Chapter 8 - System-oriented accounting theory P1

. In relation to Political Economy Theory, which of the following statements is false?

A. Political Economy Theory views society, politics and economics as inseparable

B. Political Economy Theory is derived from Positive Accounting Theory

C. Legitimacy Theory and Stakeholder Theory are derived from Political Economy Theory.

D. Political Economy Theory can be divided into 'classical' and 'bourgeois' political economy. theories

The difference between 'classical' and 'bourgeois' political economy theory is that:

A. 'Classical' political economy theory explicitly considers class conflict and the role of the state in its analysis, while 'bourgeois' political economy theory does not

B. 'Bourgeois' political economy theory explicitly considers class conflict and the role of the state in its analysis, while 'classical' political economy theory does not.

C. 'Classical' political economy theory is a normative theory, whereas bourgeois' political economy theory is a positive theory

D. 'Bourgeois' political economy theory is a normative theory, whereas 'classical' political economy theory is a positive theory.

Which of the following statements is false?

A. Legitimacy Theory is derived from 'classical' political economy theory.

B. Legitimacy Theory suggests that organisations will act in a way that society perceives as legitimate.

C. Legitimacy Theory relies upon the notion of the 'social contract'.

D. Legitimacy Theory asserts that organisations will attempt to ensure that society perceives their actions as 'legitimate'.

The idea of the 'social contract' is that corporations only exist because they benefit:

A. Shareholders

B. Governments

C. Managers

D. Society

The 'legitimacy gap' of a corporation will narrow when:

A. A corporation discloses good news about its behaviour but its actual behaviour declines.

B. A corporation discloses bad news about its behaviour but its actual behaviour improves

C. Societal expectations of appropriate corporate behaviour increase.

D. None of the given options are correct.

Which of the following is not a means by which an organisation may attempt to legitimise its activities?

A. Adapting its output, goals and methods of operation to conform to prevailing definitions of legitimacy

B. Attempting, through communication, to alter the definition of social legitimacy so that it conforms to the organisation's present practices, outputs and values

C. Asserting its right to operate under the existing regulatory framework that has been determined by society.

D. Attempting, through communication, to become identified with symbols, values or institutions that have a strong base of legitimacy.

An example of a legitimising symbol would be:

A. The World Wide Fund for Nature assessing compliance with the Australian Minerals Industry Code

B. Monsanto employing the former CEO of Greenpeace Australia as a consultant

C. Changing the name of a company from 'British Petroleum' to 'Beyond Petroleum'

D. All of the given options are correct

Empirical findings consistent with Legitimacy Theory would be increased disclosure of:

A. Environmental good news, immediately following prosecutions for breaches of environmental standards

B. Environmental bad news, immediately following prosecutions for breaches of environmental standards

C. Environmental good news, immediately preceding prosecutions for breaches of environmental standards

D. Environmental bad news, immediately preceding prosecutions for breaches of environmental standards

According to Legitimacy Theory, the annual report is:

A. A means to assist users in legitimately allocating scarce resources

B. A tool to legitimise the ongoing operations of the organization

C. A legitimate account of the activities of the organisation for the period

D. All of the given options are correct

The difference between Positive Accounting Theory and Legitimacy Theory is that:

A. Legitimacy Theory does not rely on the assumption that all action is driven by individual selfinterest.

B. Legitimacy Theory makes no assumptions about the efficiency of markets

C. Legitimacy Theory suggests that organisations have a 'social contract' with society.

D. All of the given options are correct

Chapter 8 - System-oriented accounting theory P1

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