MCQs REGULATORY FRAMEWORK 1-1 Which body has sole responsibility and authority to issue an International Financial Reporting Standard? A B C D the International Financial Reporting Standards Foundation the International Financial Reporting Standards Interpretations Committee the International Accounting Standards Board the IFRS Advisory Council 1-2 Which body provides guidance on financial reporting issues that are no specifically address in IFRS? A B C D 1-3 the International Financial Reporting Standards Foundation the International Financial Reporting Standards Interpretations Committee the International Accounting Standards Board the IFRS Advisory Council What is the objective of the International Accounting Standards Board? A To harmonise International Financial Reporting Standards with national accounting standards B To create accounting standards which meet the needs of emerging economies C To develop, in the public interest, a single set of high quality, understandable global accounting standards D 1-4 To provide a forum for participation by other interested parties that require transparent and comparable information Which one of the following is the responsibility of an audit committee? A B C D 1-5 To monitor the integrity of the financial statements To present a balanced and understandable assessment of the company’s position To maintain a sound system of internal control (including risk management) To ensure that adequate accounting records are kept for the preparation of financial statements The board of directors is collectively responsible for ensuring that: (1) (2) (3) financial statements are prepared in accordance with local GAAP; adequate accounting records are kept; financial statements are filed according to law. Which of these responsibilities can be delegated to the finance director? A B C D 1 and 2 only 1 and 3 only 2 and 3 only 1, 2 and 3 Question 1-6 FINANCIAL STATEMENTS (a) Briefly describe the scope and application of the International Accounting Standard Board’s “Framework”. (b) Identify FOUR users of financial statements and their information needs. (c) State the objective of financial statements. Question 1-7 ACCOUNTING CONCEPTS Define the following accounting concepts and give for each one an example of its application: (a) (b) (c) (d) (e) Accruals; Substance over form; Consistency (see note below); Duality; Prudence. Note: Your answer to (c) should include a brief explanation of the circumstances in which the consistency concept should not be applied. MCQs CONCEPTUAL FRAMEWORK 1-8 What is the principal purpose of the IASB’s “Conceptual Framework for Financial Reporting”? A B C D 1-9 Which of the following statements concerning the IASB’s “Framework” is correct? A B C D 1-10 To assist users in interpreting information contained in financial statements To assist preparers of financial statements in applying standards To assist national standard setting bodies in developing national standards To assist the Board of the IASB in developing and reviewing standards It is an International Accounting Standard It does not define elements of financial statements It specifies criteria for recognising items in financial statements It specifies standards for measurement and disclosure of items in financial statements What is the underlying assumption for the preparation of general purpose financial statements? A B C D Accrual accounting Going concern Materiality Prudence 1-11 Which of the following are the fundamental qualitative characteristics that make information provided in financial statements useful to users? A B C D 1-12 Comparability and Faithful representation Faithful representation and Relevance Relevance and Understandability Understandability and Comparability Some qualities of useful information in financial statements are: (1) (2) (3) (4) Accuracy Completeness Materiality Neutrality Which of these qualities contribute to the attribute of faithful representation? A B C D 1, 2 and 3 only 1, 2 and 4 only 1, 3 and 4 only 2, 3 and 4 only 1-13 Which one of the following statements concerning the recognition of an item in financial statements is correct? A B C D An item must be recognised if it meets the definition of an element An item can be recognised even if can only be depicted in words Disclosure in the notes may be used as an alternative to recognition An item can only be recognised if its value can be measured reliably 1-14 OVERALL CONSIDERATIONS IAS 1 Presentation of Financial Statements sets out overall considerations for the presentation of financial statements. Required: Explain what you understand by the following terms: (a) (b) (c) (d) (e) Fair presentation; Accounting policies; Going concern; Accruals accounting; Materiality. 1-15 CURRENT ASSETS AND LIABILITIES (a) Explain why inventories are classified as current assets. (b) List six items which would be classified as current liabilities. (c) State the circumstances in which current assets and liabilities should be offset.