B. Only owners
17. According to Positive Accounting Theory, using stock prices to determine bonuses
A. Increases the likelihood of management disclosing good news
C. Increases the likelihood of management disclosing both good and bad news
B. Can be explained from an opportunistic perspective, and gives management an incentive to manipulate
accounting information from an efficiency perspective
D. Cannot be explained
B. It is not value-free
22. Which of the following is an example of political costs under the PAT perspective?
A. Wage and salary deductions paid to unions
B. Contributions to political parties
C. Costs associated with increased wage claims
D. The cost of remaining largely unnoticed by government regulatory agencies
23. Which of the following is not an example of a Positive Accounting Theory or research?
A. True income theories
B. Legitimacy Theory
C. Costs associated with increased wage claims
D. The cost of remaining largely unnoticed by government regulatory agencies
24. Which of the following statements is not true about Positive Accounting Theory?
A. It is used to distinguish research aimed at explanation and prediction
B. It is designed to explain and predict which firms will, and which firms will not, use a particular method, and
also prescribes which method a firm should use
C. It focuses on the relationships between the various individuals involved in providing resources to an
organisation, and how accounting is used to assist in the functioning of these relationships
D. One of the key theories that underpins Positive Accounting Theory is Agency theory
25. Which of the following statements is true regarding the origins and development of Positive Accounting
Theory?
A. Positive research in accounting started coming to prominence around the mid-1960s, and appeared to
become the dominant research paradigm within financial accounting in the 1970s and 1980s
B. The introduction of positive research into accounting represented a paradigm shift from normative research
to positive research
C. Currently, almost all papers in Accounting Review and most other leading academic journals are positive
research-based
D. All of the given options are correct
Deegan_FAT3e_chapter_07 Key
Deegan - Chapter 07 #1
difficulty: easy
Deegan - Chapter 07 #2
difficulty: easy
3. To test whether accounting information is useful, researchers such as Ball and Brown tested whether share
prices responded to:
A. Expected earnings announcements
Deegan - Chapter 07 #3
difficulty: easy
4. The key theory that underpins Positive Accounting Theory is:
A. The Efficient Markets Hypothesis
B. Agency theory
Deegan - Chapter 07 #4
difficulty: easy
5. The principal's expectation of opportunistic behaviour by his or her agent results in lower payments to:
A. The agent
B. The principal
Deegan - Chapter 07 #5
difficulty: easy
6. According to agency theory, contracts that align the interests of the principal and agent primarily benefit:
A. The agent
B. The principal
Deegan - Chapter 07 #6
difficulty: easy
7. Agency theory suggests that government regulation is:
A. Necessary, because principals know that agents may not act in their interests
B. Necessary, because agents know that principals may not act in their interests
C. Unnecessary, because principals know that agents may not act in their interests
D. Unnecessary, because agents know that principals may not act in their interests
Deegan - Chapter 07 #7
difficulty: medium
B. Small firms are more likely to use accounting choices that reduce reported profits
C. Neither large nor small firms are more likely to use accounting choices that reduce reported profits
D. Both large and small firms are more likely to use accounting choices that reduce reported profits
Deegan - Chapter 07 #8
difficulty: easy
9. The 'bonus plan hypothesis' of Positive Accounting Theory suggests managers of firms with bonus plans
tied to reported income are more likely to use accounting methods that:
A. Increase prior period reported income
Deegan - Chapter 07 #9
difficulty: easy
10. The 'debt/equity hypothesis' of Positive Accounting Theory predicts that:
A. The higher the firm's debt/equity ratio, the more likely managers are to use accounting methods that lower
income
B. The lower the firm's debt/equity ratio, the more likely managers are to use accounting methods that increase
income
C. The higher the firm's debt/equity ratio, the more likely managers are to use accounting methods that
increase income
11. The "efficiency perspective" of Positive Accounting Theory suggests that firms will:
A. Adopt the accounting methods that require the least resources to implement
B. Adopt the accounting methods that result in the highest reported earnings
C. Adopt the accounting methods that result in the lowest reported earnings
D. Adopt the accounting methods that best reflect the underlying economic performance of the entity
C. Both the opportunity and the efficiency perspectives of Positive Accounting Theory
D. Neither the opportunity nor the efficiency perspectives of Positive Accounting Theory
14. Which of the following parties desire the firm to take the most risks?
A. Managers
B. Debtholders
C. Owners
D. All parties desire the firm to take the same level of risk
B. Only owners
17. According to Positive Accounting Theory, using stock prices to determine bonuses
A. Increases the likelihood of management disclosing good news
C. Increases the likelihood of management disclosing both good and bad news
B. Can be explained from an opportunistic perspective, and gives management an incentive to manipulate
accounting information from an efficiency perspective
D. Cannot be explained
B. It is not value-free
Deegan - Chapter 07
difficulty: easy
22. Which of the following is an example of political costs under the PAT perspective?
A. Wage and salary deductions paid to unions
B. Contributions to political parties
C. Costs associated with increased wage claims
D. The cost of remaining largely unnoticed by government regulatory agencies
Deegan - Chapter 07
difficulty: medium
23. Which of the following is not an example of a Positive Accounting Theory or research?
A. True income theories
B. Legitimacy Theory
C. Costs associated with increased wage claims
D. The cost of remaining largely unnoticed by government regulatory agencies
difficulty: medium
24. Which of the following statements is not true about Positive Accounting Theory?
A. It is used to distinguish research aimed at explanation and prediction
B. It is designed to explain and predict which firms will, and which firms will not, use a particular method, and
also prescribes which method a firm should use
C. It focuses on the relationships between the various individuals involved in providing resources to an
organisation, and how accounting is used to assist in the functioning of these relationships
D. One of the key theories that underpins Positive Accounting Theory is Agency theory
Deegan - Chapter 07
difficulty: hard
25. Which of the following statements is true regarding the origins and development of Positive Accounting
Theory?
A. Positive research in accounting started coming to prominence around the mid-1960s, and appeared to
become the dominant research paradigm within financial accounting in the 1970s and 1980s
B. The introduction of positive research into accounting represented a paradigm shift from normative research
to positive research
C. Currently, almost all papers in Accounting Review and most other leading academic journals are positive
research-based
D. All of the given options are correct
Deegan - Chapter 07
difficulty: easy
Deegan_FAT3e_chapter_07 Summary
Category # of Questions
Deegan - Chapter 07 24
difficulty: easy 17
difficulty: hard 3
difficulty: medium 5
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