ACC341 - Topic 8

Question 1 of 5

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It 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?

Select one of the following:

  • Bonus schemes tied to the performance of the firm will be put in place to align the interests of the owners and the managers.

  • Rewarding managers on the basis of accounting profits may induce them to manipulate accounting numbers.

  • There would be limited incentives for the manager to adopt risky strategies that increase the value of the firm.

  • The manager may be reluctant to take on optimal levels of debt.

Question 2 of 5

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Which of the following statements is not true about Positive Accounting Theory?

Select one of the following:

  • It is used to distinguish research aimed at explanation and prediction.

  • It 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.

  • It 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.

  • One of the key theories that underpins Positive Accounting Theory is Agency theory.

Question 3 of 5

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Which of the following is an example of political costs under the PAT perspective?

Select one of the following:

  • Wage and salary deductions paid to unions

  • Contributions to political parties

  • Costs associated with increased wage claims

  • The cost of remaining largely unnoticed by government regulatory agencies

Question 4 of 5

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According to Positive Accounting Theory, the existence of debt covenants:

Select one of the following:

  • Can be explained from an efficiency perspective, and gives management an incentive to manipulate accounting information from an opportunistic perspective

  • Can be explained from an opportunistic perspective, and gives management an incentive to manipulate accounting information from an efficiency perspective

  • Can be explained from both efficiency and opportunistic perspectives

  • Cannot be explained

Question 5 of 5

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The '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:

Select one of the following:

  • Increase prior period reported income

  • Increase current period reported income

  • Increase future period reported income

  • None of the given options are correct.

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ACC341 - Topic 8

mentor
Quiz by , created about 2 years ago

Quiz on ACC341 - Topic 8, created by mentor on 15/09/2014.

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Created by mentor about 2 years ago
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