The Context and Purpose of Financial Reporting (Y7C1)

1	Who issues International Financial Reporting Standards?
	A	The IFRS Advisory Committee
	B	The stock exchange
	C	The International Accounting Standards Board
	D	The government
2	Which groups of people are most likely to be interested in the financial statements of a sole trader?
	1	Shareholders of the company
	2	The business’s bank manager
	3	The tax authorities
	4	Financial analysts
	A	1 and 2 only
	B	2 and 3 only
	C	2, 3 and 4 only
	D	1, 2 and 3 only
3	Which of the following statements is/are true?
	1	A supplier of goods on credit is interested only in the statement of financial position, ie an indication of the current state of affairs.
	2	The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an entity that is useful to a wide range of users in making economic decisions.
	A	1 only
	B	2 only
	C	Both 1 and 2
	D	Neither 1 or 2
4	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 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.
	A	1 only
	B	2 only
	C	Both 1 and 2
	D	Neither 1 or 2
5	Which of the following best describes corporate governance?
	A	Corporate governance is the system of rules and regulations surrounding financial reporting.
	B	Corporate governance is the system by which companies and other entities are directed and controlled.
	C	Corporate governance is carried out by the finance department in preparing the financial statements.
	D	Corporate governance is the system by which an entity monitors its impact on the natural environment.
6	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 financial 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.
	A	1 only
	B	1 and 2 only
	C	1, 2 and 3
	D	1 and 3 only
7	Which ONE of the following statements correctly describes the contents of the Statement of Financial Position?
	A	A list of ledger balances shown in debit and credit columns
	B	A list of all the assets owned and all the liabilities owed by a business
	C	A record of income generated and expenditure incurred over a given period
	D	A record of the amount of cash generated and used by a company in a given period
8	Which ONE of the following statements correctly describes the contents of the Statement of Profit or Loss?
	A	A list of ledger balances shown in debit and credit columns
	B	A list of all the assets owned and all the liabilities owed by a business
	C	A record of income generated and expenditure incurred over a given period
	D	A record of the amount of cash generated and used by a company in a given period
9	Which of the following are TRUE of partnerships?
	1	The partners’ individual exposure to debt is limited.
	2	Financial statements for the partnership by law must be produced and made public.
	3	A partnership is not a separate legal entity from the partner themselves.
	A	1 and 2 only
	B	2 only
	C	3 only
	D	1 and 3 only
10	Which of the following statements is/are true?
	1	Directors of companies have a duty of care to show reasonable competence in their management of the affairs of a company.
	2	Directors of companies must act honestly in what they consider to be the best interest of the company.
	3	A Director’s main aim should be to create wealth for the shareholders of the company.
	A	1 and 2 only
	B	2 only
	C	1, 2 and 3
	D	1 and 3 only
11	Which of the following statements is/are true?
	1	The IFRS Interpretations Committee is a forum for the IASB to consult with the outside world.
	2	The IFRS Foundation produces IFRSs. The IFRS Foundation is overseen by the IASB.
	3	One of the objectives of the IFRS Foundation is to bring about convergence of national accounting standards and IFRSs.
	A	1 and 3 only
	B	2 only
	C	2 and 3 only
	D	3 only
12	What is the role of the IASB?
	A	Oversee the standard setting and regulatory process
	B	Formulate international financial reporting standards
	C	Review defective accounts
	D	Control the accountancy profession
13	Which ONE of the following is NOT an objective of the IFRS Foundation?
	A	Through the IASB, develop a single set of globally accepted International Financial Reporting Standards (IFRSs)
	B	Promote the use and rigorous application of International Financial Reporting Standards (IFRSs)
	C	Ensure International Financial Reporting Standards (IFRSs) focus primarily on the needs of global, multi-national organisations.
	D	Bring about the convergence of national accounting standards and IFRSs
14	Which ONE of the following statements correctly describes how International Financial Reporting Standards (IFRSs) should be used?
	A	To provide examples of best financial reporting practice for national bodies who develop their own requirements
	B	To ensure high ethical standards are maintained by financial reporting professionals internationally
	C	To facilitate the enforcement of a single set of global financial reporting standards
	D	To prevent national bodies from developing their own financial reporting standards