Topic 3: Which of the following free market perspective arguments relies upon the assumption that managers will

operate businesses for their own benefit? The market for lemons Market for corporate takeovers Market for managers Private economic-based incentives

Which of the following statements is a criticism of the free-market perspective of accounting regulation? Not true when a particular managers is close to retiring Managers are self-interested wealth maximisers Imposing regulation restricting available set of accounting methods decreases efficiency of contracting None of the statements are criticisms According to the markets for lemons argument which of the following statements is correct? Firms will disclose good news only without the need for regulation Firms will disclose bad news only without the need for regulation Firms will disclose bad news as well as good news without regulation None of the above The economic interest group theory of regulation proposes that regulation is introduced to: Protect managers Benefit the public Support the objectives of certain lobby groups All of the above

According to Mitnick (1980), the capture by an industry or regulated entity will occur when: The regulated party succeeds in coordinating the regulatory bodys activities. The regulated party neutralises the regulating body The regulated party manages to get the regulators to see things from their perspective and give them the regulation they want All of the above Which of the following actions by standard setters or other parties is considered to be consistent with the statement that accounting should be neutral? The consideration of the economic consequences of a standard Lobbying of the standard setters by affected parties The use of exposure drafts in the standard setting-process None of the above Which of the following propositions is not true if we accept the notion that accounting regulation is considered to be the output of a political process? Financial accounting is objective, neutral and apolitical. Standard-setting bodies encourage affected parties to make submissions on draft versions of the proposed accounting standards . Many decisions that are made are the outcome of compromise. If the social welfare impact of accounting policies were ignored, the basis for the existence of a regulatory body would disappear. Regulators often cite investor protection as a basis for more stringent regulation and financial reporting requirements enacted after a financial crisis. What is not a reason for this? To protect investors in the interests of the public To respond to lobbying by those affected by losing money To look as if the regulators are doing something that seems to be a problem, and therefore maintain their position as regulators All of the above