International Accounting Quiz Exam!

Total foreign taxes paid are deductions in calculating taxable income.

Foreign income taxes paid are credits against U.S. taxes owed.

Taxpayers may choose between (A) and (B) stated above.

None of the above.

Doupnik - Chapter 10 #30 Learning Objective: 3 Level: Medium

Improve competitive position of foreign operation

Minimize import duties

Avoid restrictions on repatriation funds

All of the above

The subsidiary's home country would allow tax credits for taxes paid to the parent's home country.

The parent company's home country would allow tax credits for taxes paid to the subsidiary's home country.

The home countries of both the parent and the subsidiary would forego taxation on the income earned by the subsidiary.

None of the above

Upstream transfer

Downstream transfer

International transfer

None of the above

Any member of the corporate board of directors

Any member of the corporate board of directors who is not a Certified Public Accountant (CPA)

Only members of the corporate board of directors who do not have a material interest in the company

Any manager or director of the corporation

Interest charged on intercompany loans

Transfer prices for intangible property

Charges for intercompany services

All of the above

Exchange rate

Transfer price

Conversion rate

incremental cost

Raising prices paid by the parent for goods it acquires from the subsidiary

Raising prices paid by the subsidiary for goods it acquires from the parent

Negotiated transfer pricing

Reducing prices charged by the parent for good transferred to the subsidiary

Accountant

Auditor

Independence

None of these terms is defined in the laws of the UK.

Competence of the auditor

Quality review and monitoring

Financial reporting requirements

Independence of the auditor

Taxes should be minimized.

Tax systems should not be a major factor in business decisions.

Tax policies should be unbiased.

Taxes in one jurisdiction are offset by tax credits in another jurisdiction.

She willingly participates in defrauding the company's stockholders.

She breaks a contract with the client.

She violates a rule on the manner of advertising allowed by the professional accounting and auditing association.

None of the above

If a MNC is taxed on worldwide income, it will eventually pay tax on the foreign income when it is repatriated.

Income earned by multinational corporations must remain in the foreign country offering the tax holiday.

The tax holidays are only available to large multinational corporations.

Tax holidays are offered only by governments with the ten weakest economies.

It enhances the credibility of the financial statements of corporation.

It guarantees the future viability of the corporation.

It assures readers that no errors have been made in the financial statements.

It tells shareholders that management has operated the corporation efficiently.

Audit report

Auditing standards

Regulation of the profession

None of the above

Corporate management

Internal auditors

Board of directors

Information systems department

International Accounting Standards Board (IASB)

International Auditing and Assurances Standards Board (IAASB)

International Organization of Securities Commissions (IOSCO)

Organization for Economic Cooperation and Development (OECD)

The primary customer in China was the government, which was presumed to have very good credit.

This is the international accounting standard for companies operating in eastern Asia.

Prior to being admitted to the World Trade Organization (WTO), China was required to reduce its bad debt level.

All of the above

It is objectively determined.

It reflects managers' ability to control cost.

It is based on arms-length transactions with unrelated parties.

It preserves managerial autonomy to make decisions.

They will embrace it whole-heartedly because corporate profits will increase.

The manager of Subsidiary Y will be concerned about the decline in Y's profit and the effect this will have on his/her bonus.

They won't mind because the intercompany transaction will still occur.

They won't notice because all decisions in the decentralized organization are made by the parent.

To be consistent with harmonized international accounting standards

To ensure the independence of external auditors of multinational corporations

To assure international capital markets that auditing has been consistent across companies

To reduce the authority of individual governments to enact accounting laws

Profit centers include the selling function, whereas investment centers are not responsible for sales.

Investment centers may be decentralized, but profit centers are not typically part of a decentralized organization.

Investment centers are responsible for assets, but profit centers are not.

Managers of investment centers have been delegated authority to make decisions autonomously, but managers of profit centers lack this power.

Taxes paid by a parent on foreign branch income is deducted from taxes owed to the parent's home country

Taxes paid by a foreign subsidiary are taken as a credit against a parent's taxes when dividends are received from the subsidiary

Taxing jurisdictions agree to share the taxes paid by a foreign subsidiary

A foreign taxing jurisdiction does not tax a subsidiary within its jurisdiction and allows the parent country to tax the foreign source income

Arm's length prices

Market prices

International prices

Comparable prices

Oversee the internal control system

Oversee internal auditing and the independent public accounting function

Monitor the financial reporting process

All of the above

Proportionate responsibility for damages cannot be determined objectively.

Fairness to the defendants was not relevant to ensuring fairness to the injured party.

Large auditing firms would be paying proportionately higher damage awards than small firms.

Such a policy is inconsistent with harmonization of international auditing standards.

Tax holidays

Tax shelters

Tax havens

Tax centers

Withholding taxes on a downstream transfer

Import duties

Currency devaluation of foreign cash flows

All of the above

Accounting risk

Audit risk

Audit quality

Transaction risk

Tax-based incentives

Local corporate tax rate

Method of determining taxable income

All of the above.

The foreign tax rate is less than 90% of the U.S. corporate income tax rate

Subpart F income is less than 70% of the CFC's total income

Subpart F income is less than 5% of the CFC's total income

None of the above

Current rate

Rate at the beginning of the year

Average rate for the year

Rate at the end of the year

Residence takes precedence over source

Citizenship takes precedence over residence

Source takes precedence over residence

Domestic takes precedence over foreign

Harmonization of accounting standards

Competition for foreign investment

Currencies pegged to another country's currency

None of the above

Cost-plus method

Comparable profits method

Comparable uncontrolled price method

Resale price method

It requires all companies, including foreign enterprises, listed on U.S. stock exchanges to have an internal audit function.

Since 2000, the SEC has been silent with respect to internal auditing.

Internal auditing is recommended by the SEC, but it is not required for listed companies.

Only multinational companies are required to have internal auditing systems.

They have complied with at least 75% of the IFRS

They have complied with at least one-half of the provisions of the IFRS

They have complied with all requirements and interpretations of the IFRS

They have complied with most of the IFRS, or with U.S. GAAP

Citizenship

Residence

Both citizenship and residence

None of the above

The calculations of the taxes are excessively complex.

It discourages foreign direct investment.

Enforcement of the tax law becomes excessively burdensome.

It contributes to accounting diversity.

Management

Audit committee

Government who has jurisdiction over the corporation

American Institute of Certified Public Accountants (AICPA)

Tax is imposed on the foreign subsidiary income in the year it is earned.

Tax is paid on the foreign subsidiary's income when the profits are returned to the U.S. parent as dividends.

The government of the U.S. does not tax foreign source income.

Tax credits for losses incurred by the foreign subsidiary are recognized by the parent currently, but taxes on profits are deferred until dividends are paid.

Additional tax imposed by the IRS related to a transfer pricing audit is offset with a foreign tax credit in the same amount.

When the IRS adjusts an international transfer price, the tax authority in the foreign country makes a corresponding adjustment.

The burden of revising transfer pricing schemes is offset by reduction of the corporate tax rate on foreign source income.

IRS and foreign taxing authorities will collaborate in determining the appropriate international transfer price.

Political implications

Effect on local job availability

Impact on a country's balance of trade

All of the above

All income of the CFC is taxed by the U.S. in the year it is earned rather than when dividends are received.

Some income of the CFC is taxed by the U.S. in the year it is earned rather than when dividends are received.

None of the income generated by the CFC is subject to U.S. tax.

Only interest income from CFC is taxed in the year received by the U.S. government.

Dual transfer pricing systems

Market-based transfer pricing systems

Cost-based transfer pricing systems

Negotiated transfer pricing systems

Preparing the annual report to corporate shareholders

Designing a working system of internal accounting controls

Assuring that financial statement information is high quality

Selecting independent members for the board of directors

Territorial approach

World-wide approach

Legalistic approach

None of the above

To encourage job creation

To encourage foreign investment in the country

To stimulate foreign trade

All of the above

Only the client company

Only shareholders

The client company and shareholders

It depends on a country's laws governing auditor liability.

They are only granted for intercompany transactions between a U.S. parent and a foreign subsidiary.

They are only granted for intercompany transactions between a foreign parent and a U.S. corporation.

In 2003, the IRS approved several thousand advance pricing agreements for U.S. taxpayers.

None of the above is true.