Chapter 10 - Multiple choice quiz

Virtually all of the disclosure requirements for items to be included in a company's financial statements are contained in the:

A.	UIG Interpretations;

B.	Australian Tax Office Rulings;

C.	AASB accounting standards;

D.	Framework for the Presentation of Financial Statements.

Information about the capacity of an entity to adapt is largely contained in the:

A.	statement of financial position;

B.	statement of comprehensive income;

C.	statement of cash flows;

D.	directors' report.

The statement of comprehensive income provides information relating to:

A.	financial position and the capacity of an organisation to adapt;

B.	profitability and the ability of the entity to generate cash flows;

C.	cash flows and the liquidity and solvency of an entity;

D.	the debt and equity structure of an entity.

Information about how a company has financed its operations and invested surplus cash is found in the:

A.	directors' report;

B.	statement of comprehensive income;

C.	statement of cash flows;

D.	statement of financial performance.

If a company is a small proprietary company it must comply with accounting standards if directed to prepare an annual financial report by at least:

A.	1% of its shareholders;

B.	2% of its shareholders

C.	3% of its shareholders;

D.	5% of its shareholders.

The Corporations Act specifies that the following financial statements must be included in the annual financial report of a company:

I	Statement of financial position
II	Cost of goods sold statement
III	Statement of comprehensive income
IV	Statement of cash flows

A.	I, II, III and IV;

B.	II, III and IV;

C.	I, II and III only;

D.	I, III and IV only.

The statement of comprehensive income does not include adjustments for:

A.	depreciation of property, plant and equipment;

B.	revaluation increment for non-current assets;

C.	impairment of goodwill;

D.	capitalised interest expenses.

If compliance with accounting standards does not provide a true and fair view, then a reporting entity must also provide:

A.	additional information in the notes;

B.	a concise financial report;

C.	a letter of explanation from the auditors;

D.	a letter of explanation from the most senior financial officer in the company.

The UIG Interpretations and the IFRIC Interpretations have the same status as:

A.	the Framework for the preparation and presentation of financial statements;

B.	Australian Tax office Rulings;

C.	Australian Securities Exchange Listing Rules;

D.	AASB accounting standards.

10.

The Australian Accounting Standards Board's accounting standards are equivalent to:

A.	Urgent Issues Group Interpretations;

B.	Australian Securities Exchange Listing Rules;

C.	IFRIC Interpretations;

D.	International Financial Reporting Standards.

11.

In the preparation of financial statements it is necessary to provide comparative information for:

A.	statement of financial position items only;

B.	statement of comprehensive income items only

C.	statement of cash flows items only;

D.	all amounts reported in the financial statements.

12.

The general information component of a Directors' Report must contain the following information:

I	A review of operations and the results of operations
II	The entity's principal activities
III	Likely future developments in the entity's operations
IV	Whether the financial report is in accordance with the Corporations Act

A.	I, II and III only;

B.	I, II and IV only;

C.	II, III and IV only;

D.	I, II, III and IV.

13.

The auditor, when providing an audit report must form an opinion on whether:

A.	the state of affairs of the company is likely to change;

B.	the financial statements give a true and fair view;

C.	any important circumstances arose after reporting date;

D.	the dividends paid to members during the year were too low.

14.

Instead of sending the full set of financial statements including notes and the directors' and auditor's reports to members, a company has a right to send instead:

A.	a notice that the report has been lodged with ASIC;

B.	a statement of financial position only;

C.	a concise report;

D.	a statement and of comprehensive income and a statement of financial position only.

15.

A disclosing entity as defined under the Corporations Act must prepare a half-yearly report that:

A.	need not comply with the accounting standards;

B.	includes only a statement of financial position and statement of comprehensive income;

C.	does not have to satisfy the true and fair view requirement;

D.	must have an auditor's report attached.

16.

When assessing materiality of items relating to the statement of financial position, those items must be compared with the more appropriate of the recorded amount of:

A.	equity, or the asset or liability class total;

B.	total profit or loss;

C.	total cash flows;

D.	the average of opening and closing net assets.

17.

When assessing the materiality of items relating to the statement of cash flows , those items must be compared with the more appropriate of:

I	Net cash provided by the relevant operating, investing or financing activities.
II	The average of net cash provided by the relevant operating, investing or financing activities.
III	Net opening and closing cash balances.
IV	Average of net opening and closing cash balances.

A.	I and II only;

B.	I and III only;

C.	I, III and IV only;

D.	I, II, III and IV.

18.

The accountant of E-Scale Limited assessed the materiality of a legal fee and concluded that in conformity with guidelines provided in AASB 1031 Materiality, it would not be material if it:

A.	was more than 15% but less than 20% of total profit for the period;

B.	was more than 10% but did not exceed 50% of total legal fees for the period;

C.	was less than 5% of profit for the reporting period;

D.	did not affect the cash flows for the period.

19.

For the purposes of determining whether an event after the reporting date should be included in financial statements, the date that the financial report is authorised is that date on which the:

A.	directors' declaration is signed;

B.	auditor signs the audit opinion;

C.	date the final trial balance is taken from the ledger accounts;

D.	final dividend is declared.

20.

An adjusting event after the reporting date provides evidence of:

A.	conditions that arose after the reporting date;

B.	conditions that existed at balance date;

C.	non-adjusting events;

D.	events that need not be disclosed in the financial statements.

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