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1

What term should be used to describe the current economic system in the People's Republic of China?

A. Communist

B. Socialist market

C. Totalitarian

D. Free enterprise

B. Socialist market

2

What is the basis for the People's Republic of China's current economic system?

A. Government ownership of all businesses and economic resources

B. Private ownership of all business enterprises

C. Competition between state-run entities and private businesses

D. Congressional planning of industrial output and consumption

C. Competition between state-run entities and private businesses

3

Among the world's nations, where does the People's Republic of China rank in terms of receiving foreign direct investment?

A. First

B. Fourth

C. Tenth

D. Fifth

A. First

4

The People's Republic of China (PRC) made economic reforms in the 1980s to encourage international trade. What impact have these reforms made on accounting?

A. Increased the demand for accounting information from investors

B. Increased the supply of publicly available accounting information from Chinese companies

C. Changed the nature of auditing in the PRC

D. All of the above are true.

D. All of the above are true.

5

What recent event has given the People's Republic of China an incentive to harmonize its accounting standards?

A. Collapse of Arthur Andersen

B. Membership in the NATO

C. Admission to the WTO

D. Establishment of the CSRC

C. Admission to the WTO

6

Which of the following are the requirements of the laws of Sino-foreign joint ventures?

A. Tax returns of joint ventures must be audited by Chinese CPAs.

B. Annual financial reports of joint ventures must be audited by registered Chinese CPAs.

C. Capital contributions by investors must be verified by Chinese CPAs.

D. All of the above statements are true about Chinese joint ventures.

D. All of the above statements are true about Chinese joint ventures.

7

What is the primary source of finance for German companies?

A. Issuance of stock

B. Corporate bonds

C. Bank loans

D. Government grants

C. Bank loans

8

Which of the following countries has NOT had its accounting systems significantly influenced by Germany?

A. Switzerland

B. Denmark

C. Japan

D. France

D. France

9

What was the primary influence on Germany's accounting regulations from the mid-1980's until very recently?

A. The Stock Corporation Law

B. The directives of the European Union

C. The Companies Act

D. The U.S. Financial Accounting Standards Board

B. The directives of the European Union

10

Why do German companies willingly take a conservative position in calculating income?

A. To minimize tax

B. To keep employees from asking for higher wages

C. To report stable income over time for dividend purposes

D. All of the above

D. All of the above

11

The Japanese economy is dominated by "keiretsu." What are these?

A. Warlords that control Japanese wealth

B. Local governmental entities

C. Large conglomerates

D. Joint ventures with foreign investors

C. Large conglomerates

12

What links the components of a Japanese keiretsu?

A. A governmental agency

B. A common industry affiliation

C. A common market

D. A bank

D. A bank

13

Keiretsu controls more than one-fourth (1/4) of the assets in Japan. What cultural value is reflected in this business structure?

A. Professionalism

B. Optimism

C. Collectivism

D. Conservatism

C. Collectivism

14

What is the reason given for a relatively low emphasis on public disclosure of financial information in Japan?

A. Significant reliance on bank credit for financing

B. Long-term cross-corporate ownership of stock

C. Income is not viewed as a measure of corporate performance

D. All of the above

D. All of the above

15

Why is public disclosure of financial information less important in Japan than in other industrialized countries?

A. Very few corporations

B. Undeveloped stock exchange

C. Heavy reliance on bank financing

D. Strong government control of corporations

C. Heavy reliance on bank financing

16

What was the "Big Bang" in Japan?

A. The stock market crash of 1929

B. The unprecedented decline in exports and stock prices in the late 1980's

C. The changes in accounting regulation that occurred in the late 1990's

D. The growth of the Japanese economy from the 1950's to the 1980's

C. The changes in accounting regulation that occurred in the late 1990's

17

Privatization of Mexican businesses has been encouraged by:

A. North American Free Trade Agreement (NAFTA).

B. governmental attempts to improve long-term economic growth.

C. loosening restrictions on foreign investment.

D. All of the above

D. All of the above

18

What type of economic system presently exists in Mexico?

A. Socialist market

B. Communist

C. Free market

D. Planned economy

C. Free market

19

Mexican corporations can issue three types of stock—Series A, Series B, and Series N. Series A stock can only be owned by Mexican nationals. These shares must constitute at least what percentage of corporate voting rights?

A. 51%

B. 49%

C. 25%

D. 10%

A. 51%

20

What currency is used in Mexico?

A. Peseta

B. Peso

C. Mexican dollar

D. Bolivar

B. Peso

21

What is the main source of corporate financing in the United Kingdom?

A. Banks

B. Capital markets

C. Government grants

D. Royal families

B. Capital markets

22

Which of the following represents the primary source of funds for Japanese businesses?

A. Government grants

B. Bank credit and cross-corporate ownership

C. Corporate bonds

D. Outside equity financing

B. Bank credit and cross-corporate ownership

23

Which term refers to an affiliate relationship between an accounting/auditing firm and its sponsoring organization?

A. Parent/subsidiary

B. Hooking up

C. Guanxi

D. Principal/Agent

B. Hooking up

24

Why is the validity and reliability of financial disclosures of limited importance in the People's Republic of China (PRC)?

A. Chinese investors look for long-term stock price gains, which are not based on fundamental company data.

B. The government owns all of the corporate stock traded in the PRC.

C. Most of the stock purchased in the PRC is held for only a short period of time.

D. Most of the stock is rated by the government of the PRC in terms of its quality.

C. Most of the stock purchased in the PRC is held for only a short period of time.

25

Which of the following statements is true about accounting in China?

A. Accounting has a long history, dating back thousands of years.

B. The first professional accounting body in the People's Republic of China was established in 1988.

C. Its roots can be found in the teachings of the philosopher and educator Confucius.

D. All of the above statements are true.

D. All of the above statements are true.

26

Which of the following is true of CICPA and CACPA in the People's Republic of China (PRC)?

A. These are two translations of a single Chinese professional association from Mandarin to English.

B. The CICPA was the professional association for accountants and the CACPA is the professional association for auditors.

C. The CICPA was the professional association for CPAs in private practice and the CACPA is the professional association for accountants in public practice in the PRC.

D. None of the statements above is true.

B. The CICPA was the professional association for accountants and the CACPA is the professional association for auditors.

27

What reason is given for the stagnation of accounting development during the "Cultural Revolution" in China (1966-1976)?

A. Over-simplification of accounting was pursued to make it accessible to a broad populace.

B. There was very little business being transacted in China during the Cultural Revolution.

C. Businesses in China were converting to international accounting standards during this period of time so they stopped developing new standards.

D. Auditors took over the development of accounting practice.

A. Over-simplification of accounting was pursued to make it accessible to a broad populace.

28

What functional area dominates the accounting profession in Germany?

A. Taxation

B. Auditing

C. Financial reporting

D. Managerial Accounting

B. Auditing

29

How does the cultural value of collectivism explain the status of auditors in Japanese society?

A. Collectivism places great importance on individual responsibility, giving auditors a high status in Japanese society.

B. Since outsiders are not trusted in the Japanese culture, independent auditors in Japan do not enjoy the status of American auditors.

C. As individual achievement is a hallmark of collectivism, auditors are commonly found at the top of Japanese corporations.

D. Collectivism values the ability of individuals to collect resources for themselves, so auditors who achieve distinction in their profession are highly regarded.

B. Since outsiders are not trusted in the Japanese culture, independent auditors in Japan do not enjoy the status of American auditors.

30

The population of Japan is about 1/3 the population of the United States. There are approximately 250,000 CPAs in the U.S. What is the approximate number of CPAs in Japan?

A. 250,000

B. 100,000

C. 85,000

D. 15,000

D. 15,000