Accounting Ethics Full Study Guide
The outcome of responsible leadership includes A. Ethical competencies B. Ethical culture C. Ethical leadership D. Personal ethical skills E. Ethical rules of conduct
Answers: A, B, C
The Medicis Pharmaceutical Case is a good example of an audit failure caused by a lack of A. due care B. independent auditors C. professional skepticism D. technical knowledge
Answers: A, C
The Omnicare case allowed liability under Securities Act of 1933 Section 11 when (select all that apply): A. The complaint called into question the basis for a wrong opinion. B. The plaintiff identifies immaterial omissions that make the statements misleading. C. The issuer of the opinion held a subjective belief inconsistent with the opinion.
Answers: A, C
Which of the following are features of egoism? (Check all that apply) A. Consequences of actions B. Acting in the best interests of others C. Pursuit of self-interest D. Acting in the public interest
Answers: A, C
Which of the following are ethical dilemmas that Diem-Thi Le faced while working for the Defense Contract Audit Agency (select all that apply): A. modified audit findings B. misallocation of bad debt expenses C. misallocation of costs to government contracts D. deleted audit working papers
Answers: A, C, D
Trevino suggests the pillars of ethical leadership include A. Moral manager B. Values-based leadership C. Community of people D. Moral person
Answers: A, D
Which of the following guide accountants when making a professional judgment? (Select all that apply) A. Independence B. Objectivity C. Personal values D. Professional skepticism E. Ethical awareness F. Subjectivity
Answers: B, C, D, E
The full disclosure of information leads to _____.
The full disclosure of information leads to honesty.
_____ ethics looks at the way individuals actually behave in moral circumstances.
behavioral
In the context of business, the decision one makes can be influenced by _____ culture.
corporate
Which social and organizational pressure has lead to poor ethical judgments in financial reporting?
desire to please authority
The duties of an accounting professional are based on the _____ of investors and creditors.
rights
An auditor who reasons at stage 5 should emphasize ______.
the public interest
True or false: Responsible leaders encourage auditors to exercise professional skepticism
true
One difference between virtue theory and other moral philosophies is ______.
virtue applies both to the decision maker and the act under consideration
Put the stages in audit-related dispute in order
1 Loss generating event 2 Link the losses with material misstatements or omissions in the financial statements 3 The legal process 4 The final resolution of the dispute
Which threat to independence occurs when a close relationship is formed between the CPA and an attest client? A. Familiarity threat B. Undue influence threat C. Management participation threat D. Financial self-interest threat
A. Familiarity threat
Which of the following is another way of saying that a moral meltdown has occurred at a company that has experienced an ethical collapse? A. Good people in companies do really dumb things. B. Failing to meet earnings estimates C. Unethical actions are not reported. D. Failing to be loyal to the company's interests
A. Good people in companies do really dumb things.
What must be proven for an accountant to successfully assert the materiality defense? A. Information would not have affected the decision-making of a reasonable investor B. The information provided did not cause damages C. The information would have deterred the average prudent investor from purchasing the securities D. There were minor inaccuracies or erosion in matters relevant to investors
A. Information would not have affected the decision-making of a reasonable investor
______ means to act on principle rather than expediency. A. Integrity B. Reliability C. Persistence D. Convenience
A. Integrity
In being good citizens, accountants and auditors should strive to enhance the reputation of ______. A. the accounting profession B. their clients C. the Internal Revenue Service D. their CPA firm
A. The accounting profession
Whistleblowing in accounting is a duty when it is motivated by ______. A. determination to protect the public interest B. pressure from lower level coworkers C. desire to harm the organization D. a fear of future consequences
A. determination to protect the public interest
The opinion section of the audit report A. expresses the auditor's conclusions based on the audit. B. identifies the statements examined. C. explains the audit procedures used. D. explains the conclusions reached on internal controls.
A. expresses the auditor's conclusions based on the audit.
Whenever a significant event takes place, companies whose securities are listed and traded on stock exchanges should file A. form 8-K. B. form S-K. C. form S-X. D. form 10-K.
A. form 8-K.
Which of the following are important components of tone at the top? (Select all that apply) A. Communicating the importance of compliance to employees B. Enforcing disciplinary actions C. Rarely modeling company values
Answers: A, B
Which of the following are potential concerns of the whistleblowing program? (Select all that apply) A. Permitting compliance officers to become whistleblowers based on the passage of time may dissolve trust in compliance officials. B. A self-interested person may reveal company information with inadequate safeguards as to the quality of the information. C. The whistleblowing program gives incentive to employees to report fraud and protects them from retaliation. D. The whistleblowing program protects the identity of individuals who report fraud, and this may be necessary information.
Answers: A, B
An opportunity for fraud to occur exists because of: (Check all that apply). A. Estimates and judgments that are subjective B. Unusual and complex transactions C. Significant related-party transactions D. Absence of any transactions across international borders E. Over-reliance on earnings from one geographical location
Answers: A, B, C
What might auditors be liable to clients for in addition to breach of contract? (Check all that apply). A. Failure to follow GAAS B. Fraud C. Ordinary negligence D. Failing to inform the SEC of fraud
Answers: A, B, C
Which of the following are common cognitive traps that our judgment can incur? (Select all that apply) A. Groupthink B. Problem solving rush C. Judgment triggers D. Professional skepticism E. Moral biases
Answers: A, B, C
Which of the following are various forms of egoism? (Check all that apply) A. Ethical egoism B. Rational egoism C. Enlightened egoism D. Deontological egoism
Answers: A, B, C
Safeguards that might eliminate or reduce threats to independence include those ______. (Check all that apply) A. created by the profession B. created by legislation C. implemented by the attest client D. created by the facts of a particular situation E. identified in peer reviews F. implemented by the firm
Answers: A, B, C, F
A responsible leader possess which of the following qualities (select all that apply): A. cognitive abilities B. emotional abilities C. timeliness D. moral
Answers: A, B, D
Behavioral ethics ______. (Select all that apply) A. looks at how situational and social forces influence the actual behavior of individuals B. requires explaining moral and immoral behavior in systematic ways C. looks at how individuals believe they should act D. requires understanding the consequences of actions
Answers: A, B, D
What is the purpose of the auditor's assessment of the control environment? (Check all that apply). A. assess whether management's operating style is effective B. Support the independent auditor's opinion C. assess whether top management ethical values are understood
Answers: A, C
Audit committee communications about difficulties encountered during the audit include: (Check all that apply). A. Significant delays by management in providing needed audit evidence B. Changes in audit personnel due to conflicts with management C. Extensive effort required to obtain adequate audit evidence D. Conclusion that a modified opinion will be issued E. Reluctance of management to provide going concern assessments when requested F. Unreasonable restrictions placed by management during the audit
Answers: A, C, E, F
When should the auditor issue a modified opinion? (Select all that apply) A. The auditor finds an emphasis-of-matter situation that is fundamental to users' understanding of the financial statements. B. The auditor is unable to obtain sufficient evidence indicating the financial statements are free from material misstatement. C. The auditor obtains evidence indicating the financial statements are materially misstated. D. The auditor finds litigation uncertainty that is appropriately disclosed in the financial statements.
Answers: B, C
Which of the following are objectives when performing an integrated audit? (Select all that apply) A. Obtain sufficient evidence to support auditor's guarantee that financial statements are free of material misstatements. B. Obtain sufficient evidence to support the auditor's control risk assessments for audit of financial statements. C. Obtain sufficient evidence to support the auditor's opinion on ICFR at year-end. D. Obtain sufficient evidence to support auditor's opinion that immaterial errors have been detected.
Answers: B, C
Which of the following sets a precedent for judges deciding similar cases moving forward? (Select all that apply) A. Federal statutory law with civil liability B. Common law liability to clients C. Common law liability to third parties D. Federal statutory law with criminal liability
Answers: B, C
All of the following are internal controls failures that led to FPCA violations in the Halliburton case (select all that apply) A. independence violations B. failure to conduct competitive bidding C. management override D. avoidance of a committee that reviews contracts
Answers: B, C, D
The sources of rules that should guide ethical behavior of CPAs include which of the following? (Check all that apply) A. Voluntary organizations B. State CPA societies C. State board of accountancy regulations D. AICPA Code of Conduct E. Philosophical reasoning methods
Answers: B, C, D
To sustain an allegation of fraud against the auditor when false or misleading information exists in the registration statement, a third party must prove: (Check all that apply). A. Knowledge by the auditor that reliance would be placed on the financial statements B. The specific security purchased was offered through the registration statement C. Third party was not reckless in its use of the financial statements D. A material misstatement or omission in the financial statements existed E. Damages were incurred
Answers: B, D, E
Which of the following are rules managers should follow when fostering ethical leadership? (Select all that apply) A. Choose the action that maximizes earnings. B. Always put shareholder interest first. C. Think about potential actions before making a decision. D. Do not choose actions that will harm others. E. Consider how actions will affect others. F. Make decisions that respect the rights of others.
Answers: C, D, E, F
Which of the following is conducted primarily to satisfy the public interest? A. Bookkeeping services B. Audit services C. Tax services D. Consulting services
B. Audit services
Which concept in Section 10(b) makes an auditor liable for a false or misleading statement to the public? A. Negligence rule B. Bright-line rule C. Significant weakness D. Material weakness
B. Bright-line rule
An auditor's affinity for and identification with the audit profession is referred to as A. Commitment to the firm B. Professional identity C. Commitment to the organization D. Commitment to colleagues
B. Professional identity
Pervasive effects on the financial statements require A. An adverse opinion B. Professional judgment by the auditor C. A disclaimer of opinion D. Withdrawal from the engagement
B. Professional judgment by the auditor
Applying ethical reasoning to identify shareholder interests and the effect of actions on shareholders is inconsistent with which cognitive judgment trap? A. Confirmation tendency B. Rush to judgment C. Availability tendency D. Judgment triggers E. Groupthink
B. Rush to judgment
What must a plaintiff prove for a private cause of action to fall under Rule 10b-5? A. Negligence B. Scienter C. Recklessness D. Negligent nonfeasance
B. Scienter
The basic tenet of deontology is ______. A. enlightened egoism B. a duty to respect rights of others C. to maximize net benefits over harms D. a duty to satisfy employer interests
B. a duty to respect rights of others
As a community of people, an ethical organization seeks to achieve A. benefits to the individual B. a level of excellence C. respect from the public D. external rewards of the practice
B. a level of excellence
According to the 2013 NBES Survey of Reporting of Observed Misconduct, all instances of observed misconduct ______. A. have stayed the same B. have declined C. have increased
B. have declined
How were the tests to establish negligence to third parties demonstrated in the Credit Alliance case? A. Losses incurred by Credit Alliance were linked to false financial statements B. Demonstrated that a privity relationship existed C. Andersen was aware Credit Alliance was relying on the statements prior to extending credit D. Andersen did not know Credit Alliance would rely on the statements
C. Andersen was aware Credit Alliance was relying on the statements prior to extending credit
When a business is driven into bankruptcy because it went into debt in reliance on overstated financial statements, this is an example of: A. Damage B. Breach of Duty C. Causation D. Contributory negligence
C. Causation
Which concept is identified as an operation of a control that does not allow management to detect misstatements on a timely basis in the normal course of performing their assigned functions? A. Negligence B. Material weakness C. Deficiency D. Significant weakness
C. Deficiency
While working for the Defense Contract Audit Agency, Diem-Thi Le was faced with an ethical dilemma when: A. Her supervisor took credit for Le's audit conclusions B. The contractor-client threatened to report Le to the regional manager C. Her supervisor deleted the audit findings from Le's working papers D. The contractor-client threatened to go to her supervisor unless the audit opinion was changed
C. Her supervisor deleted the audit findings from Le's working papers
Deontology is focused on the ______ of a particular behavior. A. consequences B. outcomes C. intentions
C. Intentions
Which of the following is not a factor that influences trainee auditors' willingness to report wrongdoing? A. Situational variables B. Audit firm organizational structures C. Personal characteristics of target of whistleblowing D. Personal characteristics of whistleblowers
C. Personal characteristics of target of whistleblowing
The Phar-Mor ruling builds on the concept of gross negligence by linking it to: A. Fraud B. Ordinary negligence C. Reckless disregard for the truth D. Foreseen third-party users
C. Reckless disregard for the truth
Obeying laws, being informed, and voting in elections are all important parts of ______. A. loyalty B. fairness C. caring D. citizenship
D. Citizenship
What rationalization did Dennis Kozlowski use in the Tyco fraud? A. Shareholders sanction it B. Aggressive accounting is acceptable C. It was a one-time fix D. My predecessors did it
D. My predecessors did it
The legal liability of auditors was expanded under Rosenblum to include which following approach? A. Actually foreseen third party B. Actually foreseeable C. Foreseen third party D. Reasonably foreseeable third party
D. Reasonably foreseeable third party
A common reason why management has the opportunity to commit fraud is A. The auditors fail to meet their obligations B. It only occurs one time C. The audit committee is ineffective D. They can override internal controls
D. They can override internal controls
The auditor should communicate asset misappropriations to A. The SEC B. Attorneys to determine legal obligations C. The offending employee D. Those charged with governance
D. Those charged with governance
Which of the following is not an ethical consideration for Madison in the 3D Printing case?
Determining how best to be loyal management in the company
The responsibility for preventing and detecting fraud belongs to whom? A. The external auditor B. The AICPA C. The internal auditor D. The IRS E. Management
E. Management
Which group considers long-range objectives and the well being of others while their own self-interest remains paramount in decision-making?
Enlightened Egoists
Which brand of egoism claims that the promotion of one's own good is in accordance with morality?
Ethical Egoism
_____ decision making centers on how we act when no one is looking.
Ethical decision making centers on how we act when no one is looking.
Ethical relativism is the belief that morality is relative to the _____ of one's culture.
Ethical relativism is the belief that morality is relative to the norms of one's culture.
The requirement that all companies registered with the SEC maintain internal accounting controls to ensure that all transactions are authorized by management and are recorded properly was established by the _____.
FCPA
CPAs must avoid relationships that might otherwise impair audit _____.
Independence
Giving each person what he/she deserves is a way to describe _____.
Justice
Cognitive development is based upon 20 years of research by whom?
Lawrence Kohlberg
Organizational values Individual values
Should be visible within the organization Are internal to the being of the individual
A CMA compares the harms and benefits of recording the transactions in question versus not recording them. This is an application of ______.
Utilitarianism
A CPA should decline to perform audit services for a client when ______. (Check all that apply)
a conflict exists due to certain non-audit services performed for a client independence has been compromised
The Principles of the AICPA Code of Professional Conduct can best be described as ______.
aspirational statements
In stage 1 of Kohlberg's model, behavior is driven by the desire to ______.
avoid punishment
The failure to live up to the terms of the contract is known as _____ of contract.
breach
The thought process followed in one's moral development is _____ _____.
cognitive development
The type of commitment that is dependent on a sense of responsibility and readiness to support others within the organization is _____ commitment.
colleague
The due care standard calls for continued improvement in the level of _____ and quality of services.
competency
In considering whether to go outside the company, an accountant should be most concerned with his/her _____ obligation.
confidentiality
Each of the following are characteristics of objectivity, except ______.
conflicts of interest
The reckless disregard for the truth standard in Phar-Mor links auditor behavior to gross negligence or _____ fraud. (Enter one word per blank)
constructive
Which concept involves treating individuals with respect and celebrating the rich dimensions of individuality?
diversity
The ethics of whistleblowing have been questioned because Dodd-Frank _____ the practice.
encourages
The purposeful manipulation of financial statements is called financial statement _____.
fraud
Which concept involves motivating employees so that they feel a part of the organization?
inclusion
Auditors render an _____ opinion on the conformity of the financial statements with _____.
independent, GAAP
Principles people use to decide what is right and wrong in the ethical decision-making process are referred to as _____ values.
indivdual
The guiding principle used to resolve conflicts that may exist between the interests of the client or one's employer and the public interest is acting with _____.
integrity
Fraud always entails a(n) _____ decision.
intentional
An unintended consequence of rights theory is that ______.
it might lead to disastrous consequences for others
The process of reaching a decision or drawing a conclusion where there are a number of possible alternative solutions is referred to as _____.
judgement
When evaluating the risk of material misstatements in financial statements, professional _____ is imperative for accountants.
judgement
When a company retaliates against an employee for bringing bad news to the attention of top management, a _____ the _____ syndrome exists.
kill, messenger
The Dodd-Frank Act contains _____ incentives for whistleblowers.
monetary
Honesty, Fairness, and Objectivity are ethical _____ of the Institute of Management Accountants
principles
The exercise of professional judgment is dependent on a mindset of _____ _____.
professional skepticism
To approach an audit with a questioning mind requires _____ _____.
professional skepticism
The foundation of the Principles in the AICPA Code includes ______. (Check all that apply)
public trust values of the profession
The intent to deceive, manipulate, or defraud is known as _____.
scienter
A firm will hire and promote individuals who fit into the prevailing firm culture as a result of the _____-_____ bias.
selection-socialization
Accountants who go along with fraudulent financial statements begin the slide down the ethical ______ ______.
slippery slope
Competence, Confidentiality, and Credibility are _____ of the Statement of Ethical Professional Practice of the Institute of Management Accountants.
standards
The philosopher Alasdiar MacIntyre relates virtue to community through ______. (Check all that apply)
standards of excellence internal rewards of practice
When the rules are unclear, ethical decision making may require a person to take an action that may not be in his/her best interest. This is best described as ______.
the moral point of view
An effort was made to enhance confidence and public trust in financial reporting following ______.
the scandals at Enron and Worldcom
Responsibilities to the key constituent groups of the ethical domain for accountants and auditors may conflict.
true
True or false: SSARS 21 separates the reporting on financial statements from the preparation of financial statements.
true
When people need to resolve issues in their daily lives, they often make decisions based on their own _____.
values
The objective of transformational leadership is A. Create change in individuals and social systems B. Build long-term shareholder value C. Become authentic leaders D. Adjust follower ethics to conform to organizational ethics
A. Create change in individuals and social systems
What is the purpose of assessing audit risk and materiality? A. Determine nature, timing, and extent of auditing procedures B. Evaluate independence issues C. To draw a conclusion about the proper opinion to issue D. Evaluate internal controls
A. Determine nature, timing, and extent of auditing procedures
Which of the following would help prevent and detect financial statement fraud? A. Effective internal audit function B. Unethical leadership C. Ineffective external audit D. Increased moral intensity of a decision
A. Effective internal audit function
Which of the following is not a type of fraud? A. Errors in financial statements B. Misappropriation of assets C. Fraudulent financial statements D. Disclosure fraud
A. Errors in financial statements
True or false: Internal control systems cannot guarantee all fraud will be detected. A. True B. False
A. True
Which of the following might contribute to a weak board of directors? (Check all that apply) A. Lack of independence from management B. Inadequate external audits C. Pressure to achieve desired results D. Interrelationships between board members and top management
Answers: A, D
Authentic leaders are ethically oriented in their behavior because they A. Act conservatively at all times B. Recognize and evaluate ethical issues C. Acknowledge ethical responsibilities of their roles D. Take moral actions based on stakeholder beliefs and values
Answers: B, C
By reporting through the internal reporting process, which of the following are possible outcomes? (Select all that apply) A. Employees are protected from illegal acts. B. Others may become potential whistleblowers. C. Others in the organization become informed about concerns.
Answers: B, C
For each Critical Audit Matter (CAM), the auditor should (select all that apply): A. Disclose which audit partner signed off on the CAM B. Identify the CAM C. Describe how the CAM was addressed in the audit
Answers: B, C
What increases the likelihood of trainee auditors reporting an ethical violation by an audit partner? A. A reward exists for whistleblowing B. Firm quality controls exist C. Formal structures for whistleblowing exist D. Informal structures for whistleblowing exist
Answers: B, C
What is the danger of covering up financial wrongdoing? (Check all that apply) A. It violates confidentiality. B. It violates integrity. C. It begins the slide down the ethical slippery slope. D. It violates the loyalty obligation to the client.
Answers: B, C
Which of the following are important components of tone at the top? (Select all that apply) A. Rarely enforcing the code of conduct B. Reminding employees of a non-retaliation policy C. Modeling company values
Answers: B, C
Identify the factors that influence organizational commitment in public accounting. A. Professional identity B. Identification with ethical systems C. Firm quality controls D. Firm leadership E. Colleague commitment
Answers: B, C, D
The intensity of an ethical situation is based on the ______. (Select all that apply) A. relevant laws and policies B. situational pressures in the workplace C. values of those involved D. fear of retaliation E. norms in common situations
Answers: B, C, E
New standards for services with non-compilation reports specify which of the following (select all that apply): A. Financial statements must be prepared using US GAAP. B. Pages of the report must specify no assurance is provided. C. An engagement letter is not required. D. Independence does not need to be determined.
Answers: B, D
According to Kant, the categorical imperative requires that ______. (Check all that apply) A. ethical action precedes moral intention B. we act according to maxims that could be universally accepted C. we lie when necessary to achieve an end result D. we never lie to mask the truth E. we act according to maxims that could be universally acted on
Answers: B, D, E
Taylor and Curtis suggest which of the following relationships within accounting firms influence whether an auditor will blow the whistle on wrongdoing? A. Likelihood of retaliation B. Commitment to the firm C. Commitment to one's superior D. Commitment to professional identity E. Commitment to the accounting profession
Answers: B, D, E
The occurrence of events that result in losses for users of the financial statements comes about as a result of which of the following loss-generating events? (Check all that apply). A. False certification of the financial statements B. Client bankruptcy C. Audit failure D. Misappropriation of assets E. Fraudulent financial reporting
Answers: B, D, E
Which of the following are pillars of corporate governance? A. Morals B. Fairness C. Values and beliefs D. Independence E. Transparency F. Accountability
Answers: B, D, E, F
When a material fact has been omitted from a registration statement, which individuals are potentially liable under Section 11 of the Securities Act (select all that apply): A. an accountant employed by the company B. a director that has not signed the registration statement C. an underwriter named in the registration statement D. a partner who signed the registration statement
Answers: C, D
In stage 5 of Kohlberg's model, behavior is driven by ______. A. the pursuit of self-interest B. upholding the rights and values of society C. fear of punishment D. universal ethical principles
B. upholding the rights and values of society
If the client wants to claim a $3,000 charitable deduction for the current year's taxes but has no receipts or acknowledgment of the contribution, the CPA should ______. A. Withdraw from the engagement B. Contact the IRS and report the client C. Refuse to use the deduction and explain the criteria for the deduction to be taken D. Help the client create receipts so the deduction can be taken
C. Refuse to use the deduction and explain the criteria for the deduction to be taken
Recklessness looks at what the actor knew or should have been thinking when an act occurred is an example of a: A. Contributory negligence B. Causation C. Subjective test D. Objective test
C. Subjective test
The Golden Rule is best seen as a _____ principle.
The Golden Rule is best seen as a consistency principle.
When a staff accountant is aware of financial statement fraud, but does not report it because he/she believes his/her supervisor will correct the situation, this is an example of ______.
bystander effect
Kohlberg developed the example of Heinz and the Drug to illustrate a _____ dilemma.
moral
Within the cognitive-developmental paradigm, what is the most influential factor of an individual's moral behavior?
moral judgement
Objectivity in auditing is related to the justice theory by ______. (Check all that apply)
not subordinating judgment making impartial judgments
Which bias describes when an auditor may be conservative in his/her risk assessment but may fail to seek additional information to confirm or update his/her knowledge about internal controls?
overconfidence bias
Leader ethicality is assessed in the context of _____ prescriptions. (Enter one word per blank)
social
In stages 5 and 6, the auditor's behavior should be primarily influenced by _____ ethical principles.
universal
Corporate executives are held responsible for the periodic reports filed with the SEC under section _____ of the Sarbanes-Oxley Act.
302
Misappropriation of assets can be reduced by: A. Establishing internal controls to safeguard assets B. Reporting fraud to the auditors C. Eliminating the opportunity to commit fraud D. Creating ethical standards to prevent it
A. Establishing internal controls to safeguard assets
Audit committee responsibilities for fraud risk assessment include: A. Evaluate management's identification of fraud risks B. Discuss fraud risk assessment with external auditors C. Consider any Dodd-Frank reporting responsibilities D. Report unresolved matters to the SEC
A. Evaluate management's identification of fraud risks
How should an auditor meet a level of reasonable assurance? A. Exercise a level of care to avoid charges of negligence B. Assess whether the management audited the internal controls C. Ensure that the independence in fact standard has been met
A. Exercise a level of care to avoid charges of negligence
Which of the following statements best describes the results of Arel's study? A. Internal auditor perceptions of the moral intensity of an issue determines whether a questionable accrual will be reported B. Strong internal audit function and weak ethical leadership have no affect on perception of moral intensity of the issue C. Joint influence of ethical leadership and internal audit quality determines whether a questionable accrual will be reported D. Strong internal audit function has no influence on whether accrued journal entries are recorded
A. Internal auditor perceptions of the moral intensity of an issue determines whether a questionable accrual will be reported
While working at the Defense Contract Audit Agency, Diem-Thi Le's working papers were changed by her supervisor because: A. Le concluded the contractor's system was inadequate B. Le's productivity rate was too high C. Le refused to go along with her supervisor's demands D. Le concluded the contractor's system was adequate
A. Le concluded the contractor's system was inadequate
What is the most common form of management fraud? A. Management's manipulation of financial statements B. Errors in accounting estimates C. Theft by employees who handle cash D. Auditor deception of client
A. Management's manipulation of financial statements
What is the first line of defense against allegations of fraud that auditors can assert? A. No duty existed to the third party B. Third-party acted on information without the auditor's knowledge C. Loss to third party was caused by unrelated events D. Claim is invalid because statute of limitations expired
A. No duty existed to the third party
A defense that can be used by those accused of violating the FCPA is: A. Payment is lawful under the written laws of the foreign country B. Lack of knowledge that the payment was made to induce improper behavior C. Payment did not affect the final outcome of the decision of the foreign official D. Payment was made for unusual business expenses
A. Payment is lawful under the written laws of the foreign country
The legal liability standard under the PSLRA is: A. Proportionate liability B. Liability only for fraud C. Liability for negligence D. Joint-and-several liability
A. Proportionate liability
The PCAOB Form AP require the disclosure of which of the following? A. The name of the engagement partner B. The address of the engagement partner C. The certifications the engagement partner holds
A. The name of the engagement partner
True or false: A corporate governance system includes mechanisms to ensure that management operates the organization in the interests of shareholders. A. True B. False
A. True
True or false: An SEC rule implementing the Dodd-Frank whistleblower reward program bars companies from enforcing confidentiality agreements. A. True B. False
A. True
An individual acting in accordance with his/her own reasons or motives and not those of organizational policies or whistleblowing legislation is demonstrating ______. A. autonomous will B. moral agency C. business judgment D. honest services
A. autonomous will
The SEC protects whistleblowers by ______. A. barring companies from threatening to enforce a confidentiality agreement B. allowing whistleblowers to take any confidential documents from the company
A. barring companies from threatening to enforce a confidentiality agreement
For a company to receive full credit for timely and appropriate remediation in FCPA matters, it must have in place an effective A. compliance and ethics program B. organizational chart C. independent external auditor
A. compliance and ethics program
Ethical expectations that society has for business can be referred to as ______. A. corporate social responsibility B. diversity C. ethical climate initiatives
A. corporate social responsibility
In Miceli and Near's research, the primary reason given by whistleblowers for not coming forward is ______. A. fear of retaliation B. the support of coworkers C. the fear that they wouldn't remain anonymous D. the assumption that no one else will do it E. the belief that no corrective action would be taken
A. fear of retaliation
The person-organization fit in the Ethical Dissonance Model that creates the greatest likelihood of ethical behavior occurring is ______. A. high organizational ethics, high individual ethics B. low organization ethics, low individual ethics C. low organization ethics, high individual ethics D. high organizational ethics, low individual ethics
A. high organizational ethics, high individual ethics
The whistleblower provisions of the Dodd-Frank Act include ______. A. incentives for whistleblowers when the information they provide aids in the recovery of over $1 million B. an award of 10 to 30 percent of the amount recovered in all lawsuits against the company C. external audit requirements before whistleblowing D. incentives for whistleblowers who circumvent internal measures to blow the whistle directly to the SEC
A. incentives for whistleblowers when the information they provide aids in the recovery of over $1 million
Opportunity for unethical behavior results from conditions that ______. A. increase rewards B. decrease rewards
A. increase rewards
Having the procedures and structures in place to minimize or avoid conflicts of interest is another way of describing ______. A. independence B. transparency C. fairness D. accountability
A. independence
The state of mind that permits the performance of an attest service without being influenced in ways that compromise professional judgment is called ______. A. independence in fact B. moral independence C. independence in appearance D. integrity
A. independence in fact
Reasonable assurance in an audit A. is not an absolute guarantee that the financial statements are free of material misstatement. B. guarantees management has implemented proper internal controls over financial reporting. C. guarantees that the financial statements are free of material misstatement.
A. is not an absolute guarantee that the financial statements are free of material misstatement.
When the auditor is unable to obtain sufficient audit evidence to conclude the financial statements are free of material misstatement, the auditor should A. issue a modified opinion. B. issue an unmodified opinion. C. issue an unqualified opinion. D. include an emphasis-of-matter paragraph.
A. issue a modified opinion.
Internal compliance officers and internal auditors generally cannot receive whistleblower awards under Dodd-Frank because ______. A. it is part of their job responsibilities to report suspicion of illegal acts to management B. they are never eligible to receive an award C. they fail to wait 120 days after reporting the matter to management before reporting to the SEC D. they must first report the matter to the external auditors before qualifying for an award
A. it is part of their job responsibilities to report suspicion of illegal acts to management
The ethical person-organization fit option that is most likely to lead to unethical behavior occurring is ______. A. low individual ethics, low organizational ethics B. high individual ethics, low organizational ethics C. low individual ethics, high organizational ethics D. high individual ethics, high organizational ethics
A. low individual ethics, low organizational ethics
The ultimate obligation of CPA-members of the AICPA in resolving conflicts of interests is to ______. A. meet their responsibilities to the public B. meet their responsibilities to employers C. satisfy their own interests D. meet their responsibilities to clients
A. meet their responsibilities to the public
In the Qwest Communications Case, the fraud was caused by management's A. pressure on employees to meet earnings targets B. deflating expense amounts C. lack of professional competence D. failure to follow GAAS
A. pressure on employees to meet earnings targets
PCAOB Auditing Standard No. 2201 A. requires auditors to form an option on the ICFR B. requires auditors to maintain independence when assessing internal controls. C. requires auditors to act with reasonable care. D. deems control irregularities immaterial for deciding auditor liability.
A. requires auditors to form an option on the ICFR
According to COSO, a strong internal control environment that strengthens financial reporting ______. A. starts with the tone at the top B. requires an audit committee that reports to top management C. requires external auditors to be represented on the board of directors D. includes direct and unrestricted access for the external auditors to the internal auditors
A. starts with the tone at the top
One characteristic of virtually all frauds in the late 1990s and early 2000s was ______. A. the CEOs and CFOs knew about the materially misstated financial statements B. there was no independent audit C. the CEOs and CFOs certified that the financial statements were free of material misstatements D. there were no internal controls
A. the CEOs and CFOs knew about the materially misstated financial statements
The U.S. Supreme Court issued an opinion in the Digital Realty Trust case that whistleblowers are not protected against retaliation unless they report concerns to ______. A. the SEC B. internal management C. external audit
A. the SEC
IFAC Policy Position Paper #4 links the common benefit of serving the public interest through sound financial reporting to ______. A. the application of high standards of professional judgment B. the utilitarian concept C. the rules and regulations set by the AICPA D. professional bodies that determine whether the public interest is being served
A. the application of high standards of professional judgment
When applied to decision making in accounting, rights theories might best be characterized by ______. A. the duty to ensure that the financial statements "present fairly" B. justified claims of the decision maker C. ends versus means D. justifying accounting treatment based on the interests of others
A. the duty to ensure that the financial statements "present fairly"
The conclusion stated in the opinion paragraph of the audit report should state whether A. the financial statements are fair representations. B. the auditors raised any matters with the audit committee. C. audit procedures have been used. D. internal controls have been evaluated.
A. the financial statements are fair representations.
Using rights theory, the primary ethical obligation of an accountant is to ______. A. the venture capitalists B. his own self-interests C. company executives D. his direct supervisor
A. the venture capitalists
Professional judgment may be compromised when performing attest services because ______. A. threats may exist that cannot be mitigated by safeguards B. safeguards must be used to prevent violations of independence C. no safeguards can prevent compromise D. threats will lead to subordinating judgment
A. threats may exist that cannot be mitigated by safeguards
Timely and accurate disclosure on all material matters, including the financial situation and corporate governance, are required by ______. A. transparency B. independence C. accountability D. fairness
A. transparency
An error is due to a(n) _____ misstatement or omission in the financial statements. A. unintentional B. intentional C. material
A. unintentional
The AICPA Revised Code applies to CPAs in the performance of all professional services except ______. A. when the wording of the rule indicates otherwise B. when internal pressures exist C. when the client interest is sacrificed D. when external pressures exist
A. when the wording of the rule indicates otherwise
The model of ethics standards for CPAs in the United States comes from the _____ code of professional conduct.
AICPA
According to the Six Pillars of Character, the primary motivation for ethical action is ______.
According to the Six Pillars of Character, the primary motivation for ethical action is one's inner sense of right and wrong.
Identify the points made by Grant Thornton in its defense of the charges of negligence and fraud in the Epic Resorts case. (Check all that apply). A. Liability for false misrepresentation exists only to those whom the auditor knows and intends to influence B. No evidence existed of a casual connection between Grant's alleged misrepresentation and the hedge fund's alleged injury C. No loss, significant or insignificant, was incurred by Epic Resorts or their investors
Answers: A, B
In communicating with those charged with governance, the auditor should consider the following regarding the reasonableness of accounting estimates (check all that apply) A. The degree of subjectivity in assumptions B. The nature of significant assumptions C. The immateriality of the estimates as a whole
Answers: A, B
In the Monroe v. Hughes case, the auditor (Select all that apply) A. issued an unqualified audit report. B. found internal control irregularities. C. was liable to investors due to negligence. D. disclosed the internal control irregularities.
Answers: A, B
Rule utilitarianism considers which of the following in decision making? (Check all that apply) A. What rule will have the best consequences? B. What is the correct moral rule in this situation? C. What action will maximize net utility? D. What rule will maximize my self-interest?
Answers: A, B
Sarbanes-Oxley was passed to (select all that apply): A. Increase transparency of financial reporting B. Foster an ethical climate C. Decrease auditor liability
Answers: A, B
Section 302 of SOX requires which of the following to certify periodic reports filed with the SEC? (Select all that apply) A. CFO B. CEO C. Internal auditor D. Audit firm E. President of the Board
Answers: A, B
Select all the reasons why diversity and inclusion are important issues. A. Global business environment benefits from a diverse workforce. B. Fair and equal treatment creates an ethical corporate culture. C. Diverse workforce limits opportunity for employees.
Answers: A, B
Sexual harassment often involves ______. A. quid pro quo B. severe unwelcome behavior C. a friendly work environment
Answers: A, B
The reputation of a CPA is built by performing professional services ______. (Check all that apply) A. competently B. confidentially C. expediently D. deliberately
Answers: A, B
What motivated Diem-Thi Le's supervisor at the Defense Contract Audit Agency to change her working papers? A. Make it appear that audit risk was low on contractor-clients B. Make it appear the audit work was more efficient C. Branch manager signed the audit report D. Le's audit was deficient
Answers: A, B
Which of the following were developed as a result of the decision in the 1136 Tenants Corp. case? (Select all that apply) A. Compilations and reviews B. Engagement letters C. Due care D. Modified audit opinion
Answers: A, B
Auditors may be sued for negligence under which types of liability? (Select all that apply) A. Common law by clients B. Statutory law for civil liability C. Common law by third parties D. Statutory law for criminal liability
Answers: A, B, C
Dennis Kozlowski, the CEO of Tyco, selected employees based on ______. (Select all that apply) A. possible conflicts of interest B. reluctance to challenge authority C. lack of experience D. proven moral background E. proven experience
Answers: A, B, C
Each of the following is an element of reliability that enhances ethical decision making. (Check all that apply) A. Follow through B. Moral duty C. Promise-keeping D. Egoism E. Carelessness
Answers: A, B, C
Ethical leadership failure can occur because of A. Using one's position to take advantage of followers B. Trying to keep the client happy at all costs C. Applying an ends-justifies-the-means approach to ethical reasoning D. Following moral constraints for the good of the group
Answers: A, B, C
How does the culture of an organization contribute to ethical decision making? (Check all that apply) A. By the tone set by those at the top of the organization B. Through organizational relationships C. Through organizational expectations D. By including external auditors in the organization's chain of command E. By limiting the organizational relationships and expectations
Answers: A, B, C
Identify the elements of the ruling in the Burger Court opinion. (Check all that apply) A. Requires independent audits of publicly owned companies B. The independent audit provides the basis for the existence of the accounting profession in the United States. C. The public places its trust in the independent auditor. D. It established the AICPA Code of Professional Conduct. E. The existence of independent audits was unknown before passage of legislation establishing the SEC.
Answers: A, B, C
Koh and Boo found that positive ethical culture and climate produce ______. A. the ethical climate of the organization B. favorable organizational outcomes C. support for ethical behavior from top management D. unfavorable organizational outcomes
Answers: A, B, C
The application of GAAP to the financial statements can lead to mistakes in: (Check all that apply). A. Classifications B. Presentation C. Amounts D. Management representations E. Auditing
Answers: A, B, C
The auditor's assessment of fair presentation includes whether the: (Check all that apply). A. statements reflect transactions and events within reasonable limits. B. accounting principles used comply with GAAP. C. detailed information in the statements is properly disclosed. D. statements and notes are informative of matters that may affect user understanding of the statements. E. accounting principles are appropriate even if they lack general acceptance.
Answers: A, B, D
The public watchdog function requires that accountants do which of the following? (Check all that apply) A. Demonstrate complete fidelity to the public trust. B. Maintain ultimate allegiance to the corporation's shareholders and creditors. C. Act out of allegiance to one's employer at all times. D. Maintain total independence from the client at all times. E. Be loyal to one's supervisor.
Answers: A, B, D
Which of the following do Koh and Boo identify as measures of organizational ethics? A. Support for ethical behavior from top management B. The connection between ethical behavior and career success C. Protection of whistleblowers within the organization D. The ethical climate of the organization E. The person-organization fit
Answers: A, B, D
Which of the following has been shown to influence the moral development of a manager? (Check all that apply) A. Corporate culture B. Education C. Established decision priorities D. Ethical training E. Fear of losing one's job
Answers: A, B, D
Which of the following help mitigate the risks presented by workplace social networking? (Select all that apply) A. Formal social networking policies B. Employer commitment to an ethical culture C. Company social network pages D. Training on the use of social networks
Answers: A, B, D
Which of the following encourage ethical behavior in the workplace? (Select all that apply) A. Support for ethical behavior from top management B. A corporate culture that is inconsistent with individual values and beliefs C. High organizational ethics, high individual ethics D. An ethical climate in the organization
Answers: A, D Rationale: The ethical person-organization fit does not encourage organizational ethics but describes whether it is likely to occur.
According to the ACFE report, the motivation for an employee to engage in occupational fraud includes which of the following? (Check all that apply) A. To enrich oneself at the expense of the organization B. To manipulate the financial statements C. To satisfy stakeholder interests D. To steal assets from the organization such as cash E. To achieve some personal gain
Answers: A, D, E
Identify the possible effects when individual values do not fit the expectations of the firm. A. Individual alters behavior to conform to firm norms B. Firm alters behavior to conform to individual norms C. Individual blows the whistle on the firm D. Firing of the individual E. Voluntary departure of individual
Answers: A, D, E
The Tyco Board of Directors violated the corporate governance system by: (Select all that apply) A. doing business with the company. B. maintaining independence from the audit committee. C. overseeing Tyco's system of internal controls. D. not disclosing related-party relationships. E. borrowing money from the company.
Answers: A, D, E
To meet the general responsibilities related to the quality of professionals who perform an audit, an auditor should: (Check all that apply). A. Maintain independence in mental attitude B. Adequately plan the audit within a reasonable amount of time C. Adequately supervise assistants D. Have adequate technical training and proficiency E. Exercise due care in the performance of the audit and preparation of the report
Answers: A, D, E
When does legal liability exist for auditors under Rule 10b-5? (Check all that apply). A. Employ any device or other scheme to defraud B. Fail to prove the plaintiff relied on the statements C. Violate a provision of the Securities Exchange Act of 1933 D. Make an untrue statement of material fact E. Engage in a deceitful or fraudulent act in connection with the purchase or sale of a security
Answers: A, D, E
Why is the Giving Voice to Values technique critical in ethical decision making in business? (Select all that apply) A. The correct decision is often unclear. B. The results of the decision are known. C. Rules governing ethical dilemmas are clear and concise. D. Rules governing ethical dilemmas are often vague. E. The results of the decision are unknown.
Answers: A, D, E
Which of the following steps exist in an audit-related dispute according to Palmrose? (Check all that apply). A. Link can be made between user losses and allegations of material omissions or financial statement misstatements B. Investigation by the plaintiff attorney after filing the lawsuit C. Audit failure D. Events occurred that cause losses for financial statement users E. Filing of a lawsuit F. Final resolution of the dispute
Answers: A, D, E, F
The two broad conceptual frameworks in the AICPA Revised Code apply to which of the following? (Select all that apply) A. Members in public practice B. Members in private practice C. Members in consulting D. CPAs in tax services E. CPAs in business
Answers: A, E
Virtues have been described as ______. (Check all that apply) A. Character traits B. Dispositions C. Attitudes D. Loyalty obligations E. Actions
Answers: A,B, C
Identify when common law liability may exist. (Check all that apply). AA. The plaintiff relied on the financial statements A. Auditors establish there was no substantiated performance B. An audit failure has occurred C. The client or a third-party suffers a financial loss D. The financial statements relied on leads to a loss E. The financial statements relied on are found to be materially misstated
Answers: AA, C, D, E
A correct moral rule under rule utilitarianism might be ______. (Check all that apply) A. act in a way that maximizes utility B. don't subordinate judgment C. don't mislead others D. don't ignore best consequences
Answers: B, C
Check all of the reasons engagement letters were developed: A. Clarify reporting standards B. Clarify responsibilities of accountants C. Clarify responsibilities of auditors D. Clarify responsibilities of the board of directors
Answers: B, C
Identify the characteristic behaviors of authentic leaders. A. leaders have no influence on dysfunctional auditor behavior B. leaders can help to promote an ethical culture C. leaders can reduce dysfunctional behavior D. Generally there is a positive relationship between audit senior's perceptions of ethical behavior by firms and likelihood of dysfunctional behavior
Answers: B, C
Identify the characteristic behaviors of high Individualism in workplace behavior. (Check all that apply) A. Acting in the best interests of others B. Greater possibility of blowing the whistle C.Pursuit of self-interest D. Loyalty to the group
Answers: B, C
In deciding how best to handle conflicts between rights, a useful perspective to consider is ______. (Check all that apply) A. whether any moral duties to individuals exist B. how the action would affect the basic rights of individuals C. prioritizing the rights D. weighing the consequences of actions
Answers: B, C
In the Medicis Pharmaceutical Case, the deficiencies in EY's audit were caused by A. failure to follow GAAP B. failure to follow GAAS C. over reliance on management representations D. excessive independent audit evidence
Answers: B, C
In the economic model of CSR, business exists to ______. A. decrease value for shareholders B. create jobs C. produce goods and services for society
Answers: B, C
Our views of other people (stereotypes) can cause which of the following negative behaviors? (Select all that apply) A. National pride B. Favoritism C. Discriminatory hiring
Answers: B, C
Select the possible negative outcomes of simplifying complex issues to make decision making easier. (Select all that apply) A. Considering long-term consequences B. Failing to identify stakeholders C. Underestimating risk
Answers: B, C
The Equifax data breach involved which of the following? (Select all that apply) A. Manipulating earnings to increase stock price B. Inadequate disclosures related to its cyber security C. Failing to protect consumer information it sells to banks and other organizations
Answers: B, C
The Second and Third Court of Appeals allows scienter to be pled through particularized allegations if: (Select all that apply) A. strong circumstantial evidence of independence violations exists. B. facts show the defendant had both the motive and opportunity to commit securities fraud. C. strong circumstantial evidence of recklessness exists. D. facts show the defendant had the intent to commit securities fraud.
Answers: B, C
The ancient Greeks believed that what two things contributed to the choice of action? A. Laws B. Reason C. Thought D. Rules
Answers: B, C
The worth or dignity aspect of rights theory requires that ______. (Check all that apply) A. others should make decisions based on self-worth B. individuals should be treated as ends and not the means C. others should not use us in a way that is disrespectful D. individuals should be treated as a means to an end
Answers: B, C
Which of the following are elements of the risk assessment done by auditors? (Check all that apply). A. Discuss with management any differences of opinion it had with the predecessor auditor on accounting issues B. Assessing the integrity of key management personnel C. Communications with the predecessor auditor D. Discuss with management why the previous auditors were fired E. Contact the SEC about any violations
Answers: B, C
Auditors can best protect themselves against litigation by: (Check all that apply). A. Withdraw from an audit when risks are too high B. Exercise a proper degree of professional skepticism C. Properly assess whether material misstatements exist D. Review internal controls to determine whether they help to prevent or detect material misstatements in the financial statements E. Ensure that clients do not engage in transactions with a high level of business risk
Answers: B, C, D
Emphasis of matter issues that might be addressed in the audit report include: (Check all that apply). A. Compliance of statements with GAAP B. Going concern C. Outstanding litigation D. Subsequent events E. Internal controls
Answers: B, C, D
In addition to the existence of a loss, Restatement 552, establishes the legal liability of an auditor to a person who: (Check all that apply). A. To individuals that suffered a loss but did not rely on the financial statements B. Has a near privity relationship C. Who is a forseen third party D. Was the intended recipient of the information and was provided guidance
Answers: B, C, D
The objectives of audit procedures and evidence quality standards include (select all that apply): A. adequate planning of financial statement preparation B. obtaining sufficient understanding of internal controls C. adequate planning of audit work D. gathering sufficient evidence
Answers: B, C, D
Transformational leaders seek to A. Convert employees into followers through external mechanisms B. Serve as role model for followers C. Challenge followers to take greater ownership for their work D. Develop followers into leaders E. Turn follower weaknesses into strengths
Answers: B, C, D
Which of the following are factors for disclosing Critical Audit Matters? Select all that apply. A. The professional qualifications of the auditor to address the matters B. The nature an extent of audit effort required to address the matter C. The degree of auditor judgment related to areas in the financial statements D. The auditor's assessment of the risk of material misstatement
Answers: B, C, D
The systematic evaluation of the moral intensity of an issue influences A. magnitude of consequences B. judgments of ethicality C. culture of the organization D. likelihood of whistleblowing
Answers: B, D
Which of the following are aspects of justice theory? (Check all that apply) A. Reference to one's feelings or interests B. Distribution of benefits and burdens C. Utilitarian calculation D. Giving each person what he or she deserves
Answers: B, D
Which of the following are characteristics of competent ethical leaders? A. Motivated group of followers B. Ability to handle moral problems that arise C. System 1 decision making D. Thoughtful deliberation in decision making
Answers: B, D
Which of the following are features of enlightened egoism? (Check all that apply) A. Short-term perspective B. Considering the well-being of others C. Ignoring the interests of others D. Achievement of one's goal
Answers: B, D
Which of the following factors contribute towards ethical leadership? A. Keeping promises which are profitable B. Being reliable and dependable C. Measuring ethical competence D. Personal ethical competence
Answers: B, D
Whistleblowing can be thought of as ______. (Check all that apply) A. an act that violates norms or moral standards B. going outside the organization to report wrongdoing C. an act that violates the law D. disclosing to members of an organization practices that violate norms or the law
Answers: B, D
What determines whether followers view managers as ethical leaders? A. Rating high on the ethical leadership scale B. Being a moral person C. Being a competent leader D. Being a moral manager E. Being principled and caring
Answers: B, D, E
Which of the following are included in the "social contract" accountants have? A. Commitment to serve the interest of superiors B. Commitment to a code of ethics C. Commitment to serve the interest of the client D. Commitment to lifelong learning E. Commitment to serve the interest of the public
Answers: B, D, E
Why is it important that auditors communicate information about accounting estimates to those in charge of governance? (Select all that apply) A. Accounting estimates can be highly significant to the financial statements. B. Future events can affect accounting estimates in a significant way. C. Accounting estimates are typically immaterial to the financial statements. D. Accounting estimates involve subjectivity and assumptions. E. Accounting estimates are determined by the external auditor.
Answers: A, B, D
Auditor's should look for fraud by: (Check all that apply) A. Being alert to red flags B. Assessing audit risk C. Preparing the financial statements D. Examining internal controls E. Guaranteeing that the fraud will be detected F. Evaluating the control environment
Answers: A, B, D, F
Factors that might lead to fraud include: (Check all that apply). A. Egoism B. Meet financial analysts' earnings projections C. Inadequate knowledge of the rules D. Internal Budget Pressures E. Inefficient audits F. Personal pressures
Answers: A, B, D, F
The underlying features of cognitive development include ______. (Check all that apply) A. becoming more complex and sophisticated with development B. developing from childhood to adulthood C. a hierarchical series only D. a thought process E. being set in childhood F. an ability to make reasoned judgments
Answers: A, B, D, F
An ethical workplace culture is influenced by ______. (Check all that apply) A. having an ethical code of conduct B. whistleblowing policies C. government regulation D. earnings projections E. strong internal controls
Answers: A, B, E
Heinz dealt with the dilemma by ______. (Check all that apply) A. asking the druggist to sell the drug for less B. asking the druggist if he could pay for the drug over time C. raising all the money from family and friends D. giving up on trying to obtain the drug E. stealing the drug for his wife
Answers: A, B, E
Which of the following are ways to document professional skepticism? (Select all that apply) A. Document additional corroboration of management's views B. Obtain third-party confirmations C. Maintain a materiality threshold percentage D. Document discussions with the audit committee E. Obtain direct knowledge though observation
Answers: A, B, E
Which of the following is a likely cause of action asserted by plaintiffs? (Check all that apply). A. Wrongdoing occurred B. Fraud has occurred C. Due diligence D. Substantiated performance E. Breach of contract
Answers: A, B, E
An auditor's ability to exercise professional skepticism depends on: (Check all that apply). A. Approaching the audit with a questioning mind B. Persistent questioning of management C. A critical assessment of audit evidence D. The culture of the audit firm
Answers: A, C
As a part of the oversight responsibility of the audit committee, which procedures strengthen internal controls? (Check all that apply). A. A summary of unethical conduct, follow-up and disposition is provided to those charged with governance. B. Discussions of risk factors with shareholders C. Encourage employees to report concerns about unethical behavior D. Periodic reports describing fraud and unethical conduct are sent to the SEC
Answers: A, C
Auditors should withdraw from the engagement when: (Check all that apply). A. Auditor decides management cannot be trusted B. Auditor prefers to end the engagement C. Significant conflict exists with management D. Audit report must be modified
Answers: A, C
Concerns over internal control procedures that may have contributed to the Equifax data breach include which of the following? (Select all that apply) A. The external auditors did not adequately consider problems with their information systems. B. The company had an adequate code of ethics and reporting procedures. C. The CEO did not adequately consider internal controls when certifying the internal controls.
Answers: A, C
Corporate social responsibility involves ______. (Check all that apply) A. ethical expectations that society has for business B. placing profit above all else C. responsibility to prevent harm
Answers: A, C
Ethical leadership failure can be attributed to A. organizational factors B. undefined ethical boundaries C. individual factors D. moral intensity
Answers: A, C
Fraudulent financial reporting includes: (Check all that apply). Intentional misstatements in the financial statements A. Intentional misstatements in the financial statements B. Unintentional acts to deceive others C. Intentional omissions of amounts from the statements D. Errors in the statements
Answers: A, C
From an ethical perspective, auditors can best protect themselves against lawsuits by: (Check all that apply). A. Exercising due care B. Reviewing internal controls C. Maintaining professional skepticism D. Identifying proper ethical standards
Answers: A, C
How did Michael Hudson, the former assistant treasurer at Frisch's Restaurant commit fraud? A. Programmed the company payroll computer to pay himself additional funds B. Recorded revenue for product that never shipped C. Forged vendor statements D. Delayed the recording of expenses
Answers: A, C
In accounting, the concepts closest to honesty are ______. (Check all that apply) A. Full disclosure B. Deception C. Transparency D. Loyalty
Answers: A, C
In the case of Diem-Thi Le, select all of the ways that Le identified that her identity as a whistleblower was not protected: A. Le was advised by a supervisor to seek mental health counseling B. Le was the only auditor rated as outstanding that received a performance award C. Le was transferred to another audit team
Answers: A, C
Internal controls can help to reduce fraud involving cash receipts by A. Segregating responsibilities B. Reporting fraud to to the board of directors C. Eliminating opportunities to commit fraud D. Eliminating pressures to commit fraud
Answers: A, C
Section 11 of the Securities Act provides a cause of action to investors who can prove that a registration contained which of the following (select all that apply): A. an omitted material fact B. an omitted immaterial fact C. an untrue material fact D. an untrue immaterial fact
Answers: A, C
Sims and Keenan's studies found that employees were more likely to engage in external whistleblowing if: (Check all that apply). A. They perceive that company policies suggested that such behavior was acceptable B. The internal reporting mechanisms do not exist in their companies C. They had support from their superior D. The accountability for whistleblowing is absent
Answers: A, C
The Private Securities Litigation Reform Act (PSLRA) places additional requirements upon public companies and their auditors when (select all that apply): A. an illegal act as a material effect on the financial statements B. the board of directors have taken appropriate remedial action C. management have not taken appropriate remedial action D. an illegal act has an immaterial effect on the financial statements
Answers: A, C
The most common social and organizational pressures that can cause well-intentioned people to make poor ethical choices are ______. A. obedience to authority B. considering multiple stakeholders C. conforming to ethical judgments of peers
Answers: A, C
Under Omnicare, an auditor can be held liable if (select all that apply): A. if the auditor does not actually hold the opinion. B. the opinion omits a material fact that has no effect on an ordinary investor. C. the opinion contains an embedded statement of fact that is misleading.
Answers: A, C
Which of the following actions would be protected under the National Labor Relations Act? (Select all that apply) A. An employee who complains on behalf of coworkers about safety issues B. Posting proprietary company information on social media C. Concerted efforts to improve conditions at work conducted on social media D. An employee who complains that her personal performance evaluation is unfair
Answers: A, C
Which of the following are characteristics of integrity? (Check all that apply) A. Trustworthiness B. Competence C. Self-reflection D. Non-responsiveness
Answers: A, C
Which of the following are components of the Cadbury Code? (Select all that apply) A. A majority of the board should be outside directors. B. The renumeration committee should be executive directors. C. There should be a separation of duties between the chairman of the board and the CEO.
Answers: A, C
Which of the following are components of the Cadbury Code? (Select all that apply) A. The audit committee should have a minimum of three non-executive directors. B. The CEO should also be the the chairman of the board. C. A non-executive director should not engage in day to day operations of the company. D. A majority of the board should be internal executives.
Answers: A, C
Which of the following are required of SEC registrants by the FCPA? (Select all that apply) A. Maintain internal accounting controls B. CEO and CFO certifications to the financial statements C. Maintain adequate books and records D. Maintain auditor independence
Answers: A, C
Which of the following are sections in the AICPA Revised Code of Professional Conduct? (Select all that apply) A. Members in business B. Members in audit C. Members in public practice D. Members in private practice E. Members in tax services
Answers: A, C
Which of the following must be proven by the plaintiff (third party) in cases of common law liability for fraud on the part of the auditor? A. Damages suffered by the third party B. Improper use of the information by the third-party C. A false representation by the accountant
Answers: A, C
A company's reputation for trust is enhanced when ______. (Check all that apply) A. employees follow through ethical intent with ethical action B. employee actions determine the values established C. organizational values guide actions by employees D. organizational values are supported by top management E. management overrides established values when desired
Answers: A, C, D
Andersen's moral blindness with respect to Enron was caused by ______. (Check all that apply) A. pressure from Enron B. failure of professional judgment C. Enron being one of the largest accounts for Andersen D. high consulting fees E. professional skepticism
Answers: A, C, D
Corporate governance regulation in the United States includes which of the following? (Check all that apply) A. Protection for whistleblowers B. Internal auditors must review corporate governance guidelines to ensure they have been followed. C. Auditors must attest to and report on management's certification on internal controls. D. Management must certify the internal controls over financial reporting. E. Protection for executives in fraud cases
Answers: A, C, D
The introductory paragraph of the audit report includes: (Check all that apply). A. The period covered by the statements B. The opinion reached C. The name of the entity D. The financial statements audited E. The responsibilities of the audit firm
Answers: A, C, D
The purpose of the Ethical Dissonance Model includes which of the following? (Check all that apply) A. It illustrates the interaction between the organization and the individual. B. It describes how cognitive dissonance may occur in an organization. C. It describes how the ethics of an organization influences behavior. D. It describes the ethical person-organization fit. E. It illustrates the disconnect between ethical standards and ethical behavior.
Answers: A, C, D
The risk-based approach requires a CPA to evaluate whether ______. (Check all that apply) A. a relationship would be seen as compromising professional judgment when rendering an attest service B. fraud exists in the financial statements C. threats exist that may compromise independence D. safeguards exist that can mitigate the influence of threats to independence E. a relationship would be seen as compromising the confidentiality obligation
Answers: A, C, D
What do auditors have to prove to defend against lawsuits from third-parties alleging fraud? (Check all that apply). A. No duty to the third party B. Third party did not rely on the statements C. Negligence of the third party D. Followed professional standards E. Claim is invalid because there was no privity relationship
Answers: A, C, D
What should be included in management representations? (Check all that apply). A. Affirmation that management has performed an assessment of the internal controls B. Certifications sent to the SEC C. Confirmation of providing auditor access to relevant information D. Disclosure of any deficiencies in internal controls E. Communications with the audit committee about internal control weaknesses
Answers: A, C, D
What must the accountant prove to successfully assert a due diligence defense? (Check all that apply). A. No reason existed to believe the information in the registration statement was false or misleading B. The plaintiff did not rely on the financial statements C. A prudent person would have conducted a different investigation D. A reasonable investigation of the statements was made
Answers: A, D
Which of the following procedures should be performed by the audit committee to assess the potential for management override of controls? (Check all that apply). A. Compare reported information to forecasts and industry averages B. Discuss risk factors with management C. Discussions of risk factors with the predecessor auditor D. Discussions with internal auditors
Answers: A, D
Which of the following were findings in the KPMG Integrity Survey 2013 related to what employees would do if they observed a violation of their organization's standards of conduct? A. More than 50% would call the ethics hotline. B. Almost 75% of employees would try to resolve the matter directly. C. 50% of employees would do nothing. D. More than 75% of employees would notify their supervisor of violations
Answers: A, D
Which of the following are included in the objectives of reporting? (Select all that apply) A. Assess the risk of material misstatement of the financial statements. B. Identify inconsistencies in application of accounting principles between current and prior period. C. Adequately plan and supervise the audit work. D. Determine if the financial statements were prepared in accordance with GAAP. E. Identify inadequate informative disclosures in the footnotes to the financial statements.
Answers: B, D, E
Which of the following mechanisms can help prevent bribery payments? (Check all that apply). A. Audited financial statements B. An effective system of internal controls C. Certification of financial statements D. Establish an ethical corporate culture E. Strong corporate governance
Answers: B, D, E
The following requirements exist for companies whose securities are listed and traded on stock exchanges under the Securities Exchange Act of 1934: (Check all that apply). A. File form 8-Q B. Adhere to the requirements of regulation S-X and S-K C. Follow IFRS requirements when filing reports with the SEC D. File 10-K annual reports E. File 8-K form when a significant event takes place F. File 10-Q quarterly reports
Answers: B, D, E, F
What must the plaintiff prove to successfully sue under Rule 10b-5? (Check all that apply). A. Financial statements were not accurate and reliable B. Reliance on the statements C. Auditors failed to follow GAAS D. Material, factual misrepresentation or mission of information from the statements E. Auditors intended to deceive, manipulate, or defraud F. Damages were suffered as a result of reliance on the statements
Answers: B, D, E, F
A person who acts responsibly does all of the following: ______. (Check all that apply) A. obscures the true purpose of actions B. acts with expediency C. considers alternative courses of action using ethical principles D. accepts the consequences of actions
Answers: C, D
In stage 3 of Kohlberg's model, a person is influenced by ______. (Check all that apply) A. respect for authority B. law and order C. doing what is in the best interests of others D. loyalty in relationships E. duty to the social order
Answers: C, D
The audit report states that management's responsibilities include: (Check all that apply). A. Render an opinion on the statements B. Examination of the financial statements in accordance with GAAS C. Preparation and fair presentation of the statements in accordance with GAAP D. Design, implementation, and maintenance of internal controls
Answers: C, D
The equality in the treatment of individuals under justice theory can best be expressed by ______. (Check all that apply) A. allocating resources based on preferential treatment B. equal distribution of benefits and burdens C. treating equals equally and unequals unequally D. fairly distributing the benefits and burdens
Answers: C, D
The ethical responsibilities of CPAs include ______. (Check all that apply) A. Be loyal to the interests of the employer B. Be loyal to the interests of a client C. Act in accordance with the accounting profession's ethical principles D. Act with integrity so as not to subordinate judgment
Answers: C, D
The following payments to foreign government officials are prohibited: (Check all that apply). A. Payments made when the individual making the payment is unaware of the illegality of the payment B. Facilitating payments C. Payments made when the individual making the payment knows of the illegality of the payment D. Payments intended to influence the behavior of the official in a way that is inconsistent with legal duties
Answers: C, D
The implications of the Bobek et al. study on gender factors affecting decision making in public accounting include: A. Males are more likely to recommend conceding to clients wishes B. Moral intensity may mediate context in decision-making for females C. Females are more likely to recommend conceding to clients wishes D. Moral intensity may mediate context in decision-making for males
Answers: C, D
The implications of the gender study on factors affecting decision making in public accounting include: A. Females were less likely to recommend conceding to clients wishes B. Both males and females use a deliberative approach to ethical decision making C. Females use an intuitionist approach to decision making D. Males were less likely to recommend conceding to clients wishes
Answers: C, D
The underlying principles of ethical leadership include A. Closed-mindedness and selfishness B. Loyalty C. Integrity and honesty D. Responsibility and accountability
Answers: C, D
Underlying the philosophy of rule deontology is the moral principle that ______. (Check all that apply) A. rules should be treated as guidelines in decision making B. the ends justify the means C. we should treat others the way we wish to be treated D. conformity to general moral principles should be based on logic
Answers: C, D
What is the goal of the audit committee's evaluation of fraud risk and management's oversight responsibilities? (Check all that apply). A. Support communications with the external auditor about fraud B. Meet SEC reporting requirements C. Ensure that management fulfills its responsibilities D. Serve as a deterrent to senior management engaging in fraud
Answers: C, D
Which financial or profitability risk factors might motivate fraud? (Check all that apply). A. Unclear accounting or regulatory requirements B. Estimates and judgments are made in the financial statements C. Recurring operating losses D. Inability to generate cash flows
Answers: C, D
How can ineffective monitoring of management create the opportunity for fraud? (Select all that apply) A. Lack of oversight by the external auditors B. Good liaison between management and statutory auditors of the organization C. Domination of management by one person D. Ineffective oversight of the internal controls E. Ineffective oversight of the financial reporting process
Answers: C, D, E
In stage 1 of Kohlberg's model, a person is not influenced by ______. (Check all that apply) A. obedience to rules B. fear of punishment C. satisfying one's own needs D. fairness to others E. egoism
Answers: C, D, E
In teleology, an act may be considered morally right if it: ______. (Check all that apply) A. ignores self-interest B. ignores the interests of others C. produces more positive than negative consequences D. produces some desired result E. enhances self-interest
Answers: C, D, E
Which of the following elements of integrity are integral parts of the public trust? (Check all that apply)
Objectivity Due care Honesty and candidness
Which brand of egoism claims the promotion of one's own self-interest in accordance with reason?
Rational Egoism
Regardless of their circumstances in life, all people should be treated with _____.
Regardless of their circumstances in life, all people should be treated with dignity.
Which of the following are true regarding regulation? (Select all that apply)
Regulation must be transparent. Regulation must be objectively determined.
_____ cannot be established if the damages or loss suffered by the plaintiff would have occurred regardless of whether the audited financial statements were misstated (Enter one word per blank)
Reliance
What is the common element of ethics and moral?
The common element of ethics and morals is character.
The underlying attributes of ancient Greek Philosphy include _____ and ______.
The underlying attributes of ancient Greek Philosphy include excellence and happiness.
Leader ethicality includes each of the following traits of behavior except A. Create an environment that discourages acting unethically B. Intention to demonstrate descriptively appropriate conduct C. Create an ethical environment to serve as role models for followers D. Intention to demonstrate normatively appropriate conduct
B. Intention to demonstrate descriptively appropriate conduct
From an ethical perspective, what is the most controversial provision of the Dodd-Frank Act? A. It precludes external whistleblowing by internal compliance officers and internal auditors. B. It incentivizes whistleblowing. C. It prohibits retaliation against the whistleblower. D. It prohibits external whistleblowing on a CPA firm by external auditors.
B. It incentivizes whistleblowing.
An unintended consequence of the materiality standard is A. Items that conform with GAAP may be dismissed B. Management might manipulate amounts to fall below the materiality level C. Auditors issue adverse opinions when the opinion should be modified D. Auditors withdraw from the engagement
B. Management might manipulate amounts to fall below the materiality level
Which author suggests that the social responsibility of business is to increase profits? A. Lawrence Kolhberg B. Milton Friedman C. Mary Gentile
B. Milton Friedman
Which type of fraud accounts for nearly 40% of all types of occupational fraud? A. Misappropriation of expenses B. Misappropriation of assets C. Cash related fraud D. Inflated net earnings E. Skimming fraud schemes
B. Misappropriation of assets
Covey's principle-centered leadership approach can best be described as A. A method of making ethical decisions B. One's internal values should form the basis for external actions C. A method to align external values with external actions D. One's internal values should form the basis for self-interested behavior
B. One's internal values should form the basis for external actions
Historically, the SEC allowed the accounting profession to police itself through which process? A. Mandatory review B. Peer review C. Voluntary review
B. Peer review
How should unusual and unexpected relationships be identified? A. Communications with the audit committee B. Performing analytical procedures C. Exercising professional skepticism D. Discussing relationships with other entities with management
B. Performing analytical procedures
Which of the following is not a virtue? A. Truthfulness B. Rationalization C. Integrity D. Kindness
B. Rationalization
Which section of Sarbanes-Oxley requires the inclusion of a statement that management accepts responsibility for maintaining adequate internal control over financial reporting? A. Section 406 B. Section 404 C. Section 301 D. Section 806 E. Section 302
B. Section 404
Communications with the audit committee about significant and critical accounting policies and practices should include A. Quantitative effects of management's disclosures on the financial statements B. Significant modifications to management disclosures recommended by the auditor but not followed by management C. The basis for the auditor's conclusions regarding the reasonableness of critical accounting policies D. The decision process used by the auditors to assess significant policies and practices
B. Significant modifications to management disclosures recommended by the auditor but not followed by management
Which act protects the rights of employees to act together in a concerted manner to address conditions at work, with or without a union? A. The Dodd-Frank Act B. The National Labor Relations Act C. The Sarbanes-Oxley Act
B. The National Labor Relations Act
The link between the ICFR and audit of financial statements is A. ICFR is only required when a modified opinion is given B. The audit of ICFR should be integrated with the audit of financial statements C. Assessment of ICFR's is optional while audit opinions are required D. Audit reports do not have to include any references to ICFR
B. The audit of ICFR should be integrated with the audit of financial statements
Which of the following best describes scienter? A. Failure to uncover materially misstated financial statements. B. The intent to deceive, manipulate, or defraud. C. The intent to violate independence standards. D. Failure to exercise the appropriate level of due care.
B. The intent to deceive, manipulate, or defraud.
In business, which has a greater influence on decision making? A. The individual's values B. The organization's values
B. The organization's values
How did the Ultramares decision expand the auditor's liability to third parties? A. Ordinary negligence was a cause of action against the auditor B. The third party could successfully sue if gross negligence can be proven C. Privity is required for third parties to successfully sue the auditor D. Third parties could successfully sue if they demonstrated an economic loss
B. The third party could successfully sue if gross negligence can be proven
Once a claim against an auditor has been established, the best defense against legal liability is what? A. There is no duty to the third party B. Third party was negligent in using the information C. There is no link to the third party D. The loss of the third party was not material
B. Third party was negligent in using the information
Dennis Kozlowski's rationalization for committing fraud at Tyco was A. Because he could get away with it B. To keep up with the masters of the universe C. The board of directors approved it D. The auditors didn't care
B. To keep up with the masters of the universe
Ethical leaders should be guided by A. Self-interest B. Virtues and values C. Costs and benefits to the community D. Profits to the community
B. Virtues and values
What was an underlying theme in nearly all of the companies with major accounting frauds in the early 2000s? A. Pressure to maintain the numbers B. Weak board of directors C. Fear of reprisals D. Loyalty to the boss
B. Weak board of directors
Professional skepticism A. provides absolute assurance that the financial statements are free of material misstatements. B. provides absolute assurance of effectiveness of internal controls. C. is evidenced through audit documentation as it provides evidence of following GAAS. D. is a state of mind and cannot be documented throughout the audit.
C. is evidenced through audit documentation as it provides evidence of following GAAS.
All of the following are acceptable payments to foreign governments except: A. providing police protection B. obtaining permits and licenses C. payments to expedite routine governmental action D. processing visas and work orders
C. payments to expedite routine governmental action
Auditor judgments of the needs of users of financial information are made in relation to A. management assertions about financial statement amounts. B. audit opinions. C. possible effects of misstatements on user decisions as a group. D. auditor assertions about financial statement amounts
C. possible effects of misstatements on user decisions as a group.
The AICPA Code of Professional Conduct focuses on ______. A. accountant interest B. firm interest C. public interest D. client interest
C. public interest
An accountant who believes fraud is in the best interest of the company and believes everything will go back to normal after the fraud occurs is subject to ______. A. situational pressure B. internal control C. rationalization D. opposition E. perceived opportunity
C. rationalization
The most frequently observed misconduct in organizations in the 2013 National Business Ethics Survey was ______. A. inflating hours worked B. violating company Internet policy C. stealing or theft D. falsifying expense reports
C. stealing or theft
The AICPA Code of Professional Conduct prohibits CPAs from directly disclosing information to outside parties unless A. the client approves the disclosure B. the SEC has been informed first C. the auditors have a legal duty to do so
C. the auditors have a legal duty to do so
Characteristics of the moral _____ _____ _____ include considering the consequences on stakeholders and sometimes acting in the best interest of others.
Characteristics of the moral point of view include considering the consequences on stakeholders and sometimes acting in the best interest of others.
What do the amendments to Section 10A of the Securities Exchange Act of 1934 address? A. Opinion requirements B. Due care requirements C. Independence requirements D. Audit requirements
D. Audit requirements
Gross negligence that constitutes fraud occurs when: A. There is no privity relationship B. Negligence of the auditor is so extreme that it goes beyond the fraud standard C. Constructive fraud standard does not exist D. Auditor acts so carelessly that it implies reckless disregard of the due care standard
D. Auditor acts so carelessly that it implies reckless disregard of the due care standard
The text identifies all of the following accounting professionals as individuals who demonstrated leadership qualities and were successful in putting an end to wrongdoing in their organizations except for: A. Cynthia Cooper B. Anthony Menendez C. Diem-Thi Le D. Betty Vinson
D. Betty Vinson
What is the goal of an authentic leader? A. Satisfy the needs of others B. Beat quarterly earnings estimates C. Maximize earnings D. Build long-term shareholder value
D. Build long-term shareholder value
Due care requires A. An opinion whether such care has been exercised B. An opinion whether the statements conform to GAAP C. Independence in mental attitude D. Diligence and competence
D. Diligence and competence
To which third-parties does the Restatement (Second) of the Law of Torts expand auditors' legal liability for negligence? A. Reasonably foreseeable third parties B. All third parties C. Actually foreseen third-parties D. Foreseen third-parties
D. Foreseen third-parties
The Murphy ruling identified a class of plaintiffs called: A. Indirect plaintiffs B. Foreseen plaintiffs C. Foreseeable plaintiffs D. Grapevine plaintiffs
D. Grapevine plaintiffs
Michael Hudson, the former assistant treasurer at Fricsh's Restaurant, exhibited which pressure that should have been a red flag in the fraud triangle? A. Purchased expensive cars B. Focused on stock price only C. Had a poor attitude D. Had a gambling problem
D. Had a gambling problem
______ means to act on principle rather than expediency. A. Convenience B. Reliability C. Persistence D. Integrity
D. Integrity
Which of the following is not a part of the ethical domain for accountants and auditors? A. General public B. Accounting profession C. Regulatory bodies (SEC, PCAOB) D. Legal profession
D. Legal Profession
Auditors render an independent opinion on the financial statements prepared by A. The PCAOB B. The audit firm C. The SEC D. Management
D. Management
Auditors can't guarantee that fraud will be detected because A. Auditors are not always independent of management B. Audits are not designed to detect fraud C. Management prepares the statements D. Management may hide it from auditors
D. Management may hide it from auditors
Which concept is identified as a deficiency in internal control over financial reporting such that there is a reasonable possibility that a material misstatement in the company's annual financial statements will not be detected on a timely basis? A. Negligence B. Significant weakness C. Recklessness D. Material weakness
D. Material weakness
The auditor's assessment of management's assertions about ICFR are intended, in part, to create an early warning system to alert financial statement users to what potential problem(s)? A. Lack of due care B. Lack of independence C. Negligence D. Material weaknesses
D. Material weaknesses
Pfizer was charged by the SEC for making improper payments related to: A. Grease payments B. Concealment of improper payments C. Tax payments to foreign governments D. Obtaining regulatory and formulary approvals
D. Obtaining regulatory and formulary approvals
Having a questioning mind and making a critical assessment of audit evidence relate to what? A. Risk management B. Due care C. Reasonable assurance D. Professional skepticism
D. Professional skepticism
What is the purpose of auditing standards? A. Necessary to ensure financial statements are in conformity with GAAP B. Steps taken by the auditor during the course of the audit to comply with GAAS C. Decide on the opinion on the financial statements D. Provide a measure of audit quality and objectives to be achieved in the audit
D. Provide a measure of audit quality and objectives to be achieved in the audit
When a person knowingly takes a risk that they should have been aware of it is called: A. Contributory negligence B. Breach of Duty C. Causation D. Recklessness
D. Recklessness
Which of the following statements best describes the link between followership and leadership? A. Servant leaders use coercion to influence followers' behavior B. Followers are expected to take their cue from servant leader behavior C. Followership helps to create an ethical, trusting organizational climate D. Servant leaders should put the needs of followers before their own needs
D. Servant leaders should put the needs of followers before their own needs
Which individual from the text identifies that the "CEO must have pristine ethics if there is to be any hope of ethical behavior from employees." A. Cynthia Cooper B. Anthony Menendez C. Betty Vinson D. Sherron Watkins
D. Sherron Watkins
When should an auditor give an unmodified opinion? A. Statements were prepared by management B. Differences exist with management over financial reporting issues C. There are no internal control concerns D. Statements present fairly financial position, results of operations, and cash flows
D. Statements present fairly financial position, results of operations, and cash flows
Which threat to independence occurs when a member of management attempts to coerce the CPA? A. Financial self-interest threat B. Management participation threat C. Familiarity threat D. Undue influence threat
D. Undue influence threat
The essence of caring is _____.
Empathy
True or false: Auditors should only communicate material fraud to those charged with governance
False
True or false: Withdrawal from the engagement is not allowed by SEC because the auditor was hired to do an audit and render an opinion.
False
Laws and ethical obligations can be characterized as follows: _____ _____ informs ethical obligations and _____ crate a minimum set of standards.
Laws and ethical obligations can be characterized as follows: moral philosophy informs ethical obligations and laws crate a minimum set of standards.
Loyalty issues sometimes arise because ______. A. conflicts exist between honesty and integrity B. ethical values may conflict C. the controller and CFO adopt the same position D. self-interest overrides the employer's interests
Loyalty issues sometimes arise because (B) ethical values may conflict.
_____ _____ describes the common failure of people to notice others' unethical behavior when seeing that behavior would harm the observer. (Enter one word per blank.)
Moral blindness
Which of the following are included in the IMA's overarching ethical principles? (Select all that apply)
Honesty Fairness Responsibility
An act that causes embarrassment to the accounting profession is called ______.
acts discreditable
To keep an auditor's independence intact, ______.
an auditor's relationship with the client should not look like it will impair the objective judgment in the eyes of a reasonable observer
When an individual has the tendency to not report incidents of wrongdoing because he/she believes others will report it, this is commonly called ______.
bystander effect
The exercise of due care with respect to the scope and nature of services performed requires the CPA firm to ______. (Check all that apply)
carry out its responsibilities in a professional manner establish adequate internal quality control procedures adequately supervise the performance of services
The expression "Act only according to that maxim by which you can at the same time will that it should become universal law" is known as the _____ _____.
categorical imperative
The longer an individual persists in attempting to resolve an issue, the more likely one's commitment to a _____ versus the organization becomes an influencing factor in determining whether to report wrongdoing. (Enter one word per blank)
colleague
A _____ _____ system includes mechanisms to ensure that the agent (management) runs the firm for the benefit of one or more principals (shareholders, creditors, and other stakeholders).
corporate governance
Virtuous character traits developed in one's youth should include ______. (Check all that apply)
courage and wisdom, good habits of character
The requirement that a director or officer acts in the best interest of the corporation while exercising good faith is known as the standard of _____ _____.
due care
Which concept promotes fairness and justice where everyone receives the same things to enjoy a full, healthy life?
equality
Which concept describes an equal opportunity that fits an individual's personal circumstances?
equity
Audit committee communications should include critical accounting policies and practices and critical accounting _____.
estimates
Internal reporting mechanisms are strengthened by developing _____ systems to facilitate such reporting. (Enter one word per blank)
ethical
The moral atmosphere of the work environment and the level of ethics practiced within a company is referred to as _____ _____.
ethical climate
Senior auditors were more likely to report a manager's ethical violation when they perceived personal costs of disclosure were _____ or when personal responsibility for reporting was perceived to be _____.
low, high
An ethical leader is more attuned to the _____ of _____ and uses it to mitigate any bystander effect. (Enter one word per blank)
magnitude of consequences
The appropriateness of estimates in the financial statements depends on _____ _____.
management's judgement
The term _____ describes the kind of information that an average prudent investor would want to have to make an informed decision to buy or sell a security. (Enter one word per blank)
material
The fact that some matters are important to fair presentation of the financial statements, while other matters are not, is recognized by the concept of _____.
materiality
Stronger perceptions of the ethical environment are associated with a stronger public interest responsibility and a higher frequency of receiving _____. (Enter one word per blank)
mentoring
A manager who serves as a role model for ethical conduct in a way that is visible to employees is referred to as a(n) _____ manager.
moral
A plaintiff must allege facts demonstrating a concrete and personal benefit that could be realized through the fraud in order to establish _____.
motive
A Texas Supreme Court decision in the case of Grant Thornton LLP v Prospect High Income Fund et al, has strengthened defenses available to auditors for _____ misrepresentation. (Enter one word per blank)
negligent
Each of the following are attributes of due care, except ______.
performing services regardless of one's abilities
When a third-party establishes a case sufficient to win against a CPA unless successfully rebutted, a _____ _____ case has been established. (Enter one word per blank)
prima facie
When rights come into conflict, they need to be ______.
prioritized
The contractual relationship between the auditor and client is known as a _____ relationship.
privity
Decisions that emphasize procedural justice are based on ______. (Check all that apply)
processes and activities that produce a particular outcome employee support for decision makers fairness of procedures used to make decisions
A questioning mind is essential to due care because it requires ______.
professional skepticism
The allegiance of independent auditors to the interests of the public is known as the _____ _____ function. (Enter one word per blank)
public watchdog
Trainee auditors are more likely to report wrongdoing internally when a firm has a system of _____ _____ to report internally. (Enter one word per blank)
quality controls
Kohlberg asserted that development in moral _____ enables a person to become truly a moral person, both in thought and action.
reasoning
Regaining respect for the profession to enhance the public interest requires ______. (Check all that apply)
rebuilding the public trust restoring confidence in financial reporting
Ethical and professional behavior can be promoted and achieved through well designed _____.
regulations
The degree of responsibility that the auditor is taking with respect to the opinion they issue on the financial statements is determined by the objectives of _____.
reporting
A(n) ______ is a justified claim on others.
right
Discussions with predecessor auditors about accounting and financial reporting differences with management are part of _____ _____.
risk assessment
All those who enter a practice such as the accounting profession ______. (Check all that apply)
seek out the internal rewards of the practice accept the authority of professional standards
An accountant has a(n) _____ _____ to act in accordance with the public interest.
social contract
The primary ethical obligation of an accounting professional when financial wrongdoing exists is to ______.
take the necessary steps to correct the matter
True or false: According to the "middle ground" approach, a third party user of financial statements can sue an auditor for negligence if their reliance is actually foreseen, even if the third party is unknown to the auditor.
true
True or false: An engagement letter is required for non-compilation reports that include preparation of financial statements.
true
True or false: Audit committee communications about estimates in the financial statements are based on their reasonableness.
true
True or false: Facilitation payments intended to speed up foreign official's actions are an exception to the anti-bribery prohibitions of the FCPA.
true
True or false: Foreign companies and nationals operating in the US are held to the same standards under the FCPA as domestic entities.
true
True or false: Respondents to the Deloitte Survey entitled "Global Human Capital Trends" believe that diversity creates a competitive advantage.
true
True or false: SSARS 21 provides CPAs the opportunity to prepare financial statements without the burden of submitting a compilation report.
true
True or false: Section 32(a) of the Securities Exchange Act of 1934 provides that any person who willfully violates any provision of the Act can be charged with a crime.
true
True or false: Seriousness of an unethical or illegal act can be more important than one's commitment to the firm and profession.
true
True or false: Servant leaders use collaboration and persuasion to influence followers rather than control.
true
True or false: The Murphy ruling established a class of plaintiffs that relied indirectly on information from non-auditors, so long as the auditors would have reasonably foreseen the non-auditors would tell other people.
true
True or false: The auditor's assessment of fair presentation depends on whether the information presented in the statements is classified and summarized in a reasonable manner.
true
True or false: The due diligence defense essentially requires proof of the absence of fraud or negligence.
true
True or false: The outcome of the Omnicare case allows for auditor liability when the opinion omits a fact that makes the opinion misleading to an ordinary investor.
true
When considering the 3D Printing Case, rank the following steps for accounting professionals contemplating whistleblowing according to IMA ethical standards.
1. Discuss the matter with superiors 4. Have a coversation with an impartial
Which of the following is not one of the elements of a professional negligence lawsuit that would cause liability in a malpractice claim? A. Contributory negligence B. Breach of Duty C. Causation D. Contributory Damage
A. Contributory negligence
Under the Private Securities Litigation Reform Act (PSLRA), how much time does a public company have to inform the SEC that their auditor has reported to the board of directors that no that remedial action has taken place to correct an illegal act? A. 1 business day B. 10 business days C. 30 business days D. 5 business days
A. 1 business day
According to the ACFE Global Survey, the typical organization loses ______. A. 5% of its revenue to fraud each year B. 10% of its revenue to fraud each year C. $1 million of its assets each year D. $1 million of its revenue to fraud each year
A. 5% of its revenue to fraud each year
What is Ethical Leadership Competence? A. Ability to handle all kinds of moral problems that may arise in an organization B. Making difficult decisions C. Ability to apply a System 1 thinking to resolving ethical dilemmas D. Setting the proper tone at the top
A. Ability to handle all kinds of moral problems that may arise in an organization
Which of the following hold that actions are the proper basis used to judge morality? A. Act deontologists B. Rule Egoists C. Rule deontologists D. Act Egoists
A. Act deontologists
Which of the following is a dimension of trustworthiness? A. Acting with integrity B. Being a caring individual C. Being a good citizen D. Being respectful
A. Acting with integrity
The conclusion of Morris' research was A. Authentic leaders can help to promote an ethical culture and reduce the instances of dysfunctional auditor behavior B. A significant positive correlation exists between measures of authentic leadership and dysfunctional auditor behavior C. Authentic leaders have no influence on the ethical culture or the instances of dysfunctional auditor behavior D. Perceptions of ethicality of leaders influences views of ethical firm culture
A. Authentic leaders can help to promote an ethical culture and reduce the instances of dysfunctional auditor behavior
Which of the following must be considered when considering materiality in financial statements? A. Both quantitative and qualitative factors B. Qualitative factors but not quantitative factors C. Quantitative factors but not qualitative factors
A. Both quantitative and qualitative factors
How does an auditor gather and objectively evaluate audit evidence? A. Consider competency and sufficiency of the evidence B. Consider whether internal control are effective C. Apply fieldwork standards D. By assessing audit risk
A. Consider competency and sufficiency of the evidence
What are the traits of a moral manager? A. Consistent and persuasive communication with employees B. Reward employees for performance C. Acting rightly based on provisions in the code of conduct D. Inclusiveness
A. Consistent and persuasive communication with employees
In defense to a liability claim, auditors may assert failure of a client to follow internal control procedures to properly supervise employees as examples of: A. Contributory negligence B. Causation C. Breach of Duty D. Contributory Damage
A. Contributory negligence
Which of the following is a valid defense in a malpractice lawsuit? A. Contributory negligence B. Causation C. Breach of Duty D. Contributory Damage
A. Contributory negligence
Characteristics of social learning theory include the A. way in which leaders influence followers B. way in which leaders become role models to followers C. influence of leader status and success on the behavior of followers D. influence of follower expectations on leader behavior
Answers: A, B
How can a risk management culture be improved? (Check all that apply). A. Senior management and the board should adopt internal control procedures B. Commitment to integrity and ethical values C. Engage the external auditors to develop the systems D. Evaluating the culture of the organization
Answers: A, B
To ensure that the statements are fairly presented, the financial reporting framework: (Check all that apply). A. requires compliance with relevant laws or regulations. B. is based on materiality standards. C. acknowledges management's responsibility for the statements. D. is used to determine measurement and recognition of material items in financial statements.
Answers: A, D
In decision making, an individual should ______. A. put his/her self-interest before the public interest B. rely on his/her moral principles as a guide C. rely strictly on rules and laws
Answer B
Identify the characteristics of ethical egoism (select the best statement). A. In the strong version, it is always good to promote one's own good. B. The ethical egoist should not pursue his/her own interests at a cost to others. C. In the weak version, it is never good to promote one's own good.
Answer: A
In applying a procedural justice perspective to an earnings management situation, an accountant should ______. A. assess support for decisions on the part of the company B. have the courage to withstand the pressure imposed by management to manipulate financial statements C. identify the harms and benefits of recording transactions versus not recording them D. ask oneself if others in a similar situation would complete an accounting manipulation
Answer: A
Under utilitarianism, lying is acceptable only when it ______. A. results in maximizing the net utility B. violates the basic rule of honesty C. leads to subordination of judgment D. helps to achieve our individual goals
Answer: A
Utilitarianism may be of limited value in moral decision making because ______. A. it may be difficult to assign values to benefits and harms B. rules are ignored in decision making C. stakeholder considerations are not a factor D. harms may exceed benefits
Answer: A
The basic problem under justice theory is ______. A. implementing the ethics code B. determining who should determine the fair distribution of benefits and burdens C. assessing the rights of individuals D. determining morally relevant criteria to assess fair distribution of benefits and burden
Answer: D
A conflict of interests can occur when ______. A. personal interests do not match the interests of those that trust you B. individuals make judgment calls on behalf of others C. personal judgments are in agreement with those that trust you
Answers: A, B
Application of utilitarianism in ethical decision making can be difficult because ______. (Check all that apply) A. utilitarian costs can be difficult to determine B. utilitarian benefits can be difficult to determine C. there may not be any stakeholders in a particular situation D. consequences of actions may not exist
Answers: A, B
Treating others fairly requires that we treat them ______. (Check all that apply) A. equally B. unequally C. judgmentally D. impartially
Answers: A, D
The ruling in the Bily case rejects the Rosenblum foreseeability approach because: (Check all that apply). A. It exposes auditors to potential liability in excess of their proportionate share B. Sophisticated plaintiffs have other ways to protect themselves from the risk of inaccurate financial statements C. The court opted for the more stringent standard of actually foreseen D. The court opted for the less stringent standard of reasonably foreseeable E. Third parties should not be able to sue auditors because there is no privity relationship
Answers: A, B, C
Utilitarianism requires that the decision maker should do the following: ______. (Check all that apply) A. determine consequences of action B. consider impartially the interests of stakeholders C. evaluate benefits and harms to stakeholders D. select the alternative that maximizes self-interest E. act in one's own self-interest
Answers: A, B, C
Which of the following are elements of whistleblowing? (Check all that apply) A. The act of whistleblowing B. The organization against which the complaint is lodged C. The party to whom the complaint is made D. The response by those to whom the complaint is made E. The action taken by the organization to counteract the whistleblower
Answers: A, B, C
Without admitting or denying the FPCA violations, Halliburton agreed to the following to resolve the case (select all that apply) A. retain a compliance consultant B. payment of penalties and disgorgerment C. review and evaluate anti-corruption policies D. find a new external auditor
Answers: A, B, C
When risks of material misstatements due to fraud exist, which of the following audit procedures can be used to demonstrate professional skepticism? (Check all that apply). A. Analytical procedures B. Using specialists C. Examine documents from an independent source D. Third-party confirmations E. Inquiries of the predecessor auditor F. Communicate with the audit committee
Answers: A, B, C, D
An accountant may escape liability under Section 11 by successfully asserting one of the following defenses: (Check all that apply). A. The loss was due to factors other than the material misstatement or omission of information B. The plaintiff knew the statements were incorrect at the time of purchasing the investment C. Reasonable basis existed to believe the statements were not materially misstated D. The third party did not rely on the financial statements E. Reasonable investigation was conducted F. No damages had occurred
Answers: A, B, C, E
How should auditors obtain needed information to identify the risk of material misstatement due to fraud? (Check all that apply). A. Inquire of management to assess their views about fraud risks B. Consider information received from the predecessor auditor C. Evaluate fraud risk factors D. Discuss any concerns with the audit committee E. Consider any unusual or unexpected relationships F. Discuss any concerns with the SEC
Answers: A, B, C, E
Internal controls are designed to ______. (Check all that apply) A. help to ensure that laws are strictly adhered to B. help prevent and detect materially false and misleading financial reports C. help to prevent asset misappropriations D. help prevent and detect material errors in the financial statements E. help prevent an insufficient number of disclosures in the financial statements
Answers: A, B, C, E
Which management attitudinal risk factors indicate fraudulent financial reporting may exist? (Check all that apply). A. Lack of support or enforcement of entity ethical standards B. Management's unwillingness to correct significant problems with internal controls C. Committing to overly aggressive financial analysts' earnings estimates D. Ignorance of securities regulations E. Excessive interest by management in increasing share prices and earnings F. Financial management's participation in selecting accounting principles
Answers: A, B, C, E
As stated in the audit report, the auditors' responsibilities include: (Check all that apply). A. An overview of how the audit was performed B. Express an opinion on the financial statements C. Conduct an audit in accordance with GAAS D. Prepare the statements E. Express an opinion on the internal controls F. An overview of judgments made and conclusions reached
Answers: A, B, C, F
Audit procedures selected are designed to: (Check all that apply). A. Support auditor judgments B. Evaluate the reasonableness of significant estimates C. Satisfy risk assessment concerns D. Evaluate audit committee responsibilities E. Form an opinion on the statements F. Obtain evidential matter
Answers: A, B, C, F
Accountants who assist in the preparation of registration statements in an IPO may be civilly liable if one of the following can be proven: (Check all that apply). A. The financial statements contain an untrue statement of material fact B. The statements omit information that if not given makes the facts stated misleading C. The plaintiff knew the statements were incorrect when the investment was made D. The statements omit material facts required by statute or regulation E. The plaintiff knew the loss was due to factors other than a material misstatement
Answers: A, B, D
Ethical intelligence is a component of ethical leadership. Which of the following are components of ethical intelligence (select all that apply): A. Ethical sensitivity B. Moral imagination C. Professional obligation D. Reflection skills
Answers: A, B, D
Fear and silence can stifle whistleblowing in a company because of ______. (Check all that apply) A. a kill the messenger syndrome B. a culture that retaliates against whistleblowers C. clear reporting channels for matters of concern D. fear of reprisals E. the failure to meet financial estimates
Answers: A, B, D
In stage 5 of Kohlberg's model, a person is influenced by ______. (Check all that apply) A. the legal contract of society B. rights and values of society C. acting in the best interests of others D. evaluating harms and benefits of actions E. universal ethical principles
Answers: A, B, D
Near and Miceli link whistleblowing to acts that are ______. (Check all that apply) A. immoral B. illegitimate C. taken by external auditors D. illegal E. outside the control of employers
Answers: A, B, D
Select all of the following steps Uber pledged to take as a result of Susan Fowler's sexual harassment claims and the Covington report. A. Train personnel to combat implicit bias B. Create an Ethics and Culture Committee C. Mitigate bias in performance reports D. Provide an effective complaint process
Answers: A, B, D
Which of the following occurred in the Lattice Semiconductor case? (Select all that apply) A. The Section 302 certifications of the CEO and CFO raised a strong inference of scienter. B. The court sided with the defendants due to the argument that all executives signing certifications would be subject to securities fraud action. C. The CEO and CFO either knew of the improper accounting or they knew the internal controls they attested to were inadequate. D. The CEO and CFO were deliberately reckless at a minimum.
Answers: A, C, D
Which of the following procedures help mitigate the inappropriate use of social networking at work? (Select all that apply) A. Codes of ethics that include proper usage of social networking sites B. Culture that encourages posting complaints online C. Consequences for those that violate company policies D. Formal social networking policies
Answers: A, C, D
Which of the following techniques can lead to fraud? (Check all that apply). A. Deception in the financial statements B. Audits that lack independence C. Misrepresentation of a material item in the statements D. Misapplication of GAAP to statement items E. Failure to obtain documents to detect fraud
Answers: A, C, D
Which of the following were findings in the KPMG Integrity Survey 2013 that looked at organization misconduct? A. A driving force behind misconduct was pressure to do whatever it takes to meet targets. B. A driving force behind misconduct is rewarding employees based upon the means used to achieve desired results. C. Almost 75% of employees observed misconduct in their organization within the past 12 months. D. More than 50% of employees reported the observed misconduct could cause a loss of public trust. E. Almost 60% of employees were certain they would be protected from retaliation if they blew the whistle on misconduct.
Answers: A, C, D
The following are examples of acceptable facilitating payments: (Check all that apply). A. To obtain permits, licenses, and the official documents to do business in a foreign country B. Selection to provide services in a competitive bidding arrangement C. Processing governmental papers D. Expediting the performance of a routine governmental action E. Providing utilities service F. Influence the behavior of a foreign government official
Answers: A, C, D, E
A duty to notify outside parties may exist in each of the following situations (check all that apply) A. in response to a governmental funding agency B. in response to a shareholder inquiry C. in response to a subpoena D. when an entity reports a change in management staff E. when an entity reports a change in auditor
Answers: A, C, E
Executive compensation packages can be used to alleviate the agency problem because ______. (Check all that apply) A. compensation packages can be used to link executive pay to company performance B. boards of directors do not have to monitor managerial performance C. stock option plans can be used to motivate executive performance in the best interests of the company D. stock option plans may be tied to executive wealth E. compensation packages can be used to link executive pay to performance of the company's shares
Answers: A, C, E
Safeguards implemented by the attest client include ______. (Check all that apply) A. an ethical tone at the top B. external review by an audit firm of its quality control system C. an active audit committee D. peer review E. a commitment to fair financial reporting
Answers: A, C, E
The independent auditor's public responsibility underlies its ______. (Check all that apply) A. allegiance to creditors and shareholders B. responsibility to the client C. fidelity to the public trust D. responsibility to the audit firm E. certification of public reports
Answers: A, C, E
The purposes of organizational values include: (Select all that apply) A. Link to the mission of the organization B. Serve as internal values of decision making C. Guide relationships with stakeholders D. Serve as a foundation for the GVV methodology E. Set the tone for the organization
Answers: A, C, E
Which of the following lead to loss of public trust in the accounting profession? (Select all that apply) A. Taking shortcuts B. Professional skepticism C. Subordination of judgment D. Due care E. Biased decision making
Answers: A, C, E
Which of the following occurred as a result of the Sarbanes-Oxley Act? (Select all that apply) A. Enhanced corporate disclosure and governance practices. B. Accounting firms must meet the independence standard. C. Accounting firms must review and assess management's report on internal controls. D. The Act specifies the definition of recklessness and due care. E. The Act specifies the scope of third parties to whom an auditor owes a duty of care.
Answers: A, C, E
Which of the following best describes the reasons for the difference in perceptions of tax and non-tax partners of organizational ethics? A. Frequency of receiving mentoring B. Non-tax partners rarely perceive unethical behavior in the organization C. Partner fit within firm culture D. Ability to describe an ethical dilemma E. Role of partner in influencing the ethical environment of their firms F. Sense of public interest responsibility
Answers: A, C, E, F
Auditors are responsible for: (Select all that apply) A. reporting material errors to the audit committee. B. reporting material errors to the SEC. C. reporting immaterial errors to the audit committee. D. detecting material errors in the financial statements. E. detecting immaterial errors in the financial statements.
Answers: A, D
In the Higginbotham v. Baxter Int'l. case, (Select all that apply) A. the plaintiffs did not provide specific proof as to the certifying executives awareness of deficiencies in internal controls. B. the plaintiffs provided evidence that the company's internal controls were inadequate. C. the court accepted the plaintiffs assertion of scienter relative to the individuals signing the Section 302 certifications. D. the court ruled in favor of the defendant because no specific proof of deficiency in internal controls was provided.
Answers: A, D
In the case of the Ford Pinto, ______. (Select all that apply) A. Ford relied completely on utilitarian thinking B. Ford relied on the universality perspective of rights theory C. Ford employed a stakeholder orientation and adequately considered the interests of the stakeholders D. Ford complied with all the laws and safety issues
Answers: A, D
The financial statements and notes should be informative of matters that may affect: (Check all that apply). A. The audit opinion B. Materiality C. Internal controls D. User understandings
Answers: A, D
Which of the following conclusions were drawn from the results of the ACFE occupational fraud survey? (Check all that apply) A. Almost none of the victim organizations recovered any losses they suffered due to the fraud. B. The amount of fraud losses correlate with higher levels of authority. C. A tip is the most likely way for occupational fraud to be detected. D. Anti-fraud controls correlate to significant decreases in occupational fraud. E. Anti-fraud controls are the most likely way that occupational fraud is detected.
Answers: B, C, D
Which of the following are components of the KPMG Professional Judgment Framework? (Select all that apply) A. Maintain independence. B. Clarify issues and objectives. C. Consider alternatives. D. Articulate and document rationale. E. Gather and evaluate information. F. Report findings to SEC.
Answers: B, C, D, E
Audit committee communications should address the following matters: (Check all that apply). A. Significant changes that auditors made to the process used to develop critical accounting estimates B. Critical accounting estimates C. Significant accounting policies and practices D. Critical accounting policies and practices E. Critical audit procedures followed F. Significant unusual transactions
Answers: B, C, D, F
Which management attitudinal risk factors indicate fraudulent financial reporting may exist? (Check all that apply). A. Financial management's participation in selecting accounting principles B. Lack of support or enforcement of entity ethical standards C. Committing to overly aggressive financial analysts' earnings estimates D. Management's unwillingness to correct significant problems with internal controls E. Ignorance of securities regulations F. Excessive interest by management in increasing share prices and earnings
Answers: B, C, D, F
Enron and WorldCom both failed as going concerns a result of ______. (Check all that apply) A. failing to meet earnings estimates B. a tension between ethics and the bottom line C. an excessive emphasis on financial results at all costs D. failing to hire competent management E. pressure to maintain the numbers
Answers: B, C, E
How should an auditor consider audit risk and materiality? (Check all that apply). A. Prepare a report on internal controls B. Planning of the audit and designing audit procedures C. Determine whether the statements are in conformity with GAAP D. Maintain professional skepticism during the audit E. Evaluate whether the financial statements present fairly financial results
Answers: B, C, E
The board of directors are responsible for ______. (Check all that apply) A. the ethics of top executives B. acting in the best interests of the corporation C. acting in good faith of the organization D. evaluating the legal responsibilities of external auditors for the firm's resources E. directing the business and affairs of the corporation
Answers: B, C, E
When should a qualified opinion be issued? (Check all that apply). A. Auditor was unable to obtain sufficient appropriate evidence of undetected misstatements that could be both material and pervasive B. Auditor was unable to obtain sufficient appropriate evidence, but the possible effects could be material but not pervasive C. Misstatements in the financial statements are material but not pervasive D. Misstatements in the financial statements are both material and pervasive E. Modified opinion is appropriate
Answers: B, C, E
Which of the following promote ethical behavior in an organization? (Select all that apply) A. Whistleblower retaliation within the organization B. Effective leadership within the organization. C. Rules of conduct within the organization D. Opposing points of view within the organization E. Ethical norms and standards within the organization
Answers: B, C, E
Under Sarbanes-Oxley, the audit committee is expected to be ______. (Check all that apply) A. disengaged from the financial reporting system B. conscientious and diligent in its oversight role of the financial statements C. completely independent of management D. more than 50% independent of management E. conscientious and diligent in carrying out its responsibilities
Answers: B, C, E Rationale: The committee should be 100% independent of management.
Threats to the independence of CPAs include ______. (Check all that apply) A. unlikely influence threat B. advocacy threat C. financial self-interest threat D. management oversight threat E. familiarity threat F. self-review threat
Answers: B, C, E, F
Characteristics of the moral point of view include ______. (Check all that apply) A. Always acting in one's own interest B. Sometimes acting in the best interests of others C. Situational ethical decision making D. Considering the consequences on stakeholders
Answers: B, D
Employees given the trappings of success who are then reluctant to speak up out of fear of losing their lavish lifestyles most likely do so because of ______. (Check all that apply) A. weak board of directors B. fear of reprisals C. pressure to maintain the numbers D. loyalty to the boss E. innovation like no other company
Answers: B, D
How does the PSLRA amend the Securities Exchange Act of 1934? (Check all that apply). A. Establishes audit requirements to detect all illegal acts with a direct and material effect on the statements B. Requires communication of illegal acts to the audit committee and board of directors C. Requires a modified opinion when illegal acts exist D. Establishes audit requirements to provide reasonable assurance of detecting illegal acts with a direct and material effect on the statements
Answers: B, D
Identify the conclusion(s) to be drawn about the results of internal auditors' work in the HealthSouth fraud. A. External auditors influenced internal audit conclusions B. The CEO pressured internal auditors as the company was under pressure to report good numbers C. Questioned ethicalness of the accounting imposed by the CEO and CFO D. A lack of ethical leadership by internal auditors stifled the moral intensity of financial reporting issues
Answers: B, D
If management appears unconcerned about ethics and more focused on the bottom line, ______. (Select all that apply) A. employees are more likely to become whistleblowers B. employees are more prone to fraudulent financial reporting C. employee trust increases D. employees are more prone to commit occupational fraud
Answers: B, D
In stage 1 of Kohlberg's model, a person's behavior is influenced by ______. (Check all that apply) A. pursuit of self interest B. avoidance of punishment C. egoism D. obedience to rules
Answers: B, D
Internal compliance officers and internal auditors can qualify for whistleblower awards if ______. (Check all that apply) A. disclosure to the SEC is needed to circumvent the entity's compliance process B. the whistleblower immediately reports the violation to the SEC C. the whistleblower has first reported the violation internally and at least 120 days have passed D. the whistleblower reasonably believes the entity is impeding investigation of the misconduct E. disclosure to the SEC is needed to prevent substantial injury to the entity or its investors
Answers: C, D, E
Rationalizations given for fraud include: (Check all that apply). Shareholders expect us to do it A. Shareholders expect us to do it B. Lack of internal controls C. It is a temporary fix D. Aggressive accounting is acceptable E. Keep the stock price high
Answers: C, D, E
The best way to gain trust through organizational decision making is that ______. (Check all that apply) A. the ends should justify the means B. senior managers should establish the values for each decision faced C. senior managers should model the organization's values D. employees should act in accordance with ethical intent E. employees should act in accordance with established organization values
Answers: C, D, E
The common causes of ethical collapse include ______. (Check all that apply) A. loyalty to the public interest B. failing to have an ethics code C. conflicts of interest are ignored D. overly rapid pace of innovation and change E. loyalty to the boss
Answers: C, D, E
To which type of company does the Foreign Corrupt Practices Act apply? (Select all that apply.) A. Foreign companies not filing with the SEC B. Foreign companies not filing with the SEC, but with their respective jurisdiction C. Foreign companies filing with the SEC D. Privately held U.S. corporations E. Publicly held U.S. corporations
Answers: C, D, E
Unethical behavior and financial collapse sometimes go hand and hand because of ______. (Check all that apply) A. overly pessimistic financial projections B. rogue employee behavior C. an unrealistic emphasis on meeting financial projections D. loyalty to the boss E. intense pressure to maintain the numbers
Answers: C, D, E
What conditions generally exist when fraud occurs by management? (Check all that apply). A. Failed audit B. Persistent operating losses C. Rationalizing the fraud act D. Pressure or incentive to commit fraud E. Opportunity to commit fraud
Answers: C, D, E
Which of the following influence the professional judgment of accountants? (Select all that apply) A. Independence requirements B. Contingent fee arrangements C. Personal behavioral traits D. Personal values E. Knowledge of the accounting issues
Answers: C, D, E
Which of the following were reasons the judge dismissed allegations against PwC in the Doral case? (Select all that apply) A. The inference that PwC was reckless was stronger than the inference that Doral deceived PwC. B. PwC took necessary steps to report the improper securitization of mortgages to the SEC. C. Allegations failed to create a strong indication of recklessness. D. Doral overrode several of its own internal controls. E. It was likely that Doral's management hid improper business practices from PwC.
Answers: C, D, E
Identify the defenses that might be raised by accountants to escape liability under Section 11. (Check all that apply). A. Lack of reliance B. Lack of reasonable care defense C. Knowledge of the falsehood by the plaintiff D. Lack of causation E. Materiality F. Due diligence
Answers: C, D, E, F
In stage 4 of Kohlberg's model, a person's behavior is influenced by ______. (Check all that apply) A. fear of punishment B. fairness to others C. duty to the social order D. pursuit of self-interest E. law and order
Answers: C, E
Which of the following are two important teleological philosophies that guide decision making in business decisions? A. Reputation B. Trustworthiness C. Egoism D. Citizenship E. Utilitarianism
Answers: C, E
A whistleblower must report concerns to the SEC within how many days of becoming aware of the violation to be eligible for whistleblower protections? A. 360 days B. 180 days C. 120 days D. 30 days
B. 180 days
Since the PCAOB was formed, a mandatory quality inspection program was implemented. What is the average audit deficiency rate range since the program started? A. 10-20% B. 30-40% C. 20-30% D. 40-50%
B. 30-40%
Which of the following starts from an initial numerical value and adjusts insufficiently in forming a final judgment? A. Confirmation tendency B. Anchoring tendency C. Judgment triggers D. Rush to judgment E. Availability tendency
B. Anchoring tendency
Materiality in the context of the audit refers to A. Evaluation of internal controls in the context of the audit and procedures completed by the audit firm B. Auditor judgment of the needs of a reasonable person in relation to financial statement information C. Assessments of misstatements in the financial statements
B. Auditor judgment of the needs of a reasonable person in relation to financial statement information
Which of the following may lead to judgment based on how accessible information is rather than a thorough analysis of the current situation? A. Anchoring tendency B. Availability tendency C. Confirmation tendency D. Rush to judgment E. Judgment triggers
B. Availability tendency
Which of the following procedures is required under SOX Section 302 to protect the public against fraudulent financial reporting? A. Requiring the Chief Compliance Officer to report directly to the audit committee B. Certification of financial statements by the CEO and CFO C. A code of ethics for the independent auditors D. Certification of the financial statements by the independent auditor
B. Certification of financial statements by the CEO and CFO
Which of the following leads to public perception that auditors may not act independent of their client's interests? A. Professional skepticism B. Commercialism C. Professionalism D. Moral biases
B. Commercialism
How does an auditor gather and objectively evaluate audit evidence? A. Apply fieldwork standards B. Consider competency and sufficiency of the evidence C. By assessing audit risk D. Consider whether internal control are effective
B. Consider competency and sufficiency of the evidence
Which type of liability occurs when an auditor willfully violates a federal statute? A. Civil liability to federal statutory law B. Criminal liability to federal statutory law C. Common law liability to third parties D. Common law liability to clients
B. Criminal liability to federal statutory law
Which of the following is not a goal of internal controls? A. Ensure that management policies are followed B. Ensure that fraud does not occur C. Help prevent and detect fraud D. Ensure that ethical systems are built into corporate governance
B. Ensure that fraud does not occur
Which estimates should be communicated to the audit committee in addition to critical accounting estimates? A. Estimates that were used by the auditor to form an opinion B. Estimates with a high degree of subjectivity C. Estimates that create changes in accounting policies D. Estimates that have been changed by management
B. Estimates with a high degree of subjectivity
If there is no specific rule of conduct addressing a particular relationship in the AICPA Code, what should the CPA do? A. Continue the relationship even though a specific rule of conduct does not address such relationships. B. Evaluate whether or not the relationship would lead an informed third party to conclude that the CPA's compliance with the rules is acceptable. C. Discontinue the relationship since a specific rule of conduct does not address such relationships.
B. Evaluate whether or not the relationship would lead an informed third party to conclude that the CPA's compliance with the rules is acceptable.
The former CEO at Qwest Communications, Joseph Nacchio, often displayed which red flag in the fraud triangle? A. Purchased expensive homes in multiple countries B. Focused only on meeting revenue targets C. Had a poor attitude D. Had a gambling addiction
B. Focused only on meeting revenue targets
Sliding down the ethical slippery slope can result from ______. A. acting with integrity B. giving in to internal pressures C. acting ethically because we believe it is the right way to behave D. being loyal to the public interest
B. Giving in to internal pressures
An auditor who reasons at stage six will emphasize: (Check all that apply). A. The public trust B. Integrity and objectivity C. Retaining the client D. Harms and benefits to others E. Universality
B. Integrity and objectivity E. Universality
The Categorical Imperative in Kant's ethical system implies ______. A. a rational, moral person will report wrongdoing for fear of future consequences B. a rational, moral person will report wrongdoing regardless of perceived retaliation because it is a moral requirement to do so C. a rational, moral person will not report wrongdoing due to social pressure within the organization D. a rational, moral person will not report wrongdoing due to existing pressures within the organization
B. a rational, moral person will report wrongdoing regardless of perceived retaliation because it is a moral requirement to do so
The underlying motivation for fraud is to ______. A. satisfy stakeholder interests B. achieve a gain over another party that would not otherwise exist C. cover up an error in the financial statements D. maximize profits
B. achieve a gain over another party that would not otherwise exist
All of the following are examples of effective compliance programs except: A. the compliance program has been tailored to the company's risk profile B. an unclear reporting structure C. significant company resources dedicated to compliance D. auditing of the program to ensure its effectiveness
B. an unclear reporting structure
When state board rules differ from those of the AICPA with respect to withholding client records pending fee payment, the licensed CPA is expected to ______. A. comply with either the state board or AICPA rules B. comply with the state board's rules C. comply with AICPA rules D. withhold client records pending fee payment
B. comply with the state board's rules
Ethical decisions in the workplace are often made jointly in work groups or ______. A. independent of others B. in organizational settings
B. in organizational settings
One's commitment to ethical standards and sense of professional identity is directly affected by A. professional skepticism B. persistence C. independence D. due care
B. persistence
A self-review threat occurs when a CPA ______. A. reviews her own audit work for a client B. prepares source documents that are used to generate the client's financial statements C. is threatened by a client because of a disagreement on a matter pertaining to the financial statements D. evaluates internal controls
B. prepares source documents that are used to generate the client's financial statements
Section 1.000.010 of the AICPA Revised Code applies to members in public practice and ______. (Select all that apply) A. evaluates the CPA's independence related to audit matters B. provides a foundation to evaluate whether safeguards should be developed to prevent a violation of the rules of conduct C. outlines the evaluation of a CPA's relationship with a client and the related risk level
B. provides a foundation to evaluate whether safeguards should be developed to prevent a violation of the rules of conduct
A conflict of interest may occur when a person holds a position of trust that ______. A. requires judgment for only oneself B. requires judgment on behalf of others
B. requires judgment on behalf of others
The lasting legacy of COSO is ______. A. the development of ethical standards for accountants B. the development of an integrated framework for internal control C. the development of professional skepticism guidelines in accounting D. the development of Board of Director guidelines related to audits
B. the development of an integrated framework for internal control
The ethical environment that is created in an organization by its leadership is known as ______. A. duty of good faith B. the tone at the top C. leader orientation D. the stewardship theory
B. the tone at the top
While she was working at the Defense Contract Audit Agency, Diem-Thi Le's annual performance evaluation was changed: A. to downgrade her performance from fully successful to successful B. to downgrade her performance from outstanding to fully successful C. because she was unable to complete the audit on a timely basis D. and she was put on a performance improvement plan
B. to downgrade her performance from outstanding to fully successful
The AICPA Revised Code applies to CPAs in the performance of all professional services except ______. A. when external pressures exist B. when the wording of the rule indicates otherwise C. when internal pressures exist D. when the client interest is sacrificed
B. when the wording of the rule indicates otherwise
The "middle ground" approach covers third parties who can sue auditors for negligence to those A. with a near-privity relationship between third parties and the accountant. B. whose reliance is actually foreseen, even if unknown to the auditor. C. whose reliance is reasonably foreseeable. D. third parties who fall under common law liability.
B. whose reliance is actually foreseen, even if unknown to the auditor.
Being _____ is not the same as following the law.
Being ethical is not the same as following the law.
Which of the following best describes perceptions of organizational ethics in a self-identified ethical dilemma? A. Non-tax partners were more likely to describe an actual dilemma than tax partners B. The group (tax/non-tax partners) that described the dilemma rated the ethical environment as stronger C. A disconnect exists between tax and non-tax partners D. Non-tax partners rated the ethical environments of their firms as stronger than tax partners
C. A disconnect exists between tax and non-tax partners
Which of the following is not a mechanism of corporate governance? A. Stock exchange listing requirements B. Oversight by the SEC C. AICPA Code of Conduct D. Internal controls
C. AICPA Code of Conduct
The lack of strong organizational ethical leadership can lead to A. Doing what is expected B. Lack of a moral compass C. Acting out of self-interest D. Following ethics codes
C. Acting out of self-interest
What motivated the FCPA? A. Lack of requirements for internal control over financial reporting. B. Payments made to political parties to help ensure their election. C. Bribes and other questionable payments made to win foreign contracts. D. The goal to implement ethics requirements under the due care principle.
C. Bribes and other questionable payments made to win foreign contracts.
Compared to System 1 thinking, System 2 is more ______. A. emotional B. automatic C. deliberate D. effortless
C. Deliberate
Common law liability is determined based on the auditor's ability to meet which standard? A. Business judgment B. Fiduciary responsibility C. Due care D. Loyalty
C. Due care
The ability to understand, be sensitive to, and care about the feelings of other is the definition of ______. A. respect B. responsibility C. empathy D. citizenship
C. Empathy
Which of the following is a benefit of using the Ethical Leadership Scale? A. Evaluates ethical decision making B. Measures effectiveness of teaching ethical competence C. Encourages self-reflection on one's leadership skills D. Provides a measuring stick of whether one's values consistently direct behavior
C. Encourages self-reflection on one's leadership skills
In the case of the Ford Pinto, the company applied which principle? A. Ethical relativism B. Deontology C. Ethical legalism
C. Ethical legalism
Which allegation would have been sufficient to establish scienter in the Doral case? A. Violation of GAAS B. PwC had unlimited access to Doral operations C. Evidence of corresponding fraudulent intent D. Violation of GAAP
C. Evidence of corresponding fraudulent intent
Unmodified opinions can be given on the audit of the financial statements when A. Auditor is unable to obtain sufficient appropriate evidence on which to base the opinion B. Differences exist with management on GAAP issues C. Financial statements fairly present the financial position D. Management has met all of its responsibilities
C. Financial statements fairly present the financial position
What is the identifying feature of the court decision in the Maxwell case? A. All advice provided by an auditor is subject to legal liability B. Auditors failed to exercise due care C. Lack of a direct causation between obligations of KPMG and plaintiff's loss D. Dismissed the lawsuit
C. Lack of a direct causation between obligations of KPMG and plaintiff's loss
Which of the following should not be a basis for fair decisions? A. Whistleblowing B. Performance evaluations C. Loyalty D. Resource allocations
C. Loyalty
PCAOB Form AP requires disclosure of which of the following? A. A listing of all Critical Audit Matters B. The names of junior auditors on the engagement C. The name of network firms that completed work on the audit
C. The name of network firms that completed work on the audit
Which of the following is not an element of ethical relativism? A. Societal norms B. Cultural norms C. Universal moral standards D. Situation specifics
C. Universal Moral Standards
An example of a direct effect illegal act is: A. Violations of worker discrimination laws B. Errors committed in the statements C. Violations of tax laws D. Operational matters
C. Violations of tax laws
Social learning theory can be defined as A. how leaders alter their behavior to meet follower expectations B. a way to understand parallel deviance C. a way to understand how leaders influence followers in a general way D. a way to understand how followers influence leaders in a general way
C. a way to understand how leaders influence followers in a general way
Sarbanes-Oxley requires the audit committee ______. A. be somewhat dependent on management B. include at least one member of upper management C. be completely independent of management
C. be completely independent of management
The objectives of reporting is to A. decide on the opinion to be issued. B. assess the qualities of the auditor. C. guide auditors in rendering the audit report. D. assess the quality of internal control.
C. guide auditors in rendering the audit report.
The ethical person-organization fit refers to ______. A. how top management can act in an ethical manner B. how an organization can align its goals with ethical behavior C. how ethical behavior might occur within an organization D. how ethical behavior influences one's personal code of conduct
C. how ethical behavior might occur within an organization
When are senior auditors more likely to report a manager's ethical violation? A. When they perceive personal costs of disclosure are low and when personal responsibility for reporting is low B. When they perceive personal costs of disclosure are high or when personal responsibility for reporting is high C. When they perceive personal costs of disclosure are high or when personal responsibility for reporting is low D. When they perceive personal costs of disclosure are low and when personal responsibility for reporting is high
D. When they perceive personal costs of disclosure are low and when personal responsibility for reporting is high
The unintentional omission of a material amount in financial statements is referred to as A. an illegal act. B. fraud. C. a restatement. D. an error.
D. an error.
Directing the business and affairs of the corporation is the ultimate responsibility of the ______. A. CFO B. CEO C. external auditors D. board of directors
D. board of directors Rationale: The CFO and CEO answer to the board.
SOX was designed to A. ensure accountants maintain independence. B. legislate ethics. C. prevent financial crises and recessions. D. ensure that accounting rules are followed.
D. ensure that accounting rules are followed.
CPAs should avoid circumstances that might lead informed third-party users to conclude ______. A. financial statements are not accurate and reliable B. independence in fact has been compromised C. attest services should not be performed D. integrity, objectivity, or professional skepticism has been compromised
D. integrity, objectivity, or professional skepticism has been compromised
One of the accomplishments of SOX, according to Lynn Turner, is A. better enforces world-wide accounting standards B. better legislates ethics. C. ensure accountants maintain their professional qualifications. D. it mitigated the force of the financial crisis.
D. it mitigated the force of the financial crisis.
Decision making in an organization is influenced by its culture through ______. A. conflicts between auditors and top management B. financial results C. financial projections D. organizational relationships and expectations for behavior
D. organizational relationships and expectations for behavior
One of the ethical limitations of deontology is that it ______. A. relies on consequences of actions B. considers rights and duties C. allows for exceptions to rules D. relies on moral absolutes
D. relies on moral absolutes
An accountant who goes along with fraud due to the strain of meeting earnings projections is subject to ______. A. desperation B. perceived opportunity C. rationalization D. situational pressure E. aversion to internal control
D. situational pressure
The primary result of occupational fraud is ______. A. errors in financial statements B. failing to disclose financial statement information C. retaliation against the offender D. the abuse of employer trust
D. the abuse of employer trust
IFAC Policy Position Paper #4 links the common benefits of serving the public interest through sound financial reporting to ______. A. professional bodies that determine whether the public interest is being served B. the AICPA Code of Professional Conduct C. the rules and regulations set by the SEC D. the application of high standards of ethical behavior
D. the application of high standards of ethical behavior
Cognitive dissonance can best be defined as ______. A. the disconnect between moral sensitivity and moral judgment B. the correlation between moral judgment and moral behavior C. the difference between our perceptions and behavior D. the inconsistency between our perceptions and behavior
D. the inconsistency between our perceptions and behavior
Which bias describes when an an auditor may yield to pressures of the majority even though their views are incorrect?
group think
The expression of an opinion by the auditors is based on an audit in accordance with _____.
GAAS
In accounting, the values of the profession are embedded in its codes of _____ that guide the actions of accountants and auditors in meeting their professional responsibilities.
In accounting, the values of the profession are embedded in its codes of ethics that guide the actions of accountants and auditors in meeting their professional responsibilities.
Match each condition for fraud with the proper example.
Pressure - Meet financial analysts' earnings estimates Opportunity - Ineffective internal controls Rationalization - One-time request
Students often recognize cheating as an undesirable behavior but justify and rationalize cheating under certain circumstances, reflecting a _____ ethic.
Students often recognize cheating as an undesirable behavior but justify and rationalize cheating under certain circumstances, reflecting a situational ethic.
Teleologists evaluate the moral worth of behavior by looking at its _____.
Teleologists evaluate the moral worth of behavior by looking at its consequences.
The philosophical view that there are no universal moral standards that are applied to all people at all times is associated with ethical _____.
The philosophical view that there are no universal moral standards that are applied to all people at all times is associated with ethical relativism.
Being honest and acting with integrity are two dimensions of _____.
Trustworthiness
What is the ethical dilemma facing Heinz?
Whether to steal the drug or not
An auditor's responsibility for detecting illegal acts that have a direct and material effect in the statements is _____ than responsibility to detect indirect effect items. (Enter one word per blank)
greater
The virtues of truthfulness, trust, justice, courage, and honesty are the standards of _____ that characterize relationships within accounting practice.
excellelence
One of the biggest issues that corporate boards of directors face is, _____ _____ and it has been found that most boards spend more time on this than ensuring the integrity of financial reporting.
executive compensation
The disconnect between the actual role of the external auditor in detecting fraud and the public expectation of the external auditor to detect fraud is referred to as the _____ _____.
expectations gap
FCPA does not prohibit "grease payments," which are referred to as permissible _____ payments. (Enter one word per blank)
facilitating
Payments designed to speed up routine governmental action that are not intended to influence the outcome of the official's action are referred to as _____ payments.
facilitating
True or false: Auditing standards are the steps taken by the auditor during the course of audit to comply with GAAS.
false
True or false: The outcome of the Omnicare case allows a successful claim by investors when an opinion is wrong.
false
Rule deontologists believe that ethical behavior is based on ______.
general moral principles
The Ultramares decision established a possible legal liability for auditors if negligence was so great as to constitute _____ negligence.
gross
moral person moral manager moral organization
honesty and integrity strong ethics message role of leadership
A false representation by an auditor could lead to common law liability if it was made to _____ the third party to rely on the representation. (Enter one word per blank)
induce
To sustain a criminal conviction against a defendant, it must be shown that a wrongful act exists, which means _____ violating a provision of the Securities Act of 1934. (Enter one word per blank)
intentionally
The processes and procedures that management puts in place to protect company assets and to ensure company activities are conducted in accordance with the organization's policies comprise the system of _____ _____.
internal controls
Virtue ethics addresses ______. (Check all that apply)
internal traits of character, intentions of the decision maker
Whistleblowing through the disclosure of wrongdoing to parties can be characterized as either _____ or _____ whistleblowing. (Enter one word per blank.)
internal, external
The audit opinion is strengthened by independence because ______. (Check all that apply)
it enhances assurances to the public conflicts of interest are avoided independence, both in fact and appearance, must exist
The PSLRA changes the legal liability standard for auditors from _____- and several liability to _____ liability. (Enter one word per blank)
joint, proportionate
Ethical values as well as one's knowledge of the accounting issues in question influence the professional _____ of accountants.
judgement
Consistency in words and actions underlies ethical _____.
leadership
When it comes to preventing fraud, CFOs are in a position of ethical _____.
leadership
The moral atmosphere of the work environment and the amount of ethics practiced is referred to as the _____ ethical climate.
organizational
A way should be found to voice one's values with the intent of changing hearts and minds when _____ _____ and actions differ from what one truly believes in. (Enter one word per blank)
organizational values
The conditions in an organization that limit or permit ethical or unethical behavior are referred to as _____.
oppurtunity
