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Page | 1 Problem 3-1 (IAA) 1.What are the attributes that make the information provided in the financial statements useful to the readers? a.Qualitative characteristics of financial information b. Quantitative characteristics of financial information c.Elements of financial statements d.Objectives of financial reporting 2.Qualitative Characteristics a. are considered either fundamental or enhancing. b.contribute to the decision-usefulness of financial reporting information. c.distinguish better information from inferior information for decision-making purposes. d.All of the choices are correct. 3.The fundamental qualitative characteristics are a.Relevance and faithful representation b.Relevance, faithful representation and materiality c.Relevance and reliability d.Faithful representation and materiality 4.Accounting information is considered relevant when it a.Can be depended on to represent the economic conditions and events that is intended to represent. b.Is capable of making a difference in a decision. c.Is understandable by reasonably informed users of accounting information. d.Is verifiable and neutral. 5.The ingredients of relevant financial information are a.Predictive value and confirmatory value b.Predictive value, confirmatory value and timeliness c.Predictive value, confirmatory value and materiality d.Predictive value, confirmatory value, timeliness and materiality 6.What is the quality of information that gives assurance that is reasonably free of error and bias? a.Relevance b.Faithful representation c.Verifiability d.Neutrality 7.Which of the following is the best description of “faithful representation” in relation to information in financial statements? a.Influence on the economic decision of users b.Inclusion of a degree of caution c.Freedom from material error d.Comprehensibility to users 8.To achieve faithful representation, the financial statements a.Must have predictive and confirmatory value. b.Must be complete, neutral and reasonably free from error. c.Are understandable, comparable, verifiable and timely. d.Must possess all of these. 9.The financial accounting information is directed toward the common needs of users and is independent of presumptions about particular needs and desires of specific users. a.Relevance b.Verifiability c.Neutrality d.Completeness 10. In the event of conflict between the economic substance of a transaction and the legal form, the economic substance shall prevail. a.Form over substance b.Substance over form c.Relevance d.Completeness Problem 3-2 (IAA) 1. The enhancing qualitative characteristics of financial information are a.Comparability and understandability b.Verifiability and timeliness c.Comparability, understandability and verifiability d.Comparability, understandability, verifiability and timeliness 2.Financial information exhibits consistency when a. Accounting procedures are adopted which smooth net income and make results consistent between years. b.Gains and losses are shown separately on the income statement. c.Accounting entities give similar events the same accounting treatment each period. d.Expenditures are reported as expenses. 3.When information about two different entities engaged in the same industry has been prepared and presented in similar manner, the information exhibits the enhancing qualitative characteristic of a.Relevance b.Faithful representation c.Consistency d.Comparability 4.The characteristic that is demonstrated when a high degree of consensus can be secured among independent measures using the same measurement method is a.Relevance b.Understandability c.Verifiability d. Neutrality When information is complete neutral and free from error it possess the qualitative characteristics of faithful?2. Faithful Representation. Useful financial information needs not only be a relevant but also be a faithful representation. Financial reporting information included the characteristics of complete, neutral, and free from material error is supposed to be faithful representation of an economic phenomenon.
What are the 4 qualitative characteristics?The four enhancing qualitative characteristics are comparability, verifiability, timeliness and understandability. The characteristic of relevance implies that the information should have predictive and confirmatory value for users in making and evaluating economic decisions.
Which qualitative characteristic states that accounting information are verifiable and free from personal bias?Answer: The qualitative characteristic of accounting that requires the use of a common unit and format of reporting is comparability. 'Accounting information should be verifiable and free from personal Bias'.
Which of the following characteristics means that information is reasonably free from error and bias?Which of the following characteristics means that information is reasonably free from error and bias? Faithful representation requires the financial information to be complete, neutral, and free from error.
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Which of the following qualitative characteristics relates to the fact that an information is complete neutral and free from error?
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