ca_exm_at1_2009-09

ca_exm_at1_2009-09 - CGA-CANADA ACCOUNTING THEORY &...

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EAT1S09 ©CGA-Canada, 2009 Page 1 of 7 CGA-CANADA ACCOUNTING THEORY & CONTEMPORARY ISSUES [AT1] EXAMINATION September 2009 Marks Time: 3 Hours Note: All references to the Handbook refer to the CICA Handbook . 24 Question 1 Select the best answer for each of the following unrelated items. Answer each of these items in your examination booklet by giving the number of your choice. For example, if the best answer for item (a) is (1), write (a)(1) in your examination booklet. If more than one answer is given for an item, that item will not be marked. Incorrect answers will be marked as zero. Marks will not be awarded for explanations. Note: 2 marks each a. Accountants and auditors are often caught between the conflicting interests of investors and managers. Which of the following actions is in the best long-run interests of the accounting and auditing profession? 1) Accountants and auditors should design and implement new accounting standards to better protect the investing public. 2) Accountants and auditors must act with integrity. 3) Accountants and auditors should eliminate earnings management, thereby increasing public trust. 4) Accountants and auditors should work to impose their own values on managers. b. Which of the following statements is the fundamental underlying argument for the disclosure principle? 1) If investors know the firm has the information but the firm does not disclose it, they will fear the worst. 2) Firms will not release information unless the benefits of disclosure exceed a cost threshold. 3) It is more costly for a low-type firm to signal than for a high-type firm. 4) Failure to disclose information required by GAAP leads to lawsuits, higher cost of capital, and loss of manager reputation. c. Which of the following statements illustrates an adverse selection problem in the production of information? 1) Different investors prefer different amounts of information. 2) The manager shirks and covers up by means of opportunistic earnings management. 3) A manager delays the release of decision-useful information. 4) Firms cannot charge investors for information due to externalities and free-riding. d. Which of the following statements is the strongest argument for principles-based accounting standards? 1) Accountants and auditors behave ethically. 2) Human ingenuity and interaction are so complex that detailed rules cannot be written for every possible situation the accountant or auditor may face. 3) Managers may engage in opportunistic earnings management. 4) Standard setters follow the public interest theory of regulation. Continued. ..
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EAT1S09 ©CGA-Canada, 2009 Page 2 of 7 e. In present value accounting under conditions of uncertainty, accretion of discount for a period is calculated as which of the following? 1)
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ca_exm_at1_2009-09 - CGA-CANADA ACCOUNTING THEORY &...

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