Accounting & Auditing
Consistency and Comparability Concepts
Comparability is an enhancing qualitative characteristic because it:
A. Improves usefulness of relevant and faithfully represented information
B. Replaces relevance
C. Replaces faithful representation
D. Eliminates materiality
Correct Answer: A
Comparability enhances information that is already relevant and faithfully represented.
Accounting & Auditing
Consistency and Comparability Concepts
A justified policy change should be:
A. Accounted for and disclosed according to applicable standards
B. Hidden
C. Applied only to favorable transactions
D. Ignored
Correct Answer: A
Standards prescribe how policy changes are applied and disclosed.
Accounting & Auditing
Consistency and Comparability Concepts
Consistency applies primarily to:
A. Application of accounting policies and methods over time
B. Bank opening hours
C. Audit firm location
D. Product color
Correct Answer: A
The concept concerns stable accounting treatment across reporting periods.
Accounting & Auditing
Consistency and Comparability Concepts
Which enhances comparability most?
A. Consistent classification and presentation
B. Changing labels every year
C. Omitting accounting policies
D. Combining unrelated items
Correct Answer: A
Stable classification and presentation allow users to trace changes over time.
Accounting & Auditing
Consistency and Comparability Concepts
Cross-company comparison is improved when entities use:
A. Common reporting standards and transparent policies
B. Secret methods
C. Different definitions for the same item
D. No notes
Correct Answer: A
Common standards and disclosure reduce avoidable differences in reporting.
Accounting & Auditing
Consistency and Comparability Concepts
Trend analysis depends heavily on:
A. Comparable information across periods
B. Random policy changes
C. Omission of prior data
D. Cash-only records
Correct Answer: A
Trends are meaningful only when figures are sufficiently comparable.
Accounting & Auditing
Consistency and Comparability Concepts
If prior-period amounts are reclassified, an entity generally should disclose:
A. Nature and amount of reclassification, where required/practicable
B. Nothing
C. Only bank balance
D. Only tax rate
Correct Answer: A
Disclosure helps users understand changes in presentation.
Accounting & Auditing
Consistency and Comparability Concepts
Reclassification of prior-period figures may be needed when:
A. Current presentation changes and reclassification is practicable
B. Cash is low
C. Profit increases
D. Audit starts
Correct Answer: A
Reclassification can align comparative information with the current presentation.
Accounting & Auditing
Consistency and Comparability Concepts
Uniformity can harm comparability when:
A. Different economic circumstances are forced into identical accounting treatment
B. Similar transactions are treated similarly
C. Policies are disclosed
D. Comparatives are presented
Correct Answer: A
Comparability is not achieved by making economically different things appear the same.
Accounting & Auditing
Consistency and Comparability Concepts
Consistency should not be used to justify:
A. Continuing an inappropriate accounting policy
B. Stable classification
C. Comparable presentation
D. Clear disclosure
Correct Answer: A
Consistency is not a reason to retain a policy that is no longer appropriate or permitted.
Accounting & Auditing
Consistency and Comparability Concepts
A change in accounting estimate differs from a change in accounting policy because an estimate change generally arises from:
A. New information or developments
B. A desire to rewrite history
C. A new owner only
D. Cash theft
Correct Answer: A
Estimates are revised when new information or experience changes measurement expectations.
Accounting & Auditing
Consistency and Comparability Concepts
If a policy changes, disclosure of the nature and effects helps preserve:
A. Comparability
B. Cash flow
C. Legal ownership
D. Inventory custody
Correct Answer: A
Transparent explanation allows users to understand the effect of the change.
Accounting & Auditing
Consistency and Comparability Concepts
Comparative financial statements commonly present:
A. Current and prior-period information
B. Current period only
C. Future period only
D. Cash transactions only
Correct Answer: A
Prior-period figures provide a benchmark for comparison.
Accounting & Auditing
Consistency and Comparability Concepts
Comparability does NOT mean:
A. Making unlike transactions look alike
B. Providing consistent classification
C. Explaining changes in policy
D. Presenting comparative figures
Correct Answer: A
True comparability requires unlike items to remain distinguishable.
Accounting & Auditing
Consistency and Comparability Concepts
Using the same depreciation method for similar assets each year generally enhances:
A. Consistency
B. Secrecy
C. Liquidity
D. Materiality threshold
Correct Answer: A
Stable application of methods improves period-to-period comparison.
Accounting & Auditing
Consistency and Comparability Concepts
A change in accounting policy may be appropriate when:
A. Required by a standard or it provides more reliable/relevant information
B. Management wants to hide a loss
C. Profit is low
D. No reason exists
Correct Answer: A
Policy changes require a valid reporting justification, not earnings manipulation.
Accounting & Auditing
Consistency and Comparability Concepts
Consistency and comparability are:
A. Related but not identical concepts
B. Exactly the same in all respects
C. Unrelated to financial reporting
D. Cash management methods
Correct Answer: A
Consistency supports comparability, but comparability does not require uniformity where circumstances differ.
Accounting & Auditing
Consistency and Comparability Concepts
Comparability helps users:
A. Identify similarities and differences between items
B. Guarantee accuracy
C. Eliminate estimates
D. Predict with certainty
Correct Answer: A
Comparability enables meaningful comparison across periods and entities.
Accounting & Auditing
Consistency and Comparability Concepts
The consistency principle encourages an entity to:
A. Apply accounting policies consistently from period to period unless change is justified
B. Never change any estimate
C. Use different methods each year
D. Ignore standards
Correct Answer: A
Consistent application helps users compare results over time; justified changes may still be required.
Accounting & Auditing
Going Concern Concept
The going-concern concept is most directly connected with preparation of:
A. General purpose financial statements
B. Only payroll sheets
C. Only purchase orders
D. Only bank deposit slips
Correct Answer: A
Going concern is a fundamental consideration in preparing general purpose financial statements.