International Accounting Final Exam 77

60 Questions | Total Attempts: 364

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Accounting Quizzes & Trivia

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Questions and Answers
  • 1. 
    Under U.S. tax laws, how are taxes paid by U.S. corporations to foreign governments treated? 
    • A. 

      Total foreign taxes paid are deductions in calculating taxable income.

    • B. 

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

    • C. 

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

    • D. 

      None of the above.

    • E. 

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

  • 2. 
    Which of the following is a reason for a parent to use discretionary transfer prices?
    • A. 

      Improve competitive position of foreign operation

    • B. 

      Minimize import duties

    • C. 

      Avoid restrictions on repatriation funds

    • D. 

      All of the above

  • 3. 
    In following the international norm concerning tax jurisdiction, how would double taxation be eliminated?
    • A. 

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

    • B. 

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

    • C. 

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

    • D. 

      None of the above

  • 4. 
    What is the term used for intercompany transactions from a parent to a subsidiary? 
    • A. 

      Upstream transfer

    • B. 

      Downstream transfer

    • C. 

      International transfer

    • D. 

      None of the above

  • 5. 
    Under Securities and Exchange Commission regulations, who may be a member of an audit committee for a listed company? 
    • A. 

      Any member of the corporate board of directors

    • B. 

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

    • C. 

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

    • D. 

      Any manager or director of the corporation

  • 6. 
    In addition to regulating the transfer prices on tangible property, the Internal Revenue Service also provides guidance on: 
    • A. 

      Interest charged on intercompany loans

    • B. 

      Transfer prices for intangible property

    • C. 

      Charges for intercompany services

    • D. 

      All of the above

  • 7. 
    The monetary amount used to record intercompany transactions is called: 
    • A. 

      Exchange rate

    • B. 

      Transfer price

    • C. 

      Conversion rate

    • D. 

      incremental cost

  • 8. 
    Withholding taxes on dividends paid by a foreign subsidiary to a parent can be reduced by 
    • A. 

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

    • B. 

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

    • C. 

      Negotiated transfer pricing

    • D. 

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

  • 9. 
    Which of the following terms is NOT defined by statute in the companies laws of the United Kingdom? 
    • A. 

      Accountant

    • B. 

      Auditor

    • C. 

      Independence

    • D. 

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

  • 10. 
    Which of the following is NOT a factor influencing the probability that an auditor will detect an accounting error? 
    • A. 

      Competence of the auditor

    • B. 

      Quality review and monitoring

    • C. 

      Financial reporting requirements

    • D. 

      Independence of the auditor

  • 11. 
    What is the meaning of "tax system neutrality?" 
    • A. 

      Taxes should be minimized.

    • B. 

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

    • C. 

      Tax policies should be unbiased.

    • D. 

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

  • 12. 
    An auditor may be subject to criminal liability under which of the following situations? 
    • A. 

      She willingly participates in defrauding the company's stockholders.

    • B. 

      She breaks a contract with the client.

    • C. 

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

    • D. 

      None of the above

  • 13. 
    What is a major limitation to the apparent incentive of tax holidays? 
    • A. 

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

    • B. 

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

    • C. 

      The tax holidays are only available to large multinational corporations.

    • D. 

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

  • 14. 
    What does ISA 700 say about the interpretation of an audit opinion? 
    • A. 

      It enhances the credibility of the financial statements of corporation.

    • B. 

      It guarantees the future viability of the corporation.

    • C. 

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

    • D. 

      It tells shareholders that management has operated the corporation efficiently.

  • 15. 
    In what area is external auditing consistent internationally? 
    • A. 

      Audit report

    • B. 

      Auditing standards

    • C. 

      Regulation of the profession

    • D. 

      None of the above

  • 16. 
    The OECD believes which group in a multinational corporation should oversee the financial reporting function to ensure that appropriate controls are in place to safeguard information integrity? 
    • A. 

      Corporate management

    • B. 

      Internal auditors

    • C. 

      Board of directors

    • D. 

      Information systems department

  • 17. 
    What group is responsible for developing international auditing standards? 
    • A. 

      International Accounting Standards Board (IASB)

    • B. 

      International Auditing and Assurances Standards Board (IAASB)

    • C. 

      International Organization of Securities Commissions (IOSCO)

    • D. 

      Organization for Economic Cooperation and Development (OECD)

  • 18. 
    What explains the reason for the historically very low (1/3% to ½%) limit on allowance for doubtful accounts in China? 
    • A. 

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

    • B. 

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

    • C. 

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

    • D. 

      All of the above

  • 19. 
    What is the primary advantage of a negotiated transfer price? 
    • A. 

      It is objectively determined.

    • B. 

      It reflects managers' ability to control cost.

    • C. 

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

    • D. 

      It preserves managerial autonomy to make decisions.

  • 20. 
    Refer to item #15. How will subsidiary managers in the decentralized organization view this decision by parent company management? 
    • A. 

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

    • B. 

      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.

    • C. 

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

    • D. 

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

  • 21. 
    Why is international harmonization of auditing standards important? 
    • A. 

      To be consistent with harmonized international accounting standards

    • B. 

      To ensure the independence of external auditors of multinational corporations

    • C. 

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

    • D. 

      To reduce the authority of individual governments to enact accounting laws

  • 22. 
    What is the difference between a profit center and an investment center? 
    • A. 

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

    • B. 

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

    • C. 

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

    • D. 

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

  • 23. 
    An indirect foreign tax credit arises when: 
    • A. 

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

    • B. 

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

    • C. 

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

    • D. 

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

  • 24. 
    IRS code Section 482 describes appropriate transfer prices as "the prices which would have been agreed upon between unrelated parties engaged in the same or similar transactions under the same or similar conditions in the open market." How does it refer to such prices? 
    • A. 

      Arm's length prices

    • B. 

      Market prices

    • C. 

      International prices

    • D. 

      Comparable prices

  • 25. 
    Which of the following is the responsibility of an audit committee? 
    • A. 

      Oversee the internal control system

    • B. 

      Oversee internal auditing and the independent public accounting function

    • C. 

      Monitor the financial reporting process

    • D. 

      All of the above