SBR Ethics, the framework and judgement

Which pair are the fundamental qualitative characteristics of useful financial information in the Conceptual Framework?

• 1 Relevance and faithful representation
• 2 Comparability and timeliness
• 3 Verifiability and understandability
• 4 Prudence and materiality

A finance director is asked by the chief executive to delay recognising a large expense so that a bonus target is met. Which fundamental principle is most directly threatened?

• 1 Professional behaviour only
• 2 Professional competence
• 3 Integrity
• 4 Confidentiality

Under IAS 8, a change from one acceptable accounting policy to another is accounted for:

• 1 Retrospectively, by restating comparatives
• 2 By adjusting the opening reserves only
• 3 Prospectively in the current year only
• 4 As a prior period error

A company revises the useful life of a machine from 10 to 8 years. Under IAS 8 this is:

• 1 A change in estimate, applied prospectively
• 2 A change in policy, applied retrospectively
• 3 An adjustment to opening reserves
• 4 A prior period error

Which of the following is a consequence of a prior period error that is material?

• 1 Ignore it if profit is not affected
• 2 Adjust only the current year profit
• 3 Disclose it in the directors' report only
• 4 Restate the comparative amounts and the opening balance of the earliest period presented

In the Conceptual Framework, an asset is defined as:

• 1 A right to receive cash only
• 2 A resource owned by the entity with a known cost
• 3 A present economic resource controlled by the entity as a result of past events
• 4 Anything that will generate cash in the future

The going concern assumption means that financial statements are prepared:

• 1 On the basis that the entity will continue in operation for the foreseeable future
• 2 Using only historical cost
• 3 With all assets at current value
• 4 On a break-up basis

Which of the following is a reason that earnings management harms users of financial statements?

• 1 It improves comparability
• 2 It raises the cost of audit only
• 3 It increases the information given
• 4 It reduces the faithful representation of performance