Financial-Accounting-and-Reporting by CPA Australia Valid Free Exam Practice Test

Question 1

Which one of the following is an objective of the International Federation of Accountants (IFAC)?

A. to issue new international financial reporting standards (IFRS) B. to provide advice on accounting standards to the OECD C. to provide direction to the Financial Accounting Standards Board (FASB) D. to establish high quality professional standards in accountancy

Correct Answer: D

Question 2

Which one of the following is not an Australian Securities Exchange (ASX) principle of good corporate governance?

A. Safeguard the environment. B. Remunerate fairly and responsibly. C. Promote ethical and responsible decision-making. D. Respect the rights of shareholders.

Correct Answer: A

Question 3

Investors use the audited financial statements of a company to
I)evaluate the company's current return on assets
II)predict the company's market conditions for future years.
III)predict the company's market conditions for future years.
IV)make a judgement on the liquidity and solvency of the company.

A. I and III only B. II and III only C. I and IV only D. III and IV only

Correct Answer: C

Question 4

In an efficient market, normally if interest rates rise, share prices will

A. rise since banks invest their increased profits. B. fall since investors expect a higher return. C. rise due to the overall positive sentiment. D. fall in anticipation of a reversal in the interest rate cycle.

Correct Answer: B

Question 5

Which one of the following statements is correct?

A. Assets used for long-term operations are shown under working capital in the statement of financial position. B. Liabilities are future obligations that will cause outflow of resources embodying economic benefits. C. A statement of financial position explains the reasons for movement of assets and liabilities through the accounting period. D. Current and non-current assets are shown as separate classifications in the statement of financial position.

Correct Answer: D

Question 6

Which one of the following best describes the objective of the International Financial Reporting Standards (IFRS) Foundation?

A. to develop an International regulatory framework in the national jurisdictions of countries that produce accountants B. to guide investors who compare the financial statements of one entity in one country with those of another entity located elsewhere C. to co-ordinate the accounting profession on a global scale by issuing and establishing international standards D. to promote the application, convergence and use of International Financial Reporting Standards (IFRS) as a high quality reporting solution

Correct Answer: D

Question 7

A rules-based approach to standard setting

A. ensures there are no conflicts within accounting standards as each issue is handled just once. B. provides a broad framework for standard setting. C. prescribes standards that attempt to cover all eventualities a business may face. D. helps a standard-setting body to prioritise matters.

Correct Answer: C

Question 8

Which one of the following statements differentiates semi-strong form efficiency from strong form efficiency in the context of the efficient market hypothesis?

A. Semi-strong form efficiency addresses operational efficiency whereas strong form efficiency aims to address allocative efficiency. B. Semi-strong form efficiency reflects all past price movements whereas strong form efficiency reflects future share price movements. C. Semi-strong form efficiency does not reflect knowledge whereas strong form efficiency considers knowledge in addition to publicly available information and past price movements. D. Semi-strong form efficiency does not reflect all publicly available information whereas strong form efficiency does incorporate all publicly available information.

Correct Answer: C

Question 9

Generally accepted accounting practice recognises revenue when

A. customers order goods. B. goods are produced. C. goods are dispatched to the customer. D. cash is received for the goods.

Correct Answer: C

Question 10

Which one of the following includes social reporting guidelines?

A. Generally Accepted Accounting Principles (GAAP) B. Global Reporting Initiative (GRI) C. International Financial Reporting Standards (IFRS) D. International Accounting Standards (IAS)

Correct Answer: B

CPA Australia CPA Financial Accounting and Reporting - Financial-Accounting-and-Reporting Exam Practice Test