Quiz
ACC341 - Topic 8
Questions in this quiz (5)
1It is common practice for managers to be rewarded in a way that is tied to the profits of the firm, the sales of the firm, or the return on assets. That is, their remuneration is based on the output of the accounting system. Which of the following is a drawback for such bonus schemes?
- ABonus schemes tied to the performance of the firm will be put in place to align the interests of the owners and the managers.
- BRewarding managers on the basis of accounting profits may induce them to manipulate accounting numbers.
- CThere would be limited incentives for the manager to adopt risky strategies that increase the value of the firm.
- DThe manager may be reluctant to take on optimal levels of debt.
2Which of the following statements is not true about Positive Accounting Theory?
- AIt is used to distinguish research aimed at explanation and prediction.
- BIt is designed to explain and predict which firms will, and which firms will not, use a particular method, and also prescribes which method a firm should use.
- CIt focuses on the relationships between the various individuals involved in providing resources to an organisation, and how accounting is used to assist in the functioning of these relationships.
- DOne of the key theories that underpins Positive Accounting Theory is Agency theory.
3Which of the following is an example of political costs under the PAT perspective?
- AWage and salary deductions paid to unions
- BContributions to political parties
- CCosts associated with increased wage claims
- DThe cost of remaining largely unnoticed by government regulatory agencies
4According to Positive Accounting Theory, the existence of debt covenants:
- ACan be explained from an efficiency perspective, and gives management an incentive to manipulate accounting information from an opportunistic perspective
- BCan be explained from an opportunistic perspective, and gives management an incentive to manipulate accounting information from an efficiency perspective
- CCan be explained from both efficiency and opportunistic perspectives
- DCannot be explained
5The 'bonus plan hypothesis' of Positive Accounting Theory suggests managers of firms with bonus plans tied to reported income are more likely to use accounting methods that:
- AIncrease prior period reported income
- BIncrease current period reported income
- CIncrease future period reported income
- DNone of the given options are correct.
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- Quiz on ACC341 - Topic 8, created by mentor on 15/09/2014.
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- mentor
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