Exercises for Chapter 6
一、Multiple Choice Questions
1.
According to the International Finance Corporation, which of the following
European countries had emerging capital markets in 2001?
a. France
b. Luxembourg
c. Spain
d. Russia
e. Italy
2.
According to the International Finance Corporation, which of the following Asian
countries had emerging capital markets in 2001?
a. Japan
b. Thailand
c. Singapore
d. Hong Kong
e. None of the above.
3.
According to the International Finance Corporation, which of the following Latin
American countries had emerging capital markets in 2001?
a. Argentina
b. Brazil
c. Chile
d. Mexico
e. All of the above.
4.
Which of the following are likely benefits to developing countries of having
emerging capital markets (ECMs)?
a. ECMs expand the investment options available in the country thereby
attracting foreign investors.
b. ECMs allow capital to be raised in a more cost-effective manner.
c. ECMs positively influence the economic culture in developing countries by
encouraging domestic companies to become more responsive and
accountable to a greater number of stakeholders in society.
d. ECMs help in improving allocative efficiency by channeling funds to the
most efficient and productive users of capital.
e. All of the above.
5.
According to the International Finance Corporation study cited in the book,
which of the following developing countries had good domestic accounting
standards:
a. Argentina
b. Greece
c. Taiwan
d. Philippines
e. None of the above.
6.
According to the International Finance Corporation study cited in the book,
which of the following developing countries had adequate domestic accounting
standards:
a. Jordan
b. Nigeria
c. Pakistan
d. Zimbabwe
e. All of the above.
7.
The qualitative criteria for evaluating financial reporting in emerging capital
markets include:
a. reliability
b. comparability
c. information availability
d. All of the above.
e. Only (a) and (b).
8.
In many ECMs the public dissemination of financial information is limited by
several factors. These include:
a. the absence of an effective securities exchange agency.
b. the absence of effective competition among brokers.
c. weakness in the research capability of financial institutions.
d. a weak financial press.
e. All of the above.
9.
Substantial differences have been observed in the level of assurance provided by
an independent audit in various national settings. These differences are traceable
to a variety of factors including:
a. the training and qualifications of local auditors.
b. differences in audit standards and requirements.
c. differences in the nature of audits conducted.
d. the availability of sufficient numbers of trained auditors.
e. All of the above.
10. According to the statistics presented in the book, which emerging market had the
highest number of auditors relative to its population?
a. South Africa
b. South Korea
c. Sri Lanka
d. Brazil
e. Chile
11. According to the statistics presented in the book, which emerging market had the
lowest number of auditors relative to its population?
a. India
b. Brazil
c. South Africa
d. Argentina
e. Zimbabwe
12. According to the statistics presented in the book, which developed market had the
highest number of auditors relative to its population?
a. USA
b. New Zealand
c. Australia
d. Japan
e. Italy
13. According to the statistics presented in the book, which developed market had the
lowest number of auditors relative to its population?
a. Spain
b. Ireland
c. Finland
d. Japan
e. Both c and d.
14. Important policy issues facing regulators in emerging capital markets in regard to
improving their financial reporting capability include:
a. the choice between mandated and voluntary approaches to regulation.
b. whether, and to what extent, accounting harmonization should be pursued.
c. whether to allow foreign auditors to practice in the regulator's jurisdiction.
d. All of the above.
e. Only (a) and (b).
15. According to the survey cited in the book, which emerging markets were rated
above average in the comprehensiveness of their audit reports?
a. Philippines
b. India
c. Taiwan
d. Turkey
e. Portugal
16. According to the survey cited in the book, which emerging markets were rated
below average in the comprehensiveness of their audit reports?
a. Mexico
b. Pakistan
c. Colombia
d. India
e. Nigeria
17. According to the survey cited in the book, which developed markets were rated
above average in the comprehensiveness of their audit reports?
a. Austria
b. Belgium
c. Denmark
d. Germany
e. None of the above.
18. According to the survey cited in the book, which developed markets were rated
below average in the comprehensiveness of their audit reports?
a. Italy
b. Ireland
c. Spain
d. Switzerland
e. None of the above.
19. According to research evidence cited in the book, which of the following
emerging markets allow the revaluation of fixed assets:
a. Argentina
b. India
c.
Malaysia
d. South Africa
e. All of the above.
20. According to research evidence cited in the book, in which of the following
emerging markets is historical cost not used as an overall valuation method for
financial reporting?
a. India
b. Korea
c. Malaysia
d. Mexico
e. Nigeria
二、True/False Questions
1.
Informational problems stemming from the difficulty of obtaining adequate and
reliable information contribute to the risks of investing in emerging capital
markets.
2.
Relevant, reliable, and timely financial reporting is a crucial element of the
information necessary for sustaining investor confidence in emerging capital
markets.
3.
The capital markets classified as emerging are all smaller in size than the capital
markets in Western Europe and North America.
4.
In no instance does the market capitalization of shares traded on the stock
exchanges of emerging capital markets exceed those of stock exchanges in
developed countries.
5.
Emerging capital markets in Brazil, China, India, and Mexico rank among the
twenty largest capital markets globally.
6.
Multinational lending institutions such as the World Bank generally agree that a
wellfunctioning stock market provides the impetus necessary for the economic
growth of developing countries.
7.
Active stock markets in ECMs serve as a barometer for a country's economic
health by signaling expectations regarding macroeconomic variables such as
economic growth and inflation.
8.
The World Bank regards the presence of an effective accounting and auditing
profession as essential to building well-functioning capital markets.
9.
Financial reporting is peripheral to establishing an active market for corporate
securities.
10. Capital market research studies conducted in different countries do not provide
convincing evidence of the importance of accounting reports for stock market
investors.
11. In the financial reporting context, availability means that financial and other
information on publicly listed companies is adequate, timely, and conveniently
accessible.
12. A recent article from the Wall Street Journal concluded that U.S. companies are
overvalued relative to Asian companies because the U.S. companies’ more
aggressive accounting practices make their quality of earnings more vulnerable.
13. Weakness in the research capability of local brokers and financial institutions
limits the public dissemination of information in many emerging capital markets.
14. In the financial reporting context, reliability means that financial reports need to
be prepared on the basis of sound accounting principles and there is a mechanism
to ensure compliance with these principles.
15. Some emerging capital markets have attempted to emulate financial reporting
requirements in more developed capital markets by adopting the OECD's
accounting standards.
16. In both developed and developing countries, the most rigorous financial reporting
requirements mean little if enforcement is inadequate.
17. The United Nations and the World Bank were critical of the major international
accounting firms for using less stringent auditing standards in developing
countries than those used in developed countries.
18. A major difficulty in a number of emerging capital markets is the shortage of
qualified auditors capable of attesting to the reliability of financial statements.
19. A recent survey showed that Japan has the lowest proportion of auditors to total
population among the important global financial centers.
20. Government policy towards financial reporting is not an important factor in
improving the quality of financial reporting in emerging capital markets.
21. Emerging capital markets generally share similar financial reporting legislation
and practices with the countries by which they were formerly colonized.
22. Proponents of a free market approach suggest that disclosure adequacy is best
advanced by allowing companies to choose the appropriate level of disclosure
according to their particular circumstances.
23. The most distinctive feature of Mexican accounting is its continued use of
inflation accounting long after it was discontinued by countries such as the
United Kingdom and the United States.
24. A distinct feature of the Chinese capital market is that Chinese companies issue
several classes of shares which results in Chinese companies using different
GAAPs to prepare financial statements.
25. The principal risk of pursuing accounting harmonization in emerging capital
markets is that accounting standards adopted are inappropriate for the economic
conditions prevailing in the specific country.