escribe an accounting regulation Questions 1. General acceptance of accounting standards is important to the accoun profession. By whom does the profession require general acceptance of standards, and why is it important to the profession? 2. The standard setting process is highly political. Describe an accountin that would be politically controversial, and the types of political pressures could be brought to bear in the standard setting process. 3. The text describes a theory of regulatory capture. (a) What is regulatory capture? (b) How can standard setting bodies such as the AASB avoid regulatory capture? (c) If a standard setting body is 'captured by the profession, are there any steps that the government can take to make the body independent? If so, should the government take those steps? Justify your answer. (d) Do you believe that the current international accounting standard setting arrangements, based around the IASB, are at risk of regulatory capture? Why or why not? 4. In under 500 words, provide an argument for the regulatory approach to standard setting. Then, in under 500 words, provide an argument for the free-market approach to standard setting. Finally, analyse the arguments and conclude in favour of one approach rather than the other (which approach you favour is up to you, but you must decide which approach is better, at least under a set of assumed circumstances) 5. If the IASB concludes that the economic consequences of a standard it is about to approve will disadvantage a powerful lobby group, what should the IASB 00 00 the situation? 82 PART 1 Accounting theory 6. How do you think accounting standards should be is that the approach Currently taken by the LASB? 1. We should disland a nal mandard setters. They are o no use following the adoption of international accounting standards'. Explain whether you agree or disagree with this statement 8. What are free riders'? How can a wstem ensure that those who benefit most from an accounting standard requiring certain disclosures also bear the greatest costs 9. The ting of accounting standards requires some assessment of economic and other benefits and costs. What are the ethical issues imotvedt is in posible to avoid ethical issues in developing accounting standards? 10. You have been appointed as chler accountant of a firm that will be adversely affected by the method of accounting that is proposed in an exposure draft for an accounting Mandard on l ine Write a report of 500 words or less explaining to your Board of Directors how you could by the AASB and the IASB to adopt an accounting practice other than the one proposed in the exposure draft. Also comment on the costs and benefits of lobbying for the company. 1. In 2001 and 2002 there were several High profile corporate collapses in the Unired States associated with misleading financial statements and accounting practices Following these collapses, laws were introduced to improve the quality of financial reporting (a) In your opinion, will further relation prevent deliberately misleading reporting! Explain. (b) Are additional laws likely to prevent corporate collapses! Why or why not? (c) How important is the enforcement of financial reporting requirements in promoting high quality reporting! 12. Each of the three theories of regulation discussed in this chaper has its strengths and limitations in describing accounting standard setting, either past or present. What do you believe are those strengths and weaknesses! Provide an example where you believe each of the theories has applied, or is likely to apply. 13. From 1 January 2005 Australia adopted IASB standards. (a) Do you agree with this change? Why or why not? (b) Who stands to gain from Australia's adoption of IASB standards? Explain. (c) Who stands to lose from Australia's adoption of IASB standards Explain. 14. What is the role of the Financial Reporting Council? Do you think that all members of the Financial Reporting Council should be qualified accountants? Why or why not? 15. The IASB and FASB began a convergence project in 2002. (a) What are the expected benefits of the convergence project? U (b) What factors make convergence difficult? (c) How is the future of the IASB tied to convergence 16. Should the SEC allow the use of IASB standards for US domestic listed companies? Discuss reasons for and against the use of IFRS by US companies. 17. Why has IFAC established a Public Interest Oversight Board? 18. Why would the quality of accounting and auditing standards affect the development of financial markets? Why is the strength of enforcement of the standards and investor protection important in this relationship? CHAPTER 3 Applying theory to accounting regulation