Auditors in the United Kingdom often include disclaimers of liability in their audit
reports. According to the U.S. Securities and Exchange Commission, how effective is
this approach to limiting civil liabilities?
A. It will have no effect when included in the financial statements of U.S. companies.
B. It effectively caps the damage awards that will be made in U.S. civil courts.
C. It limits who can bring civil action in cases involving the audit of U.S. companies.
D. It limits both civil and criminal liability against auditors of U.S. companies.
Answer:
The Treadway Commission Report in the United States published in 1987 used the
phrase:
A. “bottom up accounting.”
B. “top down accounting.”
C. “management culture incentive.”
D. “tone at the top.”
Answer:
What is the policy for accounting harmonization in the United Kingdom?
A. Eventual adoption of standards promulgated by the IASB
B. Alignment of U.K. GAAP with IFRS where practical
C. Rejection of IASB pronouncements
D. Alignment of U.K. GAAP with U.S. GAAP
Answer:
Carbon funds are:
A. created with a purpose of providing an incentive to increase the efficiency of fuel
use.
B. useful for assessing climate impacts and to disclose firms’ energy use.
C. set up to stimulate development of the emissions trading market and assist
companies and governments to invest in carbon credits.
D. pooled funds set up to purchase carbon credits, usually on behalf of companies and
other investors.
Answer:
Why was there very little fluctuation in the foreign exchange rate in the period
1945-1973?
A. This was a period when the world economy was very stable.
B. There was very little growth in the world economy between 1945 and 1973.
C. Countries linked their currency to the U.S. dollar, which was backed by gold
reserves.
D. Most currencies were pegged to the British pound, which could be converted to
sterling silver.
Answer:
If a derivative is not designated as a hedge:
A. the change in market value must be recognized in net income when it changes.
B. the change in market value is not recognized in net income.
C. the change in fair value is not recognized in net income.
D. the change in fair value must be recognized in net income when it changes.
Answer:
The monetary amount used to record intercompany transactions is called:
A. exchange rate.
B. transfer price.
C. conversion rate.
D. incremental cost.
Answer:
The number of U.S. dollars ($) today to buy one U.K. pound (£) six months from now
is called:
A. the spot rate.
B. the exact rate.
C. the forward rate.
D. the prime rate.
Answer:
Which of the following groups is a supranational organization?
A. United Nations
B. Organization for Economic Cooperation and Development
C. International Federation of Accountants
D. All of the above
Answer:
What do IASB standards say about related party transactions?
A. They are illegal in most countries and must be avoided.
B. Related party transactions should be eliminated from the financial statements.
C. They must be disclosed in the notes to the financial statements.
D. None of the above
Answer:
What discount rate should be used for calculating net present values of capital
investment alternatives?
A. Corporate borrowing rate
B. Desired rate of return
C. Internal rate of return
D. Corporation’s return on investment
Answer:
According to a 2010 study by Ernst & Young, what percentage of MNC respondents
had experienced a transfer pricing audit somewhere in the world since 2006?
A. More than 10%
B. More than 25%
C. More than 66%
D. More than 90%
Answer:
What type of economic system presently exists in Mexico?
A. Socialist market
B. Communist
C. Free market
D. Planned economy
Answer:
Under the temporal method of consolidating foreign currency financial statements, what
exchange rate should be used for translating the depreciation expense recorded by a
subsidiary?
A. Average rate
B. Current rate
C. Historical rate
D. Forward rate
Answer:
What is the entry point for most companies into the world of international business?
A. Transfer pricing
B. Exporting
C. Foreign direct investment
D. Cross-listing on international stock exchanges
Answer:
What is the intrinsic value of a foreign currency option?
A. The difference between the spot rate and the strike price
B. The gain that could be realized if the option was exercised immediately
C. The chance that a currency will rise over time to make the option in the money
D. The difference between a call option and a put option
Answer:
Why was the issuance of International Standard on Auditing 13 (ISA 13) considered so
important to harmonization of auditing standards?
A. It required all multinational corporations to adopt international auditing standards
by 2008.
B. It specified the form and content of the annual report.
C. It provided guidance on the form and content of the audit report.
D. It requires the auditor to express an opinion on whether the statements give a true
and fair view of corporate performance.
Answer:
In which of the following countries do companies tend to provide more extensive
environmental disclosure than U.S.?
A. Canada
B. Thailand
C. The United Kingdom
D. Australia
Answer:
Zenith Company, a calendar-year entity, amends its defined benefit pension plan on
January 1, 2013 and must recognize the increase in past service costs of its vested and
non-vested employees as of that date in the calculation of its net 2013 pension expense
(or revenue). The pertinent facts as of January 1, 2013 are:
Calculate the past service costs included in 2013 net pension expense (or revenue)
under U.S GAAP.
A. $5,100
B. $5,400
C. $600
D. $7,000
Answer:
What group is primarily responsible for the creation of International Financial
Reporting Standards (IFRS)?
A. Financial Accounting Standards Board (FASB)
B. International Forum on Accountancy Development (IFAD)
C. International Federation of Accountants (IFA)
D. International Accounting Standards Board (IASB)
Answer:
According to the 2004 Management Barometer Survey conducted with senior
executives of MNCs, in addition to internal control effectiveness, which was the next
highest area in need of improvement?
A. Security controls
B. Internal audit effectiveness
C. Fraud programs
D. Financial processes
Answer:
Homeko, Inc. is located in the U.S., but it has subsidiaries in Germany. When the euro
appreciates relative to the U.S. dollar, what is the direction of the translation adjustment
to consolidate Homeko’s financial statements?
A. When there is net asset exposure, the translation adjustment will be positive.
B. When there is net liability exposure, the translation adjustment will be positive.
C. The direction of the adjustment is indeterminate.
D. There will be no adjustment necessary unless the difference is realized.
Answer:
Which of the following would be characteristic of a bureaucratic control system?
A. Goals are more likely to be achieved by local managers
B. Financial targets are more explicitly specified throughout an organization
C. Meetings between parent and subsidiary managers are scheduled when needed
rather than on a specific schedule
D. Budgets play a minor role in the management control system
Answer:
What is the first line of enforcement of legal and professional financial reporting
standards?
A. Prosecuting attorney
B. International Accounting Standards Board
C. Local civil court system in the home country
D. External auditing
Answer:
Which of the following is a reason for a parent to use discretionary transfer prices?
A. Improve competitive position of foreign operation
B. Minimize import duties
C. Avoid restrictions on repatriation of profits
D. All of the above
Answer:
What currency is used in the United Kingdom?
A. Crown
B. Euro
C. British pound
D. UK dollar
Answer:
Which of the following is true of profit split method?
A. It is based on the assumption that similarly situated taxpayers will tend to earn
similar returns over a given period.
B. Under this method, an arm’s-length price is determined by referring to an objective
measure of profitability earned by uncontrolled taxpayers on comparable, uncontrolled
sales.
C. This method assumes that the buyer and seller are one economic unit.
D. This method is normally used in cases involving manufacturing, assembly, or other
production of goods that are sold to related parties.
Answer:
On November 1, 20×1 Zamfir Company, a U.S. corporation, purchased minerals from a
Russian company for 2,000,000 rubles, payable in 3 months. The relevant exchange
rates between the U.S. and Russian currencies are given:
The company’s incremental borrowing rate provides a discount rate of 0.975 for three
months.
If Zamfir does not attempt to hedge this transaction, what is the gain or loss that should
be shown on the company’s December 31, 20×1 financial statements?
A. $22,000 loss
B. $21,450 loss
C. $8,000 gain
D. $7,800 gain
Answer:
In which company is there a strong correlation between high profitability and
sustainability reporting?
A. Coca-Cola
B. Microsoft
C. IBM
D. All of the above
Answer:
The discovery of toxic waste dumps across the United States in the 1980s led to passage
of what legislation?
A. Offshore drilling
B. Superfund
C. Sarbanes-Oxley
D. Gramm-Rudman
Answer:
Which of the following is the most important type of Subpart F income?
A. Income from countries engaged in international boycotts
B. Income from foreign base companies
C. Income from insurance of U.S. risks
D. Income from illegal payments
Answer:
Which of the following is the primary purpose of preparing a statement of added
value?
A. To show the value added to products while at production
B. To show the distribution of added value by the company among shareholders
C. To calculate the net taxable income of the company
D. To show the costs in addition to gross payroll that the company incurs related to its
labor force
Answer:
As per IFRS 11, which of the following statements is true of the joint arrangement?
A. IFRS 11 is silent about joint arrangements.
B. In regard to joint venture accounting, IFRS 11 is quite different from U.S. GAAP.
C. IFRS 11 does not allow revaluation of assets.
D. A joint arrangement is either a joint operation or a joint venture.
Answer:
The countries ratifying the Kyoto Protocol are committed to reducing greenhouse gases
by how much from their 1990 level by 2011?
A. 25%
B. 10%
C. 5%
D. 50%
Answer: