1. What is the primary role of internal auditing in a multinational corporation?

A) To assist the external auditors in completing the financial statement audit in a timely fashion

B) To make sure that employees comply with local customs and traditions

C) To ensure that corporate policies and procedures are being followed and to assess operating efficiency

D) To prepare the consolidated financial statement of the corporation in compliance with international accounting standards

2. Why would a company want its stock cross-listed on the stock exchanges of several countries?

A) To make financial reporting less burdensome for its accounting firm

B) In order to use International Financial Reporting Standards

C) To gain access to more financial resources than are available in its home country

D) All of the above

3. Discuss what is meant by global capital markets. Give an example to clarify your discussion.

4. One of the reasons for accounting diversity is culture. Discuss how culture contributes toaccounting diversity

5. One of the reasons for accounting diversity is the legal systems used around the world. Discuss the two major types of legal systems used around the world and why this difference contributes to accounting diversity.

6. One of the reasons for accounting diversity is taxation. Discuss how taxation contributes to accounting diversity.

7. Discuss one of Gray’s accounting values. State which accounting value you are discussing and give an example to clarify your discussion.

8. In countries such as the U. S., there is great demand for public disclosure of accounting information. What is the reason for this? (2 points)

A) Corporate management isn't trustworthy.

B) Businesses rely heavily on financing through issuance of stock to the public.

C) The American populace is better able to read financial statements than people in other countries.

D) U.S. government officials are generally members of corporate boards of directors and can get all the information they require.

9. If most of a country's business financing comes from families, banks, and the government what should we expect in terms of information disclosure to the public? (2 points)

A) Relatively little because the public isn't a major factor

B) A great deal of disclosure because it will be the only way for interested parties to learn about the company

C) Complete openness of accounting records

D) No disclosure at all

10. Your textbook discussed five European countries: France, Germany, the Czech Republic, the Netherlands, and the United Kingdom. Select two of these countries – discuss how financial reporting is regulated and enforced in the two countries that you selected. Make sure that you say which countries you selected.

11. Compare and contrast a rules-based accounting system and a principles-based accounting system. Which one do you think results in the more accurate financial statements?

12. Your textbook discussed five countries of the Americas and Asia: the United States, Mexico, Japan, China and Asia. Select two of these countries – discuss how financial reporting is regulated and enforced in the two countries that you selected. Make sure that you say which countries you selected.

13. What is the difference between voluntary and mandatory disclosure and its regulation? Compare and contrast the two and give an example of voluntary disclosure and an example of mandatory disclosure.

14. Discuss corporate governance disclosers and give an example to clarify your discussion.

15. Explain the difference between a translation gain or loss and a transaction gain or loss.

16. International accounting standards define functional currency as:

A) the currency of the parent company.

B) the currency of the primary economic environment in which the subsidiary operates.

C) the currency of the primary economic environment in which the parent operates.

D) The currency used by a subsidiary for its financial reporting.

17. Under the current rate method of translating foreign currency financial statements, what exchange rate should be used for cost of goods sold? (2 points)

A) spot rate at the end of the year

B) average rate during the year

C) spot rate mid-year

D) There is no single rate because beginning and ending inventory must be converted at different exchange rates than purchases.

18. Under both the temporal method and the current rate method, what exchange rate should be used to translate a foreign subsidiary's dividends into parent company currency? (2 points)

A) current rate

B) historical rate

C) average rate

D) Any of the above methods may be used under both the temporal and current method.

19. What exchange rate should be used to translate the common stock of Essco Ltd, a foreign subsidiary of Peako Corp., when consolidating the financial statements using the current rate method? (2 points)

A) current rate

B) historical rate

C) average rate

D) cannot be determined with the information given

20. One of the reasons for accounting diversity is inflation. Define inflation and explain how and why adjustments for changing prices may vary from country to country.

21. Define harmonization and convergence as they apply to accounting standards. Explain the difference between harmonization and convergence of accounting standards. (4 points)

22. Explain market risk and provide an example of market risk using a foreign exchange example.

Chapter 10

23. Compare and contrast a standard costing system with a Kaizen costing system popular in Japan. Which do you think is a better costing system? Explain why.

24. A multinational corporation may attempt to minimize the taxes it pays in a country with a high effective tax rate by setting a very high transfer price on goods transferred to a subsidiary in a high-tax country. Why is this often not successful?

A) Laws in the foreign country may prohibit such a scheme.

B) The high transfer price would actually increase taxes.

C) Foreign exchange losses will eliminate any tax savings.

D) None of the above.

25. Explain one difficulty involved in designing and implementing performance evaluation systems in multinational companies.