ACCT Ethics Midterm

Jane finds a material misstatement while auditing a client's accounts receivables. Her senior tells her to ignore the misstatement so that the client does not get upset. Jane wants to be viewed as a team player in order to advance in the firm. So Jane follows her senior's instructions and ignores the misstatement. Which ethical theory did Jane use to make her decision? A. Egoism B. Justice C. Virtue ethics D. Utilitarianism

A. Egoism

The motivating factor for Sears to charge customers for repairs that were not needed was: A. Cover a loss from its business operations B. Greed C. Build up certain segments of its business D. All of the above

B. Greed

The most likely rationalization a student might use to justify cheating on an exam is: A. Ethical relativism B. Situational ethics C. Deontological ethics D. Teleological ethics

B. Situational ethics

The principle of ethical behavior in the AICPA Code that asks questions directly related to ethical courage is: A. Independence B. Objectivity C. Integrity D. Fraud prevention

C. Integrity

In the Phar-Mor case, Pat Finn's actions reflect ethical reasoning at what stage? A. Stage 1 B. Stage 2 C. Stage 3 D. Stage 4

C. Stage 3

The results of studies indicate that CPAs reason primarily at: A. Stages 1 and 2 B. Stages 2 and 3 C. Stages 3 and 4 D. Stages 4 and 5

C. Stages 3 and 4

Responsibility goes hand in hand with: A. Respect B. Loyalty C. Courage D. Accountability

D. Accountability

Heinz stole the drug because: A. He loved his wife B. He couldn't come up with all the money to pay for it C. He was afraid his wife would die without the drug D. All of these

D. All of these

In Thorne's model of ethical decision making, the instrumental virtues relate to: A. Moral sensitivity B. Ethical reasoning C. Ethical motivation D. Ethical character

D. Ethical character

Fraud can be defined as: A. A deliberate misrepresentation to gain an advantage over another party B. A cover-up of a mistake made in the financial statements C. An error in preparing financial statements D. All of the above

A. A deliberate misrepresentation to gain an advantage over another party

In the NYC Subway Death case, the reason that no bystanders helped Ki-Suck Han was probably due to: A. Moral blindness and ethical fading B. Bystander effect and moral blindness C. Blind spot and moral blindness D. Ethical fading and bystander effect

B. Bystander effect and moral blindness

Each of the following is an ethical issue in business except for: A. Honesty and fairness B. Independence C. Conflicts of interest D. Fraud

B. Independence

Rest's components of a moral model include all but A. Moral sensitivity B. Moral development C. Moral judgment D. Moral character

B. Moral development

The best way to characterize the efforts of Diem-Thi Le is that of a A. Disgruntled employee B. Whistleblower C. Member of the audit committee D. The director of the DCAA

B. Whistleblower

A major allegation in the XTO Energy case was the: A. Insider trading B. Violation of FCPA C. Breach of fiduciary duties by board of directors D. Retaliation of whistleblower

C. Breach of fiduciary duties by board of directors

Each of the following is an element of trustworthiness according to the Josephson Institute except for: A. Reliability B. Loyalty C. Fairness D. Honesty

C. Fairness

The biggest problem in implementing an utilitarian approach to decision making is: A. The interests of others may be subservient to self-interests B. It fails to consider the interests of others C. It can be difficult to evaluate the consequences of actions D. It relies on moral absolutes

C. It can be difficult to evaluate the consequences of actions

Which of the following is not used to overcome the agency problem? A. Executive compensation B. Audited financial statements C. Related party transactions D. Internal controls

C. Related party transactions

Each of the following is a pillar of corporate governance except for: A. Responsibility B. Accountability C. Fairness D. Independence

D. Independence

The country with the highest Power Distance score is A. United States B. United Kingdom C. Japan D. Russia

D. Russia

The cost to the public to clean up 1,043 failed savings and loan institutions during the period of 1986- 1995 was: A. $152.9 billion including $123.8 billion of U.S. taxpayer losses B. $300 million including $123.8 million of U.S. taxpayer losses C. $400 billion including $152.9 billion of U.S. taxpayer losses D. $400 million including $152.9 billion of U.S. taxpayer losses

A. $152.9 billion including $123.8 billion of U.S. taxpayer losses

The method of ethical reasoning that evaluates actions in terms of harms and benefits is: A. Act Utilitarianism B. Rights Theory C. Justice D. Virtue

A. Act Utilitarianism

The Rights Theory incorporates all of the following elements except for: A. Act based on the consequences of one's actions on others B. Treat people as an end and not merely as a means to an end C. Act in a way you would want others to act in similar situations D. All of the above

A. Act based on the consequences of one's actions on others

Each of the following is part of the New York Stock Exchange listing requirements except for: A. All directors must be independent of management B. Audit committees must consist of at least three members all of whom are independent of management and the entity C. The audit committee should report regularly to the board of directors D. Each listed company must have an internal audit function

A. All directors must be independent of management

Sally is the only student from a foreign country in an Auditing class. On the day of the midterm exam, Sally asks the teacher whether she could use a dictionary to translate English words to her native tongue so she can better understand the questions. What do you think the instructor should do if she follows the ethical principle of justice? A. Allow Sally to use the dictionary since she is at a disadvantage B. Not allow Sally to use the dictionary because she should know enough English to get by C. Allow the other students to bring in some tool to give them an advantage D. None of the above

A. Allow Sally to use the dictionary since she is at a disadvantage

Empathy entails all of the following characteristics of behavior except for: A. Being loyal to one's friends B. Being understanding of one's friends C. Being sensitive to the feelings of one's friends D. All of the above

A. Being loyal to one's friends

Under the IMA's standards of ethical practice, an accounting professional can consider informing authorities or individuals not employed by the organization when an ethical dilemma occurs about an accounting or financial reporting matter that remains unresolved if he/she: A. Believes there is a clear violation of the law. B. Contacts his/her immediate superior who says to forget about the matter C. Informs the external auditors who tell him/her to inform the appropriate authorities D. Believes there has been an ethical violation

A. Believes there is a clear violation of the law.

In the Capitalization versus Expensing case the main ethical issue is whether Gloria Hernandez should A. Capitalize or expense $1 million of expenditures B. Report her superiors actions to the CEO C. Talk to the Audit Committee D. Become a whistle blower

A. Capitalize or expense $1 million of expenditures

Which of the following is a permitted loan to a CPA from an audit client financial institution? A. Car loan collateralized by the car B. Credit cards with a limit greater than $25,000 C. Home mortgage D. Personal loan of less than $10,000

A. Car loan collateralized by the car

Which statement is correct with respect to a CPA's ethical obligation to return client books and records and CPA work papers: A. Client-provided records in the custody or control of the CPA should be returned to the client at the client's request. B. CPA work papers should be given to the client at the end of each audit. C. CPA work product never has to be turned over to the client. D. All of these

A. Client-provided records in the custody or control of the CPA should be returned to the client at the client's request.

The ethical dilemma for Brenda in "The Tax Return" case can best be described as a: A. Conflict between loyalty to one's supervisor and doing the right thing B. Conflict between reporting an item of taxable income and ignoring it C. Lack of independence due to ties to the client entity D. All of these

A. Conflict between loyalty to one's supervisor and doing the right thing

Teleology deals with A. Consequences of actions B. Fairness to others C. Respecting the rights of others D. Following prescribed virtue characteristics

A. Consequences of actions

According to the 2012 Global Fraud Study of the ACFE, which fraud scheme posed the greatest risks to organizations throughout the world: A. Corruption and billing schemes B. Improper use of social media C. Illegal facilitating payments D. Economic extortion

A. Corruption and billing schemes

The ancient Greeks thought of the virtues as characteristics of behavior that: A. Could lead to a good life B. Make up the "six pillars of character" C. Support the rights theory D. All of the above

A. Could lead to a good life

What needs to be coupled with moral motivation to act on moral judgment? A. Courage B. External pressures C. Loyalty D. Internal pressures

A. Courage

Which theory is based on doing what is right despite the consequences? A. Deontology B. Virtue ethics C. Teleology D. Egoism

A. Deontology

The case of Steve Jobs's Health deals with: A. Disclosure issues beyond financial information B. Disclosures required of members of board of directors C. Fiduciary obligations of a CEO D. Fiduciary obligations of a board of directors

A. Disclosure issues beyond financial information

The best restatement of Kant's categorical imperative is: A. Do to others as you would have everyone do unto you B. Consider others needs before you act C. That those with a smaller stake should have a smaller say compared to those with a bigger stake. D. Don't be cruel until someone is cruel to you

A. Do to others as you would have everyone do unto you

Virtue ethics is A. Doing what is right B. One's duty to act in a socially acceptable manner C. One's ability to meet or exceed their potential D. What one ought to do when presented with an ethical dilemma

A. Doing what is right

The method of ethical reasoning that does not deal with making decisions after considering the interests of others is: A. Egoism B. Enlightened Egoism C. Utilitarianism D. Rights Theory

A. Egoism

Deontology deals with A. Emphasizes rights of others B. Consequences of actions C. Following prescribed virtue characteristics D. Following the law as an element of ethical behavior

A. Emphasizes rights of others

When an employee is given a job evaluation, he has a right to expect A. Fair, but honest evaluations B. Glowing reports C. 360 degree evaluations from everyone in the firm D. Evaluations of technical, not personal skills

A. Fair, but honest evaluations

Role expectation or approval from others is a motive for doing right in which stage of Kohlberg's moral reasoning? A. Fairness to others B. Obedience C. Self-chosen principles D. Law and order

A. Fairness to others

In stage 1 of Kohlberg's model, ethical reasoning is motivated by: A. Fear of punishment B. Satisfaction of one's needs C. Following the law D. Acting based on universal ethical principles

A. Fear of punishment

In the ESM fraud discussed in this chapter, Jose Gomez violated the Independence standard because he: A. Had loans outstanding from the client B. Engaged in a business relationship with the client C. Had family members who owned stock directly in the client D. All of these

A. Had loans outstanding from the client

The ethical dissonance model looks at the ethical fit of the organizational and individual values. The optimal fit for an individual with high individual ethics would be: A. High- High B. High-Low C. Low- High D. Low-Low

A. High- High

What is a university's equivalent of a code of ethics? A. Honor code B. Student Handbook C. Faculty Handbook D. Statement of Values

A. Honor code

The ethics rules that applies solely to those who conduct an audit of a client entity is: A. Independence B. Objectivity C. Integrity D. All of these

A. Independence

Which rule of professional conduct in the AICPA code does not apply both to internal and external accountants who are CPAs and members of the Institute? A. Independence B. Integrity C. Objectivity D. Due care

A. Independence

What is a cause of agency problems? A. Information asymmetry B. Information symmetry C. Information technology D. Information privacy

A. Information asymmetry

The primary ethical concern when contemplating whistleblowing as an accountant is: A. It may violate my ethical obligations B. It may fail to correct the matter C. It may not be considered ethical by my employer D. All of the above

A. It may violate my ethical obligations

Steve is in charge of accounting for the purchase of equipment at Cal Works, Inc. The company has a policy that all expenditures less than $1,000 must be expensed. Steve decides to take a $900 expenditure and separate $600 one and combine them into one $1,500 expenditure so that the total can be capitalized thereby eliminating the effects on income. Steve's actions can be characterized as: A. Lacking in of moral sensitivity B. Lacking in professional skepticism C. Loyal to the company's best interests D. All of these

A. Lacking in of moral sensitivity

The committee that first recommended that the profession institute a voluntary program for peer review was: A. Metcalf committee B. Cohen committee C. The House Subcommittee on Oversight and Investigations D. Mintz and Morris committee

A. Metcalf committee

Diem-Thi Le felt retaliated against for whistle-blowing at the DCAA. Her persistence and determination to see audits change at DCAA exemplify A. Moral Character B. Moral Motivation C. Moral Judgment D. Moral Sensitivity

A. Moral Character

Ethical relativism can best be described as a: A. Point of view that morality is relative to the norms of one's culture. B. Concept that holds that integrity should be maintained in the face of pressure by others. C. An ethical reasoning method that holds one should always act out of self-interest. D. An ethical reasoning method that holds one should always consider the effect of one's actions on others.

A. Point of view that morality is relative to the norms of one's culture.

In "Blues Brothers" the initial dilemma facing the internal accountant is whether to: A. Prematurely record revenue and give in to pressure from the supervisor B. Record revenue correctly and start looking for a new job C. Record revenue correctly and go to the "Blues Brothers" and seek to change their minds D. Record revenue correctly refuse to budge from your position

A. Prematurely record revenue and give in to pressure from the supervisor

With respect to whistleblowing, the Sarbanes-Oxley Act: A. Protects employees of publicly traded companies who provide evidence in fraud cases B. Confers legal protection on managers who reported wrongdoing by top executives C. Confers legal protection on the board of directors for fraudulent actions by management D. All of the above

A. Protects employees of publicly traded companies who provide evidence in fraud cases

Thomas Jefferson's writing in the preamble of the Declarations of Independence is a perfect example of what theory? A. Rights Theory B. Virtue Theories C. Consequentialist Theories D. Applied Ethics

A. Rights Theory

Utilitarian philosophers are divided into two types: act utilitarian and A. Rule utilitarian B. Individual utilitarian C. Ethical utilitarian D. Benefit utilitarian

A. Rule utilitarian

The main issue in the Reneging on a Promise case is: A. Should the student who accepted an offer from one CPA firm back off from that promise in order to accept the offer of another firm deemed more preferable to the student. B. Should Regas back off from the dating relationship she developed with Giles C. Should the CPA firm renege on its offer of employment to a student after realizing it made one offer too many to student candidates for staff positions D. Should Tybell quit the firm because of conflicts with his superiors

A. Should the student who accepted an offer from one CPA firm back off from that promise in order to accept the offer of another firm deemed more preferable to the student.

CPAs should always adhere to the rules of conduct of the A. State board of accountancy B. AICPA C. IMA D. All of these

A. State board of accountancy

Each of the following is an outright restriction on providing nonattest services for an attest client except for: A. Tax services B. Financial information systems design and implementation C. Appraisal or valuation services D. Internal audit outsourcing services

A. Tax services

A CPA who informs management of a material misstatement in the financial statements can go to the SEC with his/her concerns if: A. The CPA informed the client of this matter and the client did not inform the SEC within one business day of being informed by the CPA B. The CPA informed the client of this matter and the client refuses to correct the financial statements C. The CPA informs the client of this matter and the client fires the CPA D. All of these

A. The CPA informed the client of this matter and the client did not inform the SEC within one business day of being informed by the CPA

The cultural value of Individualism reflects A. The degree a society reinforces individual or collective achievement B. Tolerance for uncertainty and ambiguity in society C. The degree of equality between people in a society D. Whether a society has a long-term or short-term orientation

A. The degree a society reinforces individual or collective achievement

The ethical domain in accounting and auditing refers to: A. The important constituent groups affected by accounting and auditing work B. The stages of the moral development of accountants and auditors C. The decision making process followed by accountants and auditors D. All of these

A. The important constituent groups affected by accounting and auditing work

A unique aspect of occupational fraud is: A. The misuse of company assets B. The falsification of financial statements C. The failure to disclose full and complete information D. All of the above

A. The misuse of company assets

A seemingly positive result of the 2011 National Business Ethics Survey is: A. The percentage of employees who had reported misconduct at work is increasing B. Pressure to compromise ethical standards has been decreasing C. The rate of retaliation against whistleblowers has been decreasing D. The percentage of employees who said they could question management without fear of retaliation is decreasing

A. The percentage of employees who had reported misconduct at work is increasing

The cognitive development approach refers to: A. The thought process followed in one's moral development B. The method of moral reasoning used in decision making C. The exercise of professional judgment in decision making D. All of these

A. The thought process followed in one's moral development

Kohlberg's model can best be described as: A. The various phases in one's moral development and related levels of moral reasoning B. A model of ethical action that is based on one's moral development C. A predictive tool to determine how a person will reason ethically based on one's moral development D. A model of age-specific levels of moral reasoning

A. The various phases in one's moral development and related levels of moral reasoning

A CPA would violate the Due Care Principle if he/she: A. Undertook a professional engagement without having the requisite background, knowledge and experience. B. Discloses confidential information about a client C. Violates the Public Interest Principle D. Performs tax services for an audit client without audit committee approval

A. Undertook a professional engagement without having the requisite background, knowledge and experience.

The country with the highest Uncertainty Avoidance is A. United States B. United Kingdom C. India D. China

A. United States

An important issue in the Hewlett Packard pretexting case was: A. Using false pretenses to obtain confidential information about members of the board of directors B. Disclosing confidential client information without the approval of the client C. Producing fraudulent financial statements D. Twittering about a competitor and driving him out of business

A. Using false pretenses to obtain confidential information about members of the board of directors

The philosophical belief that you should judge the result, not the action (end justifies the means) is? A. Utilitarianism B. Deontology C. Justice D. Virtue ethics

A. Utilitarianism

Aristotle defined __________ as a trait of character manifested in habitual action. A. Virtue B. Ethics C. Morals D. None of these

A. Virtue

The "Milton Manufacturing" case illustrates: A. What can go wrong when a company sets a policy that potentially harms one area of its operations B. How the failure to exercise professional skepticism can cloud objective judgment C. The pressure that can be placed on accountants by top management D. All of these

A. What can go wrong when a company sets a policy that potentially harms one area of its operations

In the Faulty Budget case, the primary ethical issue can be stated as: A. Whether an accountant should admit to a mistake once he has discovered it B. Whether an accountant should be given a poor performance review because of a mistake C. Whether an accountant should follow the advice of a friend in resolving an ethical dilemma D. Whether an accountant should inform the external auditors about a problem with the budget

A. Whether an accountant should admit to a mistake once he has discovered it

Assume you were assigned a term paper and decided to surf the web to identify a provider of papers for a fee. You chose what you thought was the best paper available. With respect to Rest's model of morality it can be said that: A. Your actions lack moral sensitivity B. You are reasoning at stage 1 C. You are making judgments based on the utilitarian method D. You lack the courage of your convictions

A. Your actions lack moral sensitivity

Many critics say the biggest fault with deontological theories is A. no clear way to resolve conflicts between moral duties B. the separation of consequences from duties C. the requirement to respect people as human beings D. not being able to treat people as only a means

A. no clear way to resolve conflicts between moral duties

Rest's "Four Component Model of Morality" can best be described as: A. A description of the values that influence ethical decision making B. A model of the relationship between ethical action and one's level of moral development C. A model of moral judgment based on one's possession of certain virtues of behavior D. All of these

B. A model of the relationship between ethical action and one's level of moral development

The Bennie and the Jets case deals with: A. Proper income classification of rebates received from insurers B. Accelerating revenues C. Delaying expenses D. Failing to record rebates from insurers

B. Accelerating revenues

The primary ethical issue in United Thermostatic Controls is: A. Misappropriation of corporate assets B. Accelerating the recording of revenue into an earlier period C. Delaying the recording of expenses into a later period D. Failure to fully disclose all information

B. Accelerating the recording of revenue into an earlier period

In stage 3 of Kohlberg's model, ethical reasoning is motivated by: A. Satisfaction of one's needs B. Acting in the best interests of others C. Upholding the rights, values, and legal contracts of society D. Acting based on universal principles

B. Acting in the best interests of others

The due care principle in the AICPA code: A. Addresses the quality of the individual who performs professional services B. Addresses the quality of services performed by the CPA C. Addresses whether the independence standards has been met D. All of these

B. Addresses the quality of services performed by the CPA

Under the Sarbanes-Oxley Act, which of the following bodies must contain members that are 100% independent of management? A. Board of directors B. Audit committee C. Internal auditors D. All of the above

B. Audit committee

Which tax service is still permitted by the PCAOB for audit clients following the KPMG tax shelter case? A. Aggressive tax shelter for audit clients B. Auditing of deferred taxes C. Tax services to audit client management or family members D. Tax services for a contingent fee

B. Auditing of deferred taxes

Each of the following characteristics describes the importance of integrity in decision making except for: A. Acting out of moral principle B. Being loyal to one's superior C. Having the courage to do the right thing D. Not subordinating professional judgment to others

B. Being loyal to one's superior

In the Bhopal case, in evaluating its exposure to possible future liability due to technology failures, Union Carbide used which of the following concepts: A. Professional skepticism B. Business risk C. Cost-benefit analysis D. Rights Theory

B. Business risk

Which of the following situations of a CPA's distant relatives does not impair the CPA's independence? A. CPA's parent holds a key position with an audit client. B. CPA's nephew is starting as a salesperson with an audit client. C. CPA's dependent roommate owns a material interest, and sits on the board, of an audit client. D. CPA's sister is chief counsel for an audit client.

B. CPA's nephew is starting as a salesperson with an audit client.

Section 302 of the Sarbanes-Oxley Act requires that management: A. Assess the company's internal controls B. Certify the financial statements C. Disclose all executive compensation D. All of the above

B. Certify the financial statements

An accountant who blows the whistle on financial wrongdoing by his/her employer by going outside the entity violates: A. The due care principle B. Confidentiality C. One's reliability obligation D. All of the above

B. Confidentiality

George is in the middle of a high stakes poker game when he notices what he thinks is cheating by another player. It appears to George that this player took a card from his lap and switched it with a card that he was dealt. If George is a utilitarian thinker, he should: A. Accuse the alleged cheater of cheating in front of all the other players B. Consider what might happen if he accuses the player of cheating and he is wrong C. Speak to the alleged cheater during a regularly scheduled break and tell him not to do it again D. Forget about the whole matter

B. Consider what might happen if he accuses the player of cheating and he is wrong

The motive of "duty" is most associated with A. Egoism B. Deontology C. Utilitarianism D. Justice

B. Deontology

The level of care expected of a reasonable person under similar circumstances in meeting one's fiduciary duty is called: A. Duty of loyalty B. Duty of care C. Transparency D. All of the above

B. Duty of care

Kant's categorical imperative principle suggests that: A. Only equals should be treated equally B. Everyone should be treated as a free and equal person C. Everyone should be treated unequally D. Only the elite are treated equally

B. Everyone should be treated as a free and equal person

A strong and effective internal control environment can be enhanced by: A. Financial statements that present fairly financial position and results of operations B. Giving the internal auditors direct and unrestricted access to the audit committee C. Having the internal auditors report to the external auditors D. Having the external auditors report to the audit committee

B. Giving the internal auditors direct and unrestricted access to the audit committee

In the Ethical Dissonance Model, a high person-organization fit requires: A. High organizational ethics, low individual ethics B. High organizational ethics, high individual ethics C. Low organizational ethics, high individual ethics D. Low organizational ethics, lows individual ethics

B. High organizational ethics, high individual ethics D. Low organizational ethics, lows individual ethics

In its investigation of ZZZZ Best, the House Subcommittee on Oversight and Investigations looked into: A. Why the board of directors failed to uncover the fraud at ZZZZ Best B. How the company was able to create 80% or more fictitious revenue C. How the company was able to create cookie jar reserves D. All of these

B. How the company was able to create 80% or more fictitious revenue

In the Parable of Sadhu case, Bowen T. MCoy's friend Steve summed up the dilemma by saying: A. I feel that what happened with the sadhu is a good example of the breakdown between ethics in different cultures. B. I feel that what happened with the sadhu is a good example of the breakdown between the individual and corporate ethics C. People tend to inevitably act in their own best interest D. All of the above

B. I feel that what happened with the sadhu is a good example of the breakdown between the individual and corporate ethics

The main ethical issue in Healthcare Fraud case is: A. Maintaining two sets of accounting books. B. Inflating healthcare costs submitted to Medicare. C. Outsourcing operations to a firm known for maximizing expense reimbursements. D. All of these.

B. Inflating healthcare costs submitted to Medicare.

Janice is a staff accountant in the accounting firm of Obama and Biden. She is assigned to the audit of HealthCare Associates. On the very first day Janice noticed that the accounting manager of the client took money out of the petty cash fund and put it in his pocket. The best action for Janice to take is: A. Ignore the situation because Janice doesn't know why the manager pocketed the money B. Inform her immediate supervisor of what she observed C. Tell another staff accountant who is a friend and ask for her advice D. Tell Obama or Biden

B. Inform her immediate supervisor of what she observed

Eddie paid an $8 restaurant check with a $10 bill. The waitress gave him $12 back. The most ethical action for Eddie is to: A. Keep the extra $10 B. Inform the waitress of her overpayment C. Inform the manager of the restaurant of the overpayment D. Leave a larger tip for the waitress

B. Inform the waitress of her overpayment

Kelly is the controller of a small company. One day the CFO comes in and tells her to lower the estimate of uncollectible accounts receivable. Kelly insists her numbers are correct as is. The CFO tells her it will mean her job at the company if she doesn't go along with the smaller estimate. The primary virtue that would enable Kelly to resist the pressure to manipulate the number is: A. Loyalty B. Integrity C. Caring D. Civic responsibility

B. Integrity

What is the common characteristic of Aristotle's virtues and ethical standards for CPAs? A. Truthfulness B. Integrity C. Loyalty D. Due care

B. Integrity

Backdating of stock options is unethical because: A. It favors top executives over other company employees with respect to the number of options B. It purposefully manipulates the option criteria that determine their value C. It changes the exercise price on options to benefit top executives D. All of the above

B. It purposefully manipulates the option criteria that determine their value

A code of ethics for financial professionals is important under Sarbanes-Oxley because: A. It strengthens the relationship between financial professionals and shareholders B. It supports the certification of financial statement requirement C. It decreases the likelihood of whistleblowing D. It enhances the ethics of the audit committee

B. It supports the certification of financial statement requirement

What is the agency problem? A. Managers place corporate goals ahead of personal goals. B. Managers place personal goals ahead of corporate goals. C. Managers place social goals ahead of personal goals. D. Managers place corporate goals ahead of social goals.

B. Managers place personal goals ahead of corporate goals.

Which of the following is not an ethical issue in business? A. Conflicts of interest B. Maximization of profits C. Discrimination D. Information technology

B. Maximization of profits

Each of the following is an element of the operational issues to be considered in the decision making model except for the: A. Culture of the organization B. Method of moral reasoning C. Internal controls D. Corporate governance system

B. Method of moral reasoning

In reference to Rest's four-component Model of Morality, which component reflects an individual's willingness to place ethical values ahead of non-ethical values that relate to self-interest? A. Moral Character B. Moral Motivation C. Moral Sympathy D. Moral Judgment

B. Moral Motivation

Cynthia Cooper's actions in the WorldCom case can be best characterized as demonstrating: A. Persistence and independence B. Persistence and courage C. Courage and loyalty D. Persistence and loyalty

B. Persistence and courage

The IRS whistleblowing Case deals with A. Ethics of retaliation B. Professional whistleblowing for gain C. Revenge whistleblowing D. Ethics of whistleblowing

B. Professional whistleblowing for gain

To whom does the CPA owe ultimate allegiance in carrying out professional obligations? A. Stockholders B. Public interest C. Client D. Stakeholders

B. Public interest

The method of ethical reasoning that requires selecting the correct moral rule that produces the greatest benefits over harms is: A. Act Utilitarianism B. Rule Utilitarianism C. Rights Theory D. Justice

B. Rule Utilitarianism

Keesha is the CEO of a publicly-owned company. She was informed by the CFO that the company's earnings were down 30 percent from the prior year due to the recession. The company's stock price has declined by 20 percent. The CFO comes up with a scheme to hide debt and inflate revenues by selling underperforming assets to a special purpose entity affiliated with the company. Keesha is concerned about possible effects on the creditors but ultimately she agrees to the accounting. Keesha is reasoning at: A. Stage 1 B. Stage 2 C. Stage 3 D. Stage 4

B. Stage 2

The actions of Diem-Thi Li best illustrate A. System 1 thinking B. System 2 thinking C. Moral blindness D. Pursuit of self-interests

B. System 2 thinking

In the Family Outreach case, Yimei finds three accounts all using the same documentation and amounts. Being skeptical, Yimei should consider doing all but: A. Report her findings to Kwami, her supervisor B. Talk to the agency's board of directors C. Examine more evidence to support her finding D. Check to see if the accounts were in the prior years' workpapers

B. Talk to the agency's board of directors

When is it appropriate to contact the audit committee about a difference of opinion with the CFO over an accounting or financial reporting manner? A. If the CFO does not agree to correct the financial statements B. The CEO supports the CFO and does not agree to correct the financial statements C. The external auditors support the CEO and do not agree to correct the financial statements D. The audit committee should always be the first to be informed about such a difference of opinion

B. The CEO supports the CFO and does not agree to correct the financial statements

In which of the following is a CPA independent in fact and appearance? A. The CPA's brother is the controller of the company being audited. B. The CPA serves on the board of a non-profit with the CFO of the company being audited. C. The CPA borrowed money for a new car from the CEO of the company being audited. D. The CPA owes an office building that he leases to the client.

B. The CPA serves on the board of a non-profit with the CFO of the company being audited.

In the PeopleSoft case, the auditors violated what aspect of independence? A. The auditor was exposed to an intimidation threat by the client B. The auditor was involved in a business relationship with the client C. The auditor served in a management decision making position with the client D. All of these

B. The auditor was involved in a business relationship with the client

The question that arises in the First Community Church case is whether: A. The financial statements have been materially misstated B. There has been a misappropriation of assets C. The auditors lacked independence D. All of these

B. There has been a misappropriation of assets

The requirement that there should be reasonable support for a tax return position before a CPA recommends it to a client most directly aligns with which tax standard: A. The tax return should not be based on a frivolous position B. There is a realistic possibility of success if the tax position is challenged C. It is more likely than not that the tax position will be upheld if challenged D. Contingent fees cannot be accepted when providing tax services for an audit client

B. There is a realistic possibility of success if the tax position is challenged

A unique aspect of the HealthSouth case discussed in the text of this chapter is: A. The external auditors failed to assess whether the internal controls operated as intended B. Top management certified that the financial statements were accurate C. The external auditors violated the independence standards because they were involved in a business . venturewithmembersoftopmanagement D. Top management hyped the stock price to increase the value of their stock options

B. Top management certified that the financial statements were accurate

In the Better Boston Beans case, what is the ethical dilemma facing Cindie? A. Loyalty of co-worker versus trust of co-worker B. Trust of co-worker versus the honesty of the workplace C. Honesty of the workplace versus the privacy of an individual D. Privacy of an individual versus loyalty of co-worker

B. Trust of co-worker versus the honesty of the workplace

The seven signs of a pending ethical collapse include all but: A. Pressure to make numbers B. Whistleblowing hotline C. Bigger than life CEO D. Doing good in the community

B. Whistleblowing hotline

Which of the following situations would be considered ethical? A. The cashier at Wal-Mart gives you $5 more than you were supposed to receive and you don't do anything about it B. You accidentally back into a car at Wal-Mart and leave your information for them to call C. Receiving fake $20 bills and using them in a store while knowing they are fake D. Finding a phone in a restaurant and keeping it

B. You accidentally back into a car at Wal-Mart and leave your information for them to call

Assume you are taking an exam and you see that your friend is cheating. Your professor does not notice it. What should you do if you are trustworthy person? A. You pretend not to know it. B. You tell your professor immediately. C. You also cheat the exam because your friend does. D. You talk to the friend and advise him or her to confess.

B. You tell your professor immediately.

According to Kant, individuals may be treated as: A. means to an end B. an end and never as a means only C. other mammals since we are all equal D. an end and never as a means, in some circumstances

B. an end and never as a means only

Kohlberg's model suggests that a person A. is morally developed early in life and will not change B. continues to change decision priorities with education and experiences C. may change up or down one stage upon becoming an adult D. may only go backwards through the stages upon becoming an adult

B. continues to change decision priorities with education and experiences

What is the maximum amount of time an audit manager or partner may spend on nonattest services for an attest client? A. 20 hours B. 15 hours C. 10 hours D. 8 hours

C. 10 hours

The aim of executive compensations is to: A. Enrich the executive B. Align the goals of the executive with the workers C. Align the goals of the executive with the shareholders D. Enrich the company

C. Align the goals of the executive with the shareholders

The Independence Principle in the AICPA Code applies to: A. All accountants and auditors B. All CPAs regardless of professional services C. All CPAs who render attestation services D. All members of the audit committee

C. All CPAs who render attestation services

The stakeholder view emphasizes the obligations of management to: A. The shareholders B. The shareholders and creditors C. All parties impacted by corporate decisions in a significant way D. The board of directors

C. All parties impacted by corporate decisions in a significant way

Each of the following elements make up an integral part of what is meant by "ethics" except for: A. Accepted standards of behavior B. Knowing the difference between right and wrong C. Always following the law D. The moral point of view

C. Always following the law

Which of the following would be an example of due care? A. Audit documentation only supplied by the client. B. Audit documentation is a copy of last year's workpapers. C. Audit documentation obtained by the auditor with reviews by supervisory personnel. D. Audit documentation with misapplication of GAAP.

C. Audit documentation obtained by the auditor with reviews by supervisory personnel.

To avoid violating independence when engaged in nonattest services for an audit client, a CPA must: A. Make all management decisions and perform all management decisions B. Evaluate the adequacy and results of the services performed C. Avoid being biased when providing nonattest services for the audit client D. Avoid being pressured by the client when providing nonattest services for the audit client

C. Avoid being biased when providing nonattest services for the audit client

Moral sensitivity can be summarized as A. Being able to think of others first B. Being able to identify the best course of action C. Being able to identify an ethical situation D. Being able to react quickly

C. Being able to identify an ethical situation

Which of the following immediate family members or close relatives would not have to follow the independence rules that apply to the CPA according to Interpretation 101-1? A. CPA's spouse B. CPA's spousal equivalent C. CPA's uncle D. CPA's dependents

C. CPA's uncle

When applying Utilitarianism to judge actions, what is the only thing that matters? A. Motives B. Justice C. Consequences D. Rights

C. Consequences

Aristotle believed that __________ always preceded the choice of action A. Empathy B. Due Care C. Deliberation D. Loyalty

C. Deliberation

Henry is the chief accounting office of XYZ Co. He believes the financial statements are accurate but he has been asked by the CFO to accelerate the recording of revenue at the end of the year to push a material amount that should be reported next year into the current year. If Henry is an ethical accountant he should react by: A. Going along with the request as a one-time concession to the CFO. B. Refuse to go along with the request and report the matter to the board of directors C. Discuss the matter with the CEO D. Firing the CFO

C. Discuss the matter with the CEO

When making a donation at the local Goodwill, Martha tells the clerk that her old computer is in perfect working order when she knows it is not, just so she can deduct more on her taxes. Which theory best describes Martha's behavior? A. Utilitarianism B. Deontology C. Egoism D. Justice

C. Egoism

The 2011 National Business Ethics Survey indicates each of the following with respect to how employees view the ethics and ethical practices of organizations they work for except for: A. Misconduct at work has declined over the years B. Whistleblowing is up C. Ethical cultures are weaker D. Pressure to cut corners is lower

C. Ethical cultures are weaker

In the Pinto case, Ford relied on which approaches to ethical reasoning to decide on a course of action with respect to the faulty gas tank placement: A. Egoism and utilitarianism B. Enlightened egoism and rights theory C. Ethical legalism and utilitarianism D. Justice and rights theory

C. Ethical legalism and utilitarianism

Internal control over financial reporting includes each of the following elements except for: A. Maintaining accurate financial records B. Providing reasonable assurance that receipts and expenditures are recorded based on proper authorization by management C. External audit conducted in accordance with generally accepted auditing standards D. Adhering to company policies and procedures

C. External audit conducted in accordance with generally accepted auditing standards

The ethical issue raised in the Beauda Medical Center case is similar to that in: A. ESM Government Securities B. PeopleSoft C. Fund of Funds D. Enron

C. Fund of Funds

What should be the first step in decision making when faced with an ethical dilemma? A. Choose an ethical theory to follow B. Discuss with others your options C. Get the facts surrounding the problem D. Determine consequences

C. Get the facts surrounding the problem

In the Cleveland Custom Cabinets case, the owner of the company thought it was all right to manipulate the financial statement numbers primarily because A. He wanted to improve earnings to increase the share price of company stock B. The treatment recommended by the owner for estimating overhead conformed to GAAP. C. He was the sole owner of the company and controlled the board of directors D. All of the above

C. He was the sole owner of the company and controlled the board of directors

What is the one virtue that people should want in a boss to trust the boss? A. Diligence B. Commitment C. Honesty D. Sense of humor

C. Honesty

Jason is the fastest worker on the audit of a company for the firm Zits LLP. Other Zits workers take twice as long to complete the equivalent amount of work as Jason. One day Jason is approached by the other workers and is asked to slow down "You are exceeding the time budget for the audit and making the rest of us look bad," said one staff member. The best thing for Jason to do is: A. Tell the other staff members that he will use the time he saves on his budget to help them to meet their budget by picking up their slack B. Approach his supervisor to discuss the matter C. Ignore what is being asked and go about his work as he has always done D. Tell the other staff members to mind their own business

C. Ignore what is being asked and go about his work as he has always done

A troubling result of the 2011 National Business Ethics Survey is: A. Increased witnessing of misconduct in the workplace. B. Decline in pressure to compromise ethics. C. Increased rate of retaliation against whistleblowers. D. Decline in negative view of supervisors' ethics.

C. Increased rate of retaliation against whistleblowers.

The Institute of Internal Auditors Code of Ethics includes each of the following principles except for: A. Integrity B. Objectivity C. Independence D. Confidentiality

C. Independence

Ty is a rising star at Texas State Country & Western Stores. He is the controller of the company. His wife, Rosie, is the lead auditor of the CPA firm that examines Country & Western's financial statements and issues an audit opinion. Given the nature of the relationships, Rosie would violate what ethical standard if she is allowed to conduct the audit: A. Integrity B. Due care C. Independence D. Responsibility

C. Independence

Which of the following services are allowed to be performed for an attest services client by Sarbanes Oxley Act? A. Financial information systems design and implementation B. Management functions or human resources C. Internal audit outsourcing services D. Pension plan audits

C. Internal audit outsourcing services

Virtue ethics emphasizes development of good habits of character. What should be the greatest reward of practicing good habits of character, according to MacIntyre? A. External rewards B. Money C. Internal rewards D. Authority of rules

C. Internal rewards

A similarity between the Bernie Madoff situation and that of R. Allen Stanford is theyboth were: A. The head of a major U.S. stock exchange B. The CEO of a company that went out of business after a major financial statement fraud C. Involved in Ponzi schemes D. Exonerated in a trial because of lack of evidence of wrongdoing

C. Involved in Ponzi schemes

The ethical issue in the Telecommunications case can best be described as: A. Is a payment to a foreign government official to grease the wheels for the delivery of imported goods a violation of the Foreign Corrupt Practices Act B. Is a bribe to a foreign government official to win a competitively bid contract a violation of the Foreign Corrupt Practices Act C. Is it a conflict of interests for employees to accept payments or other gifts when they are involved in the decision or execution of a contract for the party making the payment or gift D. Is it a conflict of interest for a member of management to make a decision on awarding a contract to one company when that person has a relative working for the company

C. Is it a conflict of interests for employees to accept payments or other gifts when they are involved in the decision or execution of a contract for the party making the payment or gift

The biggest problem in implementing a rights approach to decision making is: A. The interests of others may be subservient to self-interests B. It is difficult to weigh harms and benefits C. It relies on moral absolutes D. It can be difficult to determine criteria to distinguish equals from unequal claims

C. It relies on moral absolutes

Why don't auditors prepare financial statements, as well as audit them? A. It would take away a job from the controller of the company. B. It would not eliminate errors in the financial statements. C. It would be a conflict of interest and violates ethical standards. D. It would streamline the process and be effective.

C. It would be a conflict of interest and violates ethical standards.

The ethical reasoning method that is based on treating equals, equally and unequals, unequally is: A. Enlightened egoism B. Act utilitarianism C. Justice D. Virtue

C. Justice

If one's reputation is tainted it may create a: A. Conflict of interests B. Loss of independence C. Lack of trust D. All of the above

C. Lack of trust

Compensation of executives has soared over the last forty plus years to more than 400times the pay for average workers. Suggested remedies to rein in executive compensation especially during time of corporate wrongdoing include each of the following except for: A. Say on Pay rules B. Disgorgement C. Limits on executive compensation D. Clawbacks

C. Limits on executive compensation

The ethical dilemma in the "Shifty Industries" case can best be described as whether to: A. Use tax depreciation for financial reporting issues B. Manipulating earnings to maximize net income C. Maximizing section 179 depreciation expense D. Minimizing depreciation expense to maximize net income

C. Maximizing section 179 depreciation expense

How does Gilligan evaluate the solution to Heinz's dilemma? A. Women think saving a life is more important than keeping the law. B. Men think keeping the law is more important than saving a life. C. Men tend to think in terms of justice, and women in terms of caring. D. Men misunderstand and women understand.

C. Men tend to think in terms of justice, and women in terms of caring.

Financial statement fraud includes all but A. Overstating revenues B. Understating expenses C. Overstating warranties on new product D. Improper asset valuations

C. Overstating warranties on new product

Which of the following is not part of standards for the quality of work? A. Planning and supervision B. Professional competence C. Professional data D. Professional care

C. Professional data

Your manager asks you to "cook the books" to support a loan application at the local bank. The manager insists it is a one-time request. If you are a person of integrity, what should you do? A. Go along with the manager's request B. Talk to others in the company to determine how they handled such situations C. Refuse to go along with the request D. Inform the audit committee

C. Refuse to go along with the request

Wanda is faced with an ethical dilemma. She knows her supervisor, the CFO, wants to accelerate the recoding of revenue to an earlier period to "make the numbers," but Wanda is convinced this would violate GAAP. If Wanda reasons at stage 4 of Kohlberg's model she is most likely to: A. Make a decision based on what is in her own best interests B. Consider the interests of the stakeholders but decide based on what is in her best interests C. Refuse to record the transaction as desired by the CFO D. Inform the board of directors of the difference of opinion with the CFO

C. Refuse to record the transaction as desired by the CFO

What are the four pillars of corporate governance? A. Respect, accountability, fairness and transparency. B. Responsibility, accountability, firmness and transparency. C. Responsibility, accountability, fairness and transparency. D. Respect, accountability, firmness and transparency

C. Responsibility, accountability, fairness and transparency.

Strong corporate governance relies on a strong board of directors. Which of the following would be a strong candidate to be a board director for XYZ, Inc.? A. Community member who has already served on the board 15 years. B. Investor who has a multi-million dollar joint venture with the CEO and CFO. C. Retired controller of a Fortune 1000 company. D. Community member who receives annual large consulting contracts from XYZ.

C. Retired controller of a Fortune 1000 company.

The COSO report states that management should enact five components related to internal control objectives including each of the following except for: A. Control environment B. Risk assessment C. Risk activities D. Monitoring

C. Risk activities

What are the fiduciary obligations of the board of directors? A. Maximize profits for the company and its shareholders B. Give excessive executive compensation C. Safeguard the organization's resources and interests of the company's stakeholders D. Allow high risk accounting practices

C. Safeguard the organization's resources and interests of the company's stakeholders

Each of the following is a safeguard that helps to mitigate threats to independence except for: A. Safeguards created by the profession, legislation, or regulation B. Safeguards implemented by the attest client, such as a tone at the top C. Safeguards developed to ensure independence when performing nonattest services D. Safeguards implemented by the firm, including policies and procedures to implement regulatory requirements

C. Safeguards developed to ensure independence when performing nonattest services

To whom does the management owe its ultimate allegiance? A. Employees B. Creditors C. Shareholders D. Government

C. Shareholders

Michael Josephson, founder of the Josephson Institute of Ethics, is credited for developing A. Book of virtues B. Care and response orientation C. Six Pillars of Character D. Rights theory

C. Six Pillars of Character

At which stage of Kohlberg's view on ethical development is an individual's actions influenced by group norms? A. Stage 1 B. Stage 2 C. Stage 3 D. Stage 4

C. Stage 3

In the "Heinz and the Drug" case described in the chapter, Heinz's actions falls into which of Kohlberg's stages? A. Stage 1 B. Stage 2 C. Stage 3 D. Stage 4

C. Stage 3

A client asks his accountant to ignore a mistake which overstated the accounts receivable account. The accountant decides that the accounts receivable account has to be corrected to state the correct amount. The accountant makes his decision based on his duty to society, respect for authority, and maintaining the social order. Which stage of Kohlberg' Stages of Moral Development is the accounting reasoning? A. Stage 2 B. Stage 3 C. Stage 4 D. Stage 5

C. Stage 4

Yvonne is preparing a tax return for Jack. Jack wants to claim his nephew as a dependent even though he does not meet the criteria. Jack says if Yvonne does not list his nephew as a dependent, he will fire her and find a new tax accountant. Yvonne refuses because it is illegal to claim a dependent that does not meet the qualifications. Based on Yvonne's decision, she is likely reasoning in which stage of Kohlberg's moral development model? A. Stage 2 B. Stage 3 C. Stage 4 D. Stage 5

C. Stage 4

Assume the external auditor of a client entity also served on the client's board of directors. What aspect of independence would be violated? A. The auditor may be exposed to an intimidation threat by the client B. The auditor is involved in a business relationship with the client C. The auditor serves in a management decision making position with the client D. All of these

C. The auditor serves in a management decision making position with the client

The accounting issues at failed savings and loan institutions included: A. The failure to provide adequate allowances for loan losses B. The failure to disclose dubious deals between the S&Ls and some of its major customers C. The existence of inadequate controls to prevent inadequate allowances and control for dubious deals D. All of these

C. The existence of inadequate controls to prevent inadequate allowances and control for dubious deals

The Public Interest Principle in the AICPA Code of Professional Conduct recognizes: A. The importance of integrity in decision making B. The importance of stakeholder groups C. The need to be independent of the client D. The importance of exercising objectivity in decision making

C. The need to be independent of the client

The Agency Theory can best be described as: A. The relationship between top management and the board of directors B. The relationship between the board of directors and shareholders C. The relationship between top management and the board of directors, and shareholders D. The relationship between the external auditors and top management

C. The relationship between top management and the board of directors, and shareholders

Each of the following considerations should help to evaluate alternative courses of action in the decision making model except for: A. Whether the alternatives are consistent with professional standards B. Whether the alternatives are consistent with firm policies and its own code of ethics C. The stage of moral development of the decision maker D. The potential harms and benefits of alternative courses of action

C. The stage of moral development of the decision maker

To whom do the accounting codes of professional conduct (either the state board of public accountancy or AICPA) apply? A. Those CPAs in public accounting only. B. Those CPAs in industry, government, and education. C. Those CPAs in public accounting, industry, government, and education. D. Those CPAs in public accounting, doing auditing and taxation.

C. Those CPAs in public accounting, industry, government, and education.

One of the Contributions of the Treadway Commission Report and the work of the Committee of Sponsoring Organizations (COSO) was: A. To establish a voluntary process for peer review B. To identify red flags that might lead to fraud C. To identify the tone at the top for management to create an ethical culture D. All of these

C. To identify the tone at the top for management to create an ethical culture

The term disgorgement means: A. To give up one's meal after eating B. To return profits earned illegally C. To return ill-gotten gains D. To give up one's board position after a fraud incident

C. To return ill-gotten gains

One failure with respect to the internal controls at Tyco and Adelphia was: A. Falsification of bank statement balances B. Top executives manipulated financial statement amounts C. Top executives used hundreds of millions of dollars from interest-free loans for personal purposes D. Top management engaged in a Ponzi scheme

C. Top executives used hundreds of millions of dollars from interest-free loans for personal purposes

In stage 5 of Kohlberg's model, ethical reasoning is motivated by: A. Acting in the best interests of others B. Following the law C. Upholding the rights, values, and legal contracts of society D. Acting based on universal principles

C. Upholding the rights, values, and legal contracts of society

Which is a questionable ethical work behavior of an employee? A. Handing in all assignments on time. B. Taking time off without pay to attend to a family crisis. C. Using social media during the work day to update your Facebook page. D. Giving your best effort during work time.

C. Using social media during the work day to update your Facebook page.

Greatest good for the greatest number of people is the theory of A. Rights B. Deontology C. Utilitarianism D. Justice

C. Utilitarianism

In the Gateway Hospital case, Troy: A. Wants to be treated the same as Kristen with respect to expense reimbursement B. Wants to be treated consistently with the company policy on expense reimbursement C. Wants to be treated differently than Kristen with respect to expense reimbursement because of personal considerations D. Believes the company's reimbursement policy is fair

C. Wants to be treated differently than Kristen with respect to expense reimbursement because of personal considerations

During the investigations by the House Subcommittee on Oversight and Investigations, a question that was raised was: A. Why was fraud allowed to occur at some many companies B. Where was the board of directors in all these frauds C. Where were the auditors D. Why did the internal controls fail in some many frauds

C. Where were the auditors

In the Giles and Regas case, the primary ethical issue can be stated as: A. Whether a subordinate should blow the whistle on a superior who has violated ethical policy B. Whether two staff members of the same rank should be allowed to date C. Whether a superior should become involved in a dating relationship with a subordinate D. Whether a student should renege on the acceptance of an offer from one firm after receiving an offer from a second firm

C. Whether a superior should become involved in a dating relationship with a subordinate

A difficult choice between two moral principles that are in conflict with one another is known as a/an: A. ethical behavior B. gray area C. ethical dilemma D. pragmatism

C. ethical dilemma

"Do that action which will bring about the greatest good for the greatest number of people," is the basic concept of which ethical theory? A. egoism B. deontology C. utilitarianism D. virtue ethics

C. utilitarianism

Egoists maintain a general principle of the following sort: A. "One ought always act in others' interest" B. "One ought always act in one's and others' interests" C. "One ought always act in peer group's interest" D. "One ought always act in one's own interest"

D. "One ought always act in one's own interest"

The 2010 Dodd-Frank Act includes additional incentives for whistleblowers. What is the act's effect on whistleblowing by accountants? A. No accountant, internal or external, whether by job title or certification may receive a reward. B. All accountants who whistle-blow are protected against retaliation. C. Internal auditors who whistle-blow may receive a reward. D. A CPA may report a violation of a public accounting firm's performance in an audit.

D. A CPA may report a violation of a public accounting firm's performance in an audit.

What are the implications of reasoning at stages 3 and 4? A. A CPA unable to apply technical accounting standards is unlikely to be influenced by others. B. A CPA is unlikely to be influenced by rules or authority. C. A CPA is unlikely to be influenced or give into pressures. D. A CPA unable to apply technical accounting standards is likely to be influenced by others

D. A CPA unable to apply technical accounting standards is likely to be influenced by others

Thorne's "Integrated Model of Ethical Decision Making" can best be described as: A. A depiction of a model of moral development B. A depiction of how the Principles in the AICPA Code of Professional Conduct influences decision making C. A model of the role of virtue in decision making D. A model of the role of moral development and virtue in decision making

D. A model of the role of moral development and virtue in decision making

A unique aspect of Johnson & Johnson's Credo is that it: A. It is an aspirational statement rather than the typical "thou shalt not" form of a code of ethics B. It encourages employees to internalize the values of the company C. It follows a stakeholder approach to decision making D. All of the above

D. All of the above

Agency costs refer to: A. The costs incurred in monitoring managerial performance B. The costs incurred because there is information asymmetry between the corporation and outsiders C. The costs incurred because insiders know more about a company than do outsiders D. All of the above

D. All of the above

An ethical corporate culture can best be established by: A. Setting a proper tone at the top B. Establishing strong internal controls C. Having an effective internal audit function D. All of the above

D. All of the above

An ethical organization incorporates what into their decision-making process: A. Core values B. Strategic policies C. Reporting responsibilities D. All of the above

D. All of the above

An important issue in the HP case with "event hostess" Jodie Fisher is: A. Conflict of interest of Mark Hurd B. Alleged sexual harassment of Jodi Fisher C. Disclosure of confidential client information by Hurd to Fisher D. All of the above

D. All of the above

An internal accountant should always consider taking each of the following steps after exhausting all avenues of appeal within the organization when there is a difference of opinion with top management on an accounting or financial reporting matter except for A. Inform the SEC B. Terminate employment with the entity C. Seek legal advice before taking any action D. All of the above

D. All of the above

In the Harvard Cheating Scandal case, using ethical reasoning who is at fault for situation? A. The professor B. Teaching assistants C. Students who cheated D. All of the above

D. All of the above

Objectivity requires that a CPA should: A. Maintain a mental attitude of impartiality B. Maintain a mental attitude of intellectual honesty C. Be free of conflicts of interest D. All of the above

D. All of the above

Steve is deep in debt due to a gambling problem. He is the bookkeeper for a family-owned business, Cal Poly Greenery. The company has only three employees - Steve, the husband, and the wife. All three have been friends for many years. One day the loan shark who lent Steve $20,000 comes knocking at his door asking for repayment of the loan. Steve convinces the loan shark to give him another day. The following day Steve writes a check on the company's books to himself for $20,000. Since he reconciles the bank accounts and prepares the financial statements, Steve knows it's unlikely the owners will ever know about what he has done. From an ethical perspective, Steve has A. Violated the trust placed in him by the owners B. Risked his reputation if the owners find out C. Compromised his integrity D. All of the above

D. All of the above

The credibility standard in the Statement of Ethical Professional Practice of the IMA requires that an accounting professional should: A. Communicate information fairly and objectively B. Disclose all relevant information that might affect the intended user's understanding of the reports, analyses or recommendations C. Disclose delays or deficiencies in information, timeliness, processing or internal controls in conformance with organization policy and the law D. All of the above

D. All of the above

A reason that Bernie Madoff was able to pull off the Ponzi scheme for so long was: A. He was trusted by those who invested with him B. The SEC failed to act on tips about Madoff's questionable practices C. The auditors either looked the other way or didn't look too hard to find the fraud D. All of the above.

D. All of the above.

Impairments of independence can occur when: A. A CPA owns a direct financial interest in a client B. A CPA owns a material indirect financial interest in a client C. Immediate family members of the CPA are in violation of the independence rules D. All of these

D. All of these

Individuals who reason at stage 6 incorporate ethical reasoning based on: A. The morality of law and duty to the social order B. A rational calculation of benefits and harms to society C. Universal ethical principles D. All of these

D. All of these

PricewaterhouseCoopers was investigated by the SEC for independence violations due to: A. Reporting systems that relied on self-reporting of violations B. Ownership of client stock C. Investments by PwC professionals in bank accounts of audit clients D. All of these

D. All of these

The confidentiality standard in the AICPA code provides for exceptions to the rule in: A. In response to a validly issued court summons B. To provide information to the CPA's peer reviewers C. To defend oneself in an ethics investigation D. All of these

D. All of these

The ethical decision making model described in the chapter helps to: A. Organize the various elements of ethical reasoning and professional judgment B. Evaluate stakeholder interests using ethical reasoning C. Identify and select alternative courses of action D. All of these

D. All of these

What ethical rules are violated when a CPA auditing a client provides inside information about the client to a friend? A. Independence and objectivity B. Objectivity and due care C. Due care and confidentiality D. Confidentiality and integrity

D. Confidentiality and integrity

The biggest problem in applying virtue theory to decision making is: A. It can be difficult to evaluate the effect of virtues on others in decision making B. It relies on moral absolutes in decision making C. It can be difficult to determine virtues to distinguish equals from unequal claims in decision making D. Conflicts between virtues may make decision making more difficult

D. Conflicts between virtues may make decision making more difficult

The relationship between the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy and rule of law is known as A. Code of ethics B. Corporate sustainability C. Corporate responsibility D. Corporate governance

D. Corporate governance

Which is not a permitted form of organization for a CPA practice? A. Sole proprietorship with name of sole proprietor B. Limited liability partnership C. Professional corporation D. Corporation

D. Corporation

Kevin Lowe's ethical dilemma in the Eating Time case can best be described as whether to: A. Date another staff member of the CPA firm B. Inform his supervisor about a lack of diligence of other staff accountants C. Quit his job because he can't meet the firm's expected quality of work D. Devote time on an audit and not charge it to the job

D. Devote time on an audit and not charge it to the job

Which case in the text of the chapter illustrates the danger of a CPA accepting loans from an audit client? A. Tyco International B. Enron C. Adelphia D. ESM Government Securities

D. ESM Government Securities

Treating others fairly encompasses treating them: A. Equally, impartially, and responsibly B. Equally, responsibly, and openly C. Impartially, openly, and diligently D. Equally, impartially, and openly

D. Equally, impartially, and openly

The relationship between legal and ethical is that A. Ethical always follow the law B. Ethical requires less than legal C. Legal and ethical are the same thing D. Ethical behavior requires us to do more than required by the law and less than the law allows

D. Ethical behavior requires us to do more than required by the law and less than the law allows

The noted researcher who studied how values in the workplace are influenced by culture is: A. Thomas Hobbes B. Jeremy Bentham C. Aristotle D. Geert Hofstede

D. Geert Hofstede

Integrity is measured in terms of what is right and just. What is a question that a CPA can ask to test decisions? A. Am I doing what another CPA would do? B. Am I serving the interests of my client? C. Am I protecting my self-interests? D. Have I retained my integrity?

D. Have I retained my integrity?

Each of the following describes the behavior of Cynthia Cooper in the WorldCom fraud except for: A. Persistence B. Competence C. Integrity D. Hesitance

D. Hesitance

Assume you are an ethical person and feel uncomfortable about the way your company is reporting earnings. You believe it is deliberately overstated. If you want to bring your concerns to upper management, in which person-organization fit is it most likely that you will do so? A. High organizational ethics, low individual ethics B. Low organizational ethics, high individual ethics C. Low organizational ethics, low individual ethics D. High organizational ethics, high individual ethics

D. High organizational ethics, high individual ethics

The main accounting issue in the Juggyfroot case is: A. How to account for prepaid capacity B. How to account for and report special purpose entities C. How to account for inventory declines D. How to account for investments in marketable securities

D. How to account for investments in marketable securities

The most important values included in corporate values statements include: A. Pursuit of self-interests B. Commitment to beating the competition C. Diversity D. Integrity and ethical behavior

D. Integrity and ethical behavior

The most important duty of public accounting is to the: A. Securities Exchange Commission B. Current stockholders C. Management D. Investing public

D. Investing public

Respect is an important character of behavior because: A. It entails a loyalty obligation to one's superior B. It enables one to perform professional services competently C. It is critical to maintaining one's integrity D. It encompasses attributes of how we should treat others

D. It encompasses attributes of how we should treat others

An important modern contributor to the theory of utilitarianism is: A. Plato B. John Rawls C. Immanuel Kant D. Jeremy Bentham

D. Jeremy Bentham

Each of the following is a pillar of character according to the Josephson Institute except for: A. Caring B. Citizenship C. Respect D. Judgmental

D. Judgmental

As a manager in her firm, Lucy concerns herself with the effectiveness of internal controls. Her main focus is how efficient and effective the company's internal controls are over time. Which component of internal control is Lucy engaging in? A. Risk assessment B. Control activities C. Control environment D. Monitoring

D. Monitoring

The corporate governance system includes each of the following elements except for: A. Board of directors B. Internal controls C. Executive compensation policies D. Monitoring by top management

D. Monitoring by top management

James Rest's model of ethical action involves four components inherent to the ethical decision-making process. Which of the following relates to a person's moral judgment? A. Interpreting a situation as a moral dilemma B. Willingness to place ethical values ahead of non-ethical values C. Intention to act ethically aligning to his values D. Outcome of one's prescriptive reasoning

D. Outcome of one's prescriptive reasoning

When Sally is asked why she should share her toys with her sister, she responds by saying "Because my mom says I have to and if I don't I'll go to time-out." In which stage of moral development is Sally? A. Conventional Morality B. Fairness to Others C. Postconventional Morality D. Preconventional Morality

D. Preconventional Morality

One concern in the Armadillo Foods case in the text of the chapter is: A. The failure of internal controls B. Pressure to go along with the misappropriation of assets C. The failure of the external auditors to catch fraud D. Pressure to meet financial analysts' earnings estimates

D. Pressure to meet financial analysts' earnings estimates

The actions of Sherron Watkins in the Enron case appears to reflect each of the following except for: A. Moral sensitivity B. Egoism C. Enlightened egoism D. Professional skepticism

D. Professional skepticism

The importance of framing the ethical issue in the decision making model is: A. Identify the stakeholders affected by intended actions B. Evaluating alternative courses of action using moral reasoning methods C. Identify the accounting issues present in a case D. Providing a perspective to apply the decision making model to specific facts of the case

D. Providing a perspective to apply the decision making model to specific facts of the case

Which of the following relationships do not impair CPA-auditor independence? A. Financial relationships with the client B. Business relationships with the client C. Family relationships whereby an immediate family member holds a decision-making position with the client D. Relationships where a best friend serves in a financial reporting oversight role with the client

D. Relationships where a best friend serves in a financial reporting oversight role with the client

In the Lee & Han, LLC case, Barbara Strom should: A. Report the situation to SEC under the Dodd-Frank Act. B. Change the audit workpapers to not reflect the market decline in inventory. C. Discuss the matter with Kate Boller. D. Report the situation to the firm's oversight or similar committee.

D. Report the situation to the firm's oversight or similar committee.

The fiduciary duty of the board of directors includes all of the following except for: A. Safeguarding corporate assets B. Promoting shareholder interests C. Exercising care in carrying out their responsibilities D. Representing the interests of all stakeholders

D. Representing the interests of all stakeholders

In the Amgen case, former employees, Shawn O'Brien and Kassie Westmoreland sued the company for: A. Wrongful termination B. Fraudulent actions C. Discrimination D. Retaliation

D. Retaliation

Rosie is the external auditor of Texas Two Steps, a privately-owned dance company in Texas. Rosie believes the owner of the company is skimming cash off the top. She approaches the owner who explains that the money will be replaced in the following month after he refinances his house. Rosie accepts the owner's explanation but reclassifies the expenditure as a receivable of the company from Rosie. Rosie's reasoning best reflects: A. Stage 1 B. Stage 2 C. Stage 3 D. Stage 4

D. Stage 4

The Act that enables a whistleblower to receive compensation for blowing the whistle if the claims are deemed to be valid and the individual is not precluded from receiving such an award is: A. The Sarbanes-Oxley Act B. The Foreign Corrupt Practices Act C. The Private Securities Litigation Reform Act D. The Dodd-Frank Financial Reform Act

D. The Dodd-Frank Financial Reform Act

What is the difference on contingent fees under the PCAOB rules versus the AICPA rules? A. Both rules allow contingent fees for an audit client if the contingency is based upon findings of government agencies. B. The AICPA prohibits contingent fees to an audit client. C. The PCAOB allows contingent fees for non-public company engagements. D. The PCAOB prohibits contingent fees in tax engagements performed for an audit client.

D. The PCAOB prohibits contingent fees in tax engagements performed for an audit client.

To ensure audit committee independence, the committee should meet separately with each of the following groups except for: A. Senior executives B. Internal auditors C. External auditors D. The audit committee should meet separately with all of the above

D. The audit committee should meet separately with all of the above

If a client refuses to accept an auditors' report that has been modified, the public accounting firm should withdraw from the engagement and give its reasons in writing to the board of directors except when: A. The auditor is unable to obtain sufficient appropriate evidence about a suspected illegal act B. The client fails to account for or disclose properly a material amount connected with an illegal act C. The auditor is unable to estimate amounts involved in an illegal act D. The auditor is unable to observe the physical inventory

D. The auditor is unable to observe the physical inventory

In the Lone Star School District case, the auditors were mostly concerned about: A. The behavior of a staff member toward client personnel B. The falsification of the financial statements C. The lack of independence of the audit team D. The lack of documentation for travel and entertainment expenses

D. The lack of documentation for travel and entertainment expenses

According to the 2012 Global fraud Study of the ACFE, the most common method of initial detection of occupational fraud is: A. Internal audit B. Management review C. External audit D. Tip

D. Tip

One of the duties of a board of directors is to protect the interests of stakeholders. Which of the following is an example of protecting such interests? A. Back dating options for executives B. Deceptive business practices C. Off balance sheet financing D. Transparent financial reporting

D. Transparent financial reporting

Kevin Greenberg's actions in the "Supreme Designs" case can be said to have been: A. Selfish, in that he only thought of his own interests B. Disloyal to the company C. Unethical because he wrote checks to himself for unauthorized checks D. Undertaken with the intent to help out his supervisor

D. Undertaken with the intent to help out his supervisor

James Doty, the chairman of the PCAOB, in his testimony before Congress on the financial crisis of 2007-2008, admitted that auditors should have been more vigilant—not just at Lehman Brothers, but across the board. Which audit areas did Doty signal out for criticism? A. Inventories and cash flow B. Capital and operating expenses C. Special purpose and related-party entities D. Valuations and end-of-period transactions

D. Valuations and end-of-period transactions