Discuss the purpose of a stock exchange
Compare the concepts of value in use and value in exchange.
6 Argue both for, and against, the following proposition: ‘Historical cost accounting is irrelevant to users’
decision-making.’
7 Why is ethics so important to a profession? Is there really a necessity for ethical guidance for members of a
profession?
8 What statements are included in a complete set of financial statements?
9 What is the purpose of the notes to the financial statements?
10 Go to the web page for a listed company, find its annual report and describe the contents of the CEO’s
report.
11 What purpose does the auditor’s report serve?
12 What are the types of audit reports, and what does each indicate to the users of financial statements?
13 In addition to the financial statements, what else is included in an annual report?
14 Auditors play an important role in the financial reporting system, and their independence from their clients
is an essential feature of this system. Why is such independence considered necessary? Why is it difficult to
maintain?
15 a To an investor, what value has been added to the financial statements by the auditor’s report? Why?
b Suggest some limitations regarding the value of the auditor’s report that an investor should be aware of.
16 Do you think not-for-profit organisations should follow the same GAAP that business organisations do?
Why, or why not?
17 Give examples of cases where there is a conflict of interest between preparers of financial statements and
users of them.
18 Should a senior financial manager who works for a company, and is a professional accountant, have to meet
the same standards of professional ethics as does a colleague who is an external auditor in public practice?
Why, or why not?
19 What is the role of information in a capital market?
20 What is meant by the efficient market hypothesis?
21 What is the major purpose of a stock exchange?
22 Explain the terms ‘agency theory’ and ‘stewardship’.
23 Briefly describe two important implications capital market theory has for the use of accounting information.
24 Briefly describe two important implications agency (contract) theory has for the use of accounting information.
25 It appears that some top managers attempt to manage their companies’ financial disclosure, including their
financial accounting, to alter the story each disclosure tells. Why might managers be motivated to do this?
26 Why should the shareholders of a large, publicly traded company want to have the company’s financial
statements audited?
27 The auditor’s report is normally written using standard wording. The idea is that, if things are not all right,
variations from the standard wording will alert users of the financial statements. Is that consistent, or
inconsistent, with capital market theory?
