WEEK 1 STUFF

Question 1

Define Information Asymmetry

Answer 1

When stakeholders dont have the same equal access to all relevant information

Question 2

What are the types of information asymmetry problems?

Answer 2

Adverse selection and Moral hazard

Question 3

Types of asymmetry problems

Answer 3

Adverse selection and moral hazard

Question 4

Define adverse selection

Answer 4

With information asymmetry, capital markets may attract the wrong kind of participants

Question 5

Define Moral Hazard

Answer 5

The concept that people will shrink their responsibility if there is no accountability

Question 6

Define Management Bias

Answer 6

Overstating or understating financial information to their benefit (aggressive and conservative accounting)

Question 7

Standard setting parties involved

Answer 7

AcSB, IASB, Provincial securities commission and stock exchanges, FASB and SEC

Question 8

What do we do if we do not have a rule to follow for a specific situation?

Answer 8

Professional judgement

Question 9

What are the primary exchange mechanisms for allocating resources?

Answer 9

Debt and Equity Markets (public stock markets/exchange and private sources)

Financial Institutions

Question 10

What is the underlying theme of the conceptual framework?

Answer 10

Decision usefulness