FIA FA Step 01 (0223) Step01 Question 1 of 10 Which TWO of the following groups of people are most likely to be interested in the financial statements of a sole trader? Shareholders of the company. The business's bank manager. The tax authorities. Financial analysts. 0 out of 2 The correct answers are: 2 and 3. A sole trader does not have any shareholders. The accounts are unlikely to be of interest to a financial analyst, they are more usually interested in the accounts of public companies. Step01 Question 2 of 10 Which of the following are advantages of trading as a limited liability company? 1. Operating as a limited liability company makes raising finance easier because additional shares can be issued to raise additional cash. 2. Operating as a limited liability company is more risky than operating as a sole trader because the shareholders of a business are liable for all the debts of the business whereas the sole trader is only liable for the debts up to the amount he has invested. 1 only 2 only Both 1 and 2 Neither 1 or 2 2 out of 2 The correct answer is: 1 only. (2) is incorrect – shareholders are only liable for the debts of the business up to the amount they have invested in shares, whereas sole traders are liable for all of the debts of the business. Step01 Question 3 of 10 Which of the following best describes corporate governance? Corporate governance is the system of rules and regulations surrounding financial reporting. Corporate governance is the system by which companies and other entities are directed and controlled. Corporate governance is carried out by the finance department in preparing the financial accounts. Corporate governance is the system by which an entity monitors its impact on the natural environment. 2 out of 2 The correct answer is: Corporate governance is the system by which companies and other entities are directed and controlled. Step01 Question 4 of 10 Which of the following statements is/are true? 1. The directors of a company are ultimately responsible for the preparation of financial statements, even if the majority of the work on them is performed by the finance department. 2. If financial statements are audited, then the responsibility for those financial statements instead falls on the auditors instead of the directors. 3. There are generally no laws surrounding the duties of directors in managing the affairs of a company. TrueFalse The directors of a company are ultimately responsible for the preparation of financial statements, even if the majority of the work on them is performed by the finance department. If financial statements are audited, then the responsibility for those financial statements instead falls on the auditors instead of the directors. There are generally no laws surrounding the duties of directors in managing the affairs of a company. 0 out of 2 The correct answer is: True False The directors of a company are ultimately responsible for the preparation of financial statements, even if the majority of the work on them is performed by the finance department. If financial statements are audited, then the responsibility for those financial statements instead falls on the auditors instead of the directors. There are generally no laws surrounding the duties of directors in managing the affairs of a company. x This statement is correct. x The responsibility of the financial statements rests with the directors, whether or not those financial statements are audited x Some of the duties of directors are statutory duties, laid down in law, including the duty to act within their powers, promote the success of the company and exercise reasonable skill and care. Step01 Question 5 of 10 Who issues International Financial Reporting Standards? The IFRS Advisory Committee The stock exchange The International Accounting Standards Board The government 0 out of 2 The correct answer is: The International Accounting Standards Board (IASB). The role of the IASB is to develop and publish International Financial Reporting Standards. Step01 Question 6 of 10 Which of the following statements is/are true? TrueFalse The IFRS Interpretations Committee is a forum for the IASB to consult with the outside world. The IFRS Foundation produces IFRSs. The IFRS Foundation is overseen by the IASB. One of the objectives of the IFRS Foundation is to bring about convergence of national accounting standards and IFRSs. 0 out of 2 The correct answer is: True False The IFRS Interpretations Committee is a forum for the IASB to consult with the outside world. The IFRS Foundation produces IFRSs. The IFRS Foundation is overseen by the IASB. One of the objectives of the IFRS Foundation is to bring about convergence of national accounting standards and IFRSs. x x This is the definition of the IFRS Advisory Council x The IASB produces IFRSs and is overseen by the IFRS Foundation. This is true. The IFRS Advisory Council is a forum for the IASB to consult with the outside world. The IASB produces IFRSs and is overseen by the IFRS Foundation. Step01 Question 7 of 10 Which of the following correctly defines ‘equity’ according to the IASB's Conceptual Framework for Financial Reporting? Equity is a is a present obligation of the entity to transfer an economic resource as a result of past events. Equity is a present economic resource controlled by the entity as a result of past events. Equity is the residual interest in the assets of the entity after deducting all its liabilities. Equity is the increase in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities. 2 out of 2 The correct answer is: The residual interest in the assets of the entity after deducting all of its liabilities. The other options are definitions of a liability, asset and income according to the Conceptual Framework. Step01 Question 8 of 10 Which accounting concept should be considered if the owner of a business takes goods from inventory for his own personal use? The substance over form concept The accruals concept The going concern concept The business entity concept 0 out of 2 The correct answer is: The business entity concept. This means that the business is considered to be a separate entity from its owner and so the personal transactions of the owner should never be mixed with the business transactions. Step01 Question 9 of 10 According to the IASB's Conceptual Framework for Financial Reporting, which TWO of the following are part of faithful representation? It is neutral It is relevant It is presented fairly It is free from material error 2 out of 2 The correct answers are: 1 and 4. Information has the quality of faithful representation when it is complete, neutral and free from material error. Step01 Question 10 of 10 Which of the following accounting concepts means that similar items should receive a similar accounting treatment? Going concern Accruals Substance over form Consistency 2 out of 2 The correct answer is: Consistency. To maintain consistency, the presentation and classification of items in the financial statements should stay the same from one period to the next, unless a change is required by an IFRS or unless there is a significant change in the nature of operations or a review of the accounts indicates a more appropriate presentation.
