In what countries would one expect auditing standards to evolve based on the needs
perceived by the auditing profession?
A. Code law countries
B. Members of the European Union
C. Countries that follow common law
D. Countries with strong accounting laws
Answer:
How does UK GAAP differ from IFRS with respect to goodwill?
A. UK GAAP requires impairment testing annually, whereas IFRS allows amortization.
B. UK GAAP allows impairment testing annually, whereas IFRS requires amortization.
C. UK GAAP prohibits amortization, whereas IFRS allows amortization at the firm’s
choice.
D. UK GAAP allows amortization at the firm’s choice, whereas IFRS prohibits
amortization.
Answer:
Purchasing an option to buy foreign currency at a predetermined exchange rate in order
to reduce exchange risk is called:
A. transfer pricing.
B. hedging.
C. translating.
D. cross-listing.
Answer:
According to Gray’s framework for accounting system development, which of the
following is directly affected by ecological influences, such as geography, demography,
and technology?
A. Accounting values
B. Accounting systems
C. Institutional consequences
D. Cultural dimensions
Answer:
Differences in legal systems used in various countries have been cited as one reason for
diversity in accounting practices. What are the major types of legal systems?
A. Commercial law and accounting law
B. Rules and regulations
C. Written law and unwritten law
D. Common law and code law
Answer:
In August 2010, what was the price per ton of carbon?
A. $1.00
B. $2.50
C. 10 cents
D. 25 cents
Answer:
What is the requirement for reporting derivatives under international accounting
standards and U.S. GAAP?
A. They may be shown on the balance sheet or they may be treated as off-balance sheet
investments.
B. They must be shown on the balance sheet at fair value.
C. They must be shown on the balance sheet at historical cost.
D. They may be shown on the balance sheet at historical cost or at net realizable value.
Answer:
What is a major limitation to the apparent incentive of tax holidays?
A. If an MNC is taxed on worldwide income, it will eventually pay tax on the foreign
income when it is repatriated.
B. Income earned by multinational corporations must remain in the foreign country
offering the tax holiday.
C. The tax holidays are only available to large multinational corporations of wealthier
nations.
D. Tax holidays are offered only by governments with the ten weakest economies.
Answer:
The definition of a “permanent establishment” is a key article of the OECD’s model tax
treaty. Which of the following would NOT be considered a permanent establishment by
the OECD?
A. Branch
B. Mine
C. Storage facility
D. Construction site
Answer:
The Morgan Stanley Dean Witter “Apples to Apples” analysis relies on:
A. converting financial statements to U.S. GAAP to compare international investment
opportunities.
B. identifying the most significant factors affecting stock value and considering the
effect of accounting diversity on these factors.
C. the superiority of U.S. GAAP for determining the true value of international capital
investments.
D. converting all the accounts in foreign financial statements to a common set of
accounting standards.
Answer:
Which of the following is a reason to report segmented accounting information for
multinational enterprises?
A. There are different risks in different parts of the world that a reader may need to
know about.
B. Different lines of business have different levels of risk that may affect business
success.
C. Growth opportunities differ from one nation to another that could affect share value.
D. All of the above are reasons for segmented reporting.
Answer:
In Gray’s framework for accounting system development, which of the following
countries tends to have a relatively high degree of transparency in their companies’
financial statements?
A. Germany
B. Switzerland
C. United Kingdom
D. Saudi Arabia
Answer:
Assume that an initial investment is $100,000 and that the estimated annual cash flows
for the next 5 years are $25,000. What is the internal rate of return (IRR) for this
investment?
A. 5.56%
B. 18%
C. 1%
D. 8%
Answer:
What are the most disclosed social report items in Thai corporate annual reports?
A. Employee information and environmental information
B. Thailand tends not to issue corporate social reports
C. Amount of carbon credits traded
D. Community involvement
Answer:
What do investors in the Prototype Carbon Fund (PCF) receive in return for their
investment?
A. A guaranteed 10% return
B. The satisfaction of contributing to corporate societal values
C. A reduction of the carbon tax
D. A pro-rata share of the carbon credits
Answer:
What is a carbon tax?
A. It is a tax imposed by the World Bank on excessive carbon usage.
B. It is a tax imposed by the U.S. government on excessive vehicle emissions.
C. It is a regressive tax.
D. It is a tax on the use of fuels that cause the emission of carbon dioxide and other
greenhouse gases into the atmosphere.
Answer:
Gray argues that national cultural values affect accounting values. If Country X ranks
low on uncertainty avoidance, which of the following statements would be true?
A. The country would rank high on the accounting values of uniformity.
B. The country would rank high on the accounting values of secrecy.
C. The country would rank low on the accounting values of professionalism.
D. The country would rank low on the accounting values of conservatism.
Answer:
In China, who is responsible for regulating auditing practice?
A. Chinese Institute of Certified Public Accountants (CICPA)
B. Government, through local audit bureaus
C. Chinese stock exchange
D. Auditing Practices Board (APB)
Answer:
According to Gray’s framework which is an extension of Hofstede’s model of cultural
pattern, which of the following is true about accounting system development?
A. Accounting system development is mainly influenced by a country’s constitutional
framework.
B. Countries following limited disclosures adhere less strictly to the notion of
conservatism in the measurement of assets and liabilities.
C. Accounting system development is influenced by a less conservative approach
resulting in the development of short-term oriented accounting practices.
D. The external factors have a direct influence on the development of institutional
framework leading to the development of accounting systems.
Answer:
For a U.S. multinational corporation, consolidating the financial statements of foreign
subsidiaries requires two steps. First, the foreign subsidiary’s statements must be
restated according to the U.S. GAAP. The next step is to:
A. convert the account balances into U.S. dollars.
B. determine the exchange rate gain or loss.
C. calculate the translation adjustment.
D. restate the income using international accounting standards.
Answer:
According to IAS 37, with respect to onerous contracts, a provision should be
recognized for “unavoidable costs of the contract”, which is:
A. the intrinsic value of the contract.
B. the lower of cost or market value of the contract.
C. the lower of cost of fulfillment or the penalty from non-fulfillment of the contract.
D. None of the above
Answer:
The following inventory information was taken from the records of GlobeKom Ltd.:
Under IAS 2, what should the balance sheet report for Inventory?
A. $9,000
B. $8,500
C. $9,500
D. $10,000
Answer:
Companies must choose between which exchange rates for consolidating foreign
subsidiaries?
A. Spot rate and forward rate
B. Spot rate and closing rate
C. Current rate and historical rate
D. Domestic rate and international rate
Answer:
What is the focus of Section 404 of the Sarbanes-Oxley Act?
A. Requirement that all members of the board of directors be independent of the
corporation.
B. It addresses the need for a consistent set of international auditing standards.
C. Attesting to the reliability of internal controls in the annual report.
D. This defines the membership in the Public Company Accounting Oversight Board
(PCAOB).
Answer:
Of the following methods for translating foreign currency financial statements, which
one maintains the underlying valuation method (i.e. historical cost or current value)
used by the foreign subsidiary?
A. Current rate method
B. Current/Noncurrent method
C. Temporal method
D. Monetary/Nonmonetary method
Answer:
What is a primary difference between the OECD and UN model tax treaties?
A. The UN model assumes all countries are economic equals, whereas the OECD
model does not.
B. The UN model grants more taxing rights to the host country than does the OECD
model when income repatriation is out of developing countries.
C. The model treaty of the UN gives more taxing rights to well-developed countries
than developing countries.
D. All of the above are differences between the OECD and UN models.
Answer:
Assume that ABCO is a U.S. multinational corporation. Its foreign subsidiaries must
report income in their respective countries according to GAAP in those countries. How
must ABCO report its consolidated financial statements?
A. ABCO must choose any one country’s accounting standards and combine the
subsidiary reports into the parent company’s statements using that one country’s GAAP.
B. Since the company is operating in several different countries, the International
Accounting Standards must be used for the consolidated financial statements.
C. Since ABCO is a U.S. corporation, U.S. generally accepted accounting principles, or
GAAP, must be used for the consolidated financial statements.
D. On the consolidated financial statements, each subsidiary’s financial results must be
shown in the currency of the country where the subsidiary is located.
Answer:
Who was the first chairman of the International Accounting Standards Board?
A. Sir Walter Raleigh
B. Sir David Tweedie
C. Sir Paul McCartney
D. Sir Bryan Carsberg
Answer:
According to international auditing standards, if audit work has been limited in its
scope, the auditors have had a disagreement with management, or there is significant
uncertainty associated with the financial statements, what kind of audit opinion should
be rendered?
A. Disclaimer of opinion
B. Unqualified
C. Adverse
D. Qualified
Answer:
How does FASB ASC 830, Foreign Currency Matters define a “highly inflationary
economy?”
A. Inflation rate over 50% annually
B. Inflation rate over 10% annually
C. Cumulative three-year inflation over 26%
D. Cumulative three-year inflation over 100%
Answer: