Ethics Exam 1
Rest's "Four Component Model of Morality" can best be described as: a. A model of moral development based on one's diversity perspective 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. An approach to ethical decision making based on prescribed steps in making ethical decisions
b. A model of the relationship between ethical action and one's level of moral development
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. fairness
b. duty of care
External auditors communications with the audit committee include each of the following except: a. matters related to why certain accounting policies are considered critical b. shareholder returns c. significant estimates made by management d. significant unusual transactions
b. shareholder returns
Proper tone at the top includes all of the following except: a. communicating compliance and ethics messaging to employees b. regularly reminding employees of the importance of ethical behavior c. rarely enforcing the code of conduct d. modeling the company's values
c. rarely enforcing the code of conduct
What is the strength and courage of one's convictions called?
integrity
What standard establishes the basis for moral action of auditors and avoids subordinating judgment?
integrity
What are some examples of nonattest services?
internal audit services, legal services, human resource services
What organizational function prevent and detect errors and fraud?
internal controls
what is an example of a safeguard?
internal policies and procedures for disclosure of interests and relationships
What are internal mechanisms?
the mechanisms that help manage, direct, and monitor corporate activities to create shareholder value
What is enlightened egoism?
the mindset that centers on one's longterm self-interest but takes others' wellbeing into account
What is the main responsibility of the organization's ethics officer?
to ensure that the organization is in compliance with laws and regulations
what are the six pillars of character?
trustworthiness, respect, responsibility, fairness, caring, citizenship
What type of threat involves threatening to replace the CPA or CPA firm because of a disagreement with the client over the application of an accounting principle?
undue influence threat
What are basic fundamental beliefs that guide or motivate a person's actions?
values
what is cultural relativism?
The theory that morality is relative to norms of one's culture
The Olympus case was unique from a corporate governance perspective because it deals with: a. A board of directors that was completely under the influence of the CEO b. Cultural differences between Japanese management and western style of management c. Cultural differences between U.S. and non-U.S. companies d. A company that consistently overrides its internal controls and commits fraud
b. Cultural differences between Japanese management and western style of management
What are vices?
bad habits/character traits
Aristotle believed that __________ always preceded the choice of action. a. Empathy b. Due Care c. Deliberation d. Loyalty
c. Deliberation
Responsibility goes hand in hand with: a. Respect b. Loyalty c. Courage d. Accountability
d. Accountability
What is miniscribe fraud?
when top management overrides internal controls to commit fraud
What are the seven signs of ethical collapse?
1. Pressure to maintain numbers 2. Fear and silence 3. Young people and bigger than life CEO 4. Weak board of directors 5. Conflicts of Interests overlooked 6. Innovation like no other company 7. Goodness in some areas atones for evil in others
What are the steps in the integrated ethical decision making process?
1. identify the ethical and professional issues 2. identify and evaluate alternative courses of action 3. reflect on the moral intensity of the situation 4. take action
What is the Acts Discreditable Rule (1.400.001)?
A member shall not commit an act discreditable to the accounting profession.
What is virtue ethics?
A moral theory that focuses on the development of virtuous character
What is the stipulation on Rest's Model of Ethical Decision Making?
All 4 processes must occur to create moral behavior
What is Operation Broken Gate?
An SEC initiative to identify auditors who neglect their duties and the required auditing standards
What is an important part in making an ethical choice, according to Kidder?
Courage
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
Judgments can fall prey to cognitive traps and biases that negatively influence judgments. With that said, what are the main 3 judgement traps?
Group-think, Rush to solve problems, Judgment triggers
Why does hosting services impair independence?
Independent CPAs cannot maintain responsibility over a client's internal controls
What moral philosopher is associated with justice?
John Rawls
What does the business judgement rule state?
Management is expected to exercise due care and to use their best judgment in guiding corporate management, but they are not insurers of business success
What code addresses differences of opinion between a CPA accountant/auditor and that person's supervisor or others in the organization?
Subordination of Judgment (1.130.020)
What is the difference between system 1 thinking and system 2 thinking?
System 1 is an intuitive system of thinking that is fast and effortless but System 2 is a slower and conscious system of thinking
What is a right?
a justified claim on others
what is situation ethics?
a system of ethics by which acts are judged within their contexts instead of by categorical principle
what is a tax shelter?
a tax avoidance transaction
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. Rationalize unethical actions
a. Could lead to a good life
One reason independence in appearance is used to evaluate threats to independence is: a. Factual independence is based on unobservable matters b. Independence in appearance links to other rules of conduct c. Threats to independence can only be measured using a safeguards approach d. Threats to independence always exist when perceptions indicate a conflict of interests may exist between the auditor and client
a. Factual independence is based on unobservable matters
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. Social contract d. Law and order
a. Fairness to others
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
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. The failure to resolve conflicts of interest
a. The misuse of company assets
The KPMG professional judgment framework defines judgment as: a. The process of reaching a decision or drawing a conclusion where there are a number of possible alternative solutions b. The process of making a judgment where there are a number of possible virtues c. The process of acting in accordance with AICPA code d. The process of deciding when giving voice to one's values
a. The process of reaching a decision or drawing a conclusion where there are a number of possible alternative solutions
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. The approach to giving voice to one's values
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 the belief that one will not report incidents of wrongdoing if they believe others will report it c. A predictive tool to determine how a person will reason ethically based on one's views on diversity 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
In using the GVV framework, questions to pose for dealing with the opposing points of view include all of the following except: a. What is the way to appeal all parties? b. What is at stake for the key parties? c. What is your most powerful and persuasive response you need to address? d. What levers can you use to influence others?
a. What is the way to appeal all parties?
The philosophical methods of moral reasoning suggest that once we have ascertained the facts, we should ask ourselves certain questions when trying to resolve a moral issue. Which of the following is NOT one of those questions? a. Which course of action maximizes my net benefits? b. Which course of action develops moral virtues? c. Which course of action advances the common good? d. What benefits and what harms will each course of action produce and which alternative will lead to the best overall consequences?
a. Which course of action maximizes my net benefits?
The difference between occupational fraud and financial statement fraud is: a. occupational fraud is generally committed by employees b. occupational fraud is generally committed by external auditors c. financial statement fraud occurs either by accident or deliberation d. financial statement fraud always starts with non-executive decisions
a. occupational fraud is generally committed by employees
A common ethical problem where there is an unrealistic expectation to meet expected results and the ends justify the means can be best described as: a. pressure to maintain the numbers b. fear of reprisal c. loyalty to the boss d. weak board of directors
a. pressure to maintain the numbers
The cultural value of Individualism reflects: a. the degree 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 society has a long-term or short-term orientation
a. the degree society reinforces individual or collective achievement
Who are accountants supposed to be "loyal" to?
accountants should be loyal to public interest, not a specific company or organization
What type of threat involves commencing litigation by either the client or the CPA against one another?
adverse interest threat
What type of threat involves promoting the client's securities as part of an initial public offering or representing the client in US tax court?
advocacy threat
What is an individual's mindset in the conventional level of Kohlberg's stages of moral development?
an individual becomes aware of the interests of others and one's duty to society
What is an individual's mindset in the pre-conventional level of Kohlberg's stages of moral development?
an individual is very self-centered
What is an individual's mindset in the post-conventional level of Kohlberg's stages of moral development?
an individual recognizes there must be a society wide basis for cooperation
What is moral intent?
an individual's degree of commitment to the moral course of action
An unacceptable threat to independence occurs when a CPA performs nonaudit services for an audit client unless the CPA: a. Assumes all management responsibilities b. Accepts management's responsibility for the services c. Evaluates the adequacy of the services d. Evaluates the results of the services
b. Accepts management's responsibility for the services
Madison is in the process of gathering evidence to support the audit opinion on Jefferson & Adams, Inc. She's a new staff accountant and wants to make sure she exercises the appropriate level of professional skepticism. Madison asks for your advice as the senior on the audit. How best might you guide her as to the skepticism issues? a. Accept management's representation unless they fail to provide adequate supporting documentation b. Always review the evidence you gather to assess persuasiveness c. Approach the audit assuming fraud does exist d. Keep an open mind and rely on your team in making professional judgments
b. Always review the evidence you gather to assess persuasiveness
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 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. Fairness
b. Duty of care
Treating others fairly encompasses treating them: a. Equally, impartially, and responsibly b. Equally, impartially, and openly c. Equally, responsibly, and openly d. Impartially, openly, and diligently
b. Equally, impartially, and openly
Common judgment traps include: a. Group think, judgment triggers, and reacting to pressures b. Group think, judgment triggers, and a rush to solve problems c. Reacting to pressures, a rush to solve problems, and Systems 1 thinking d. Systems 1 thinking, cognitive dissonance, a rush to solve problems
b. Group think, judgment triggers, and a rush to solve problems
Gabby has just left a meeting with the partner in charge of an audit engagement and was told to ignore the typical year-end accrual entries because earnings are below financial analysts' earnings expectations. Gabby knows this is wrong and wants to act on her values but she does not want to lose her job. What is the best thing for Gabby to do in this situation if she chooses to voice her values? a. Quit the firm b. Speak with the managing partner of the firm c. Inform the SEC of the difference d. All of the above
b. Speak with the managing partner of the firm
The International Federation of Accountants (IFAC) Policy Position Paper #4, entitled A Public Interest Framework for the Accountancy Profession was designed to accomplish which of the following? a. To create an international CPA certificate b. To better evaluate whether the public interest is being served through actions of the profession c. Establish global corporate disclosure standards from an international perspective d. Develop guidelines for auditors to express professional judgment
b. To better evaluate whether the public interest is being served through actions of the profession
Which of the following characteristics does NOT describe the importance of integrity in decision making? 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 judgement to others
b. being loyal to one's superior
George has been asked by his audit client to provide income tax services including tax planning. Prior to providing such services, George should be certain that: a. he first completes the audit b. he assesses threats to independence c. the CEO pre-approves the performance of such services d. the board of directors is informed about such services
b. he assesses threats to independence
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 advice d. tell the supervisor of the accounting manager what she has observed
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
Objectivity requires that a CPA should: a. maintain a mental attitude of intellectual honesty and independence b. maintain a mental attitude of intellectual honesty and impartiality c. act in accordance with the best interests of one's client d. act in accordance with the best interests of one's employer
b. maintain a mental attitude of intellectual honesty and impartiality
Safeguards implemented by the attest client include each of the following except: a. proper oversight by client management b. management participation in the client by the attest firm c. policies and procedures to address ethical conduct d. the tone at the top set by executive management
b. management participation in the client by the attest firm
what are the dimensions of trustworthiness?
being honest, acting with integrity, being reliable, and exercising loyalty
What is an example of cultural relativism?
bull fighting because some cultures praise it's artistic value while others condemn it to be an indecent form of torture
How can promoting/marketing violate the Acts Discreditable rule?
by advertising claims of their experience or qualifications in a false manner
How can an organization create an environment that supports whistleblowing and whistle-blowers?
by establishing an ethical culture and anonymous channels to report fraud
Section 404 of the Sarbanes-Oxley Act requires a. The establishment of procedures to accept employee complaints b. The principle executive to certify that they have reviewed the financial statements c. A report of the company's internal control over financial reporting d. Code of ethics requirements for senior officers
c. A report of the company's internal control over financial reporting
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
What is the significance of the Menendez v Halliburton, Inc.? a. Halliburton was able to preserve and show that their bill and hold method was in accordance with GAAP. b. Menendez was awarded his position back at Halliburton, but the actions of Halliburton were retaliatory. c. Appeals court panel ruled that Menendez (an internal accountant) had been retaliated against for blowing the whistle. d. The SEC agreed with Menendez about the bill and hold method; Halliburton restated their financial statements and paid penalties.
c. Appeals court panel ruled that Menendez (an internal accountant) had been retaliated against for blowing the whistle.
What are the five elements of the framework for understanding ethical decision making in business? a. Ethical issue sensitivity; individual factors; organizational factors; opportunity; and business ethics intentions and evaluations. b. Individual factors; organizational factors; opportunity; moral character; and business ethics intentions, behavior, and evaluations. c. Ethical issue intensity; individual factors; organizational factors; opportunity; and business ethics intentions, behavior, and evaluations. d. Organizational factors; opportunity; moral judgment; individual values; and business ethics intentions, behavior, and evaluations.
c. Ethical issue intensity; individual factors; organizational factors; opportunity; and business ethics intentions, behavior, and evaluations.
Jacob just joined the firm of Gordon & Towns LLC. Prior to beginning his first group audit assignment, Jacob asks to meet with his mentor, Isaac. He asks Isaac how making judgments in an audit team setting differs from running an audit oneself. What is the best advice for Isaac to give to Jacob? a. They are not the same b. Groups are not prone to judgment traps and biases c. Groups are prone to making quick decisions in order to avoid conflict d. Good judgment principles apply only in group settings since other are involved
c. Groups are prone to making quick decisions in order to avoid conflict
Professional skepticism links to professional judgment through the ethical standards of: a. Independent thought, objectivity, and intelligence b. Objectivity, intelligence, and reflective thought c. Independent thought, objectivity, and due care d. Honesty, integrity, and due care
c. Independent thought, objectivity, and due care
The biggest problem in implementing a 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 weigh all the consequences of actions d. It relies on moral absolutes
c. It can be difficult to weigh all the consequences of actions
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 interest b. Loss of independence c. Lack of trust d. Loss of objectivity
c. Lack of trust
Which of the following statements best reflect the ethical obligation of CPAs with respect to working with outside advertising agencies to market professional services for the CPA? a. Make sure that advertising is done professionally b. Prohibit advertising on social media c. Make sure the agency does not do anything that would put you in violation of the ethics rules d. Prohibit statements about the scope of professional services
c. Make sure the agency does not do anything that would put you in violation of the ethics rules
Has SOX accomplished its intended goal of reliable financial reporting by public companies? a. Yes, as the CEO and CFO are certifying that financial statements contain no material misstatements. b. Maybe, as very few defendants have been charged with false certification, and fewer still have been convicted. c. Maybe, as laws are needed but they serve as only a minimum standard of ethical conduct and may not lead to ethical conduct. d. No, as the SEC has unsuccessfully sought to collected disgorgement of bonuses and other compensations of officers.
c. Maybe, as laws are needed but they serve as only a minimum standard of ethical conduct and may not lead to ethical conduct.
Which of the following connect the integrated ethical decision-making process with Rest's framework? a. Identify the ethical and professional issues and ethical behavior b. Identify and evaluate alternate courses of actions and ethical sensitivity c. Reflect on the moral intensity and virtues that enable action and ethical intent d. Take action and ethical judgment
c. Reflect on the moral intensity and virtues that enable action and ethical intent
Assume your values conflict with what you are being asked to do. Under the Giving Voice to Values methodology which of the following statements reflects the thought process you might have in developing a game plan to voice your values? a. Use philosophical ethical theories to reason through alternative courses of action b. Use the ethical decision making model to evaluate the ethics of the situation c. Reflect on the objections that might be raised to your intended expressed views d. Use Systems 2 thinking to decide on a course of action
c. Reflect on the objections that might be raised to your intended expressed views
According to Kidder, which of the following is least likely to be a step or checkpoint in ethical decision-making guidelines? a. Recognize there is an ethical issue b. Determine the actor c. Test for wrong issues d. Look for a third way
c. Test for wrong issues
In the business world, 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
Greatest good for the greatest number of people is the theory of _________. a. Rights b. Deontology c. Utilitarianism d. Justice
c. Utilitarianism
What is "Operation Broken Gate?" a. an SEC initiative to identify audit firms that violate independence standards b. a PCAOB initiative to identify audit firms with deficiencies in audits through its inspection program c. an SEC initiative to identify auditors who neglect their duties and the required auditing standards d. an AICPA program to implement its conceptual framework standards
c. an SEC initiative to identify auditors who neglect their duties and the required auditing standards
Individuals that ignore the moral point of view and take advantage of others in an effort to meet their own short term objectives can be classified as: a. deontologists b. relativists c. egotists d. utilitarians
c. egotists
Which of the following is NOT an element of trustworthiness according to the Six Pillars of Character? a. reliability b. loyalty c. fairness d. honesty
c. fairness
Carpendale suggests that moral reasoning is viewed as a process of coordinating all perspectives involved in a moral dilemma. Moral reasoning takes place in which of the following steps in Rest's Model? a. moral sensitivity b. moral development c. moral judgement d. moral character
c. moral judgement
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 the above
c. universal ethical principles
What are judgment triggers?
circumstances that lead an individual to accept a solution before it is properly evaluated
What is way you conduct yourself as a member of the community?
citizenship
What allows a recovery of compensation from CEOs and CFOs of public companies?
clawback
What are the four key constituent groups of the accountants and auditors' domain?
client, accounting firm, accounting profession, general public
A _________________ goes beyond what is legal for an organization and provides normative guidelines for ethical conduct.
code of conduct
What is the inconsistency between our thoughts, beliefs, or attitudes and behavior that creates the need to resolve contradictory or conflicting beliefs, values, and perceptions?
cognitive dissonance
What is it called when the rules of thumb and biases that shape ethical decision-making affect persons in ways they do not understand or may not notice?
cognitive errors
What is executive compensation?
compensation packages tied to firm performance that are aimed at getting management to maximize share value
What does the General Standards Rule (1.300.001) establish requirements for?
competence, compliance with professional standards, and adherence to accounting principles
What are the standards associated with the Institute of Management Accountants (IMA)?
confidence, confidentiality, integrity, credibility
_______________ occur when a professional service, relationship, or specific matter creates a situation that might impair objective judgment
conflict of interest
What are the 5 components of the COSO's internal control framework?
control environment, risk assessment, control activities, monitoring, information and communication
What is the shared beliefs of top managers in a company about how they should manage themselves and other employees, and how they should conduct business?
corporate culture
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, but may not receive a reward. c. Internal auditors who whistle-blow may not 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.
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 the above
d. All of the above
Which of the following was NOT a finding of the ACFE Report to the Nation on Occupational Fraud? a. Fraud is more likely to be detected by tips than any other way b. Frauds lasted a medium of 16 months before detection c. Asset misappropriation schemes was the most common type of occupational fraud d. External auditors discover about 15 percent of the frauds
d. External auditors discover about 15 percent of the frauds
CPAs in business face threats to independence just as CPAs in public practice. Which of the following threats do not exist for CPAs in business? a. Adverse interest threat b. Advocacy threat c. Self-interest threat d. Management participation threat
d. Management participation threat
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
Daniel Kahneman's System 1 thinking is described by all of the following except for: a. Automatic b. Emotional c. Intuitive d. Reflective
d. Reflective
Which of the following is NOT a safeguard that can help to mitigate threats to independence? a. Safeguards created by the Sarbanes-Oxley Act b. Safeguards created by the corporate governance system of the attest client c. Quality control safeguards created by the audit firm d. Safeguards performed by the audit firm that are the responsibility of management
d. Safeguards performed by the audit firm that are the responsibility of management
EY partner Pamela Hartford violated Independence Rules when: a. She prepared financial statements and provided attest services for her audit client b. She identified the firm's protective covenants are reasonable in scope. c. She refused to maintain adequate records and documents. d. She maintained a personal relationship with a member of company management.
d. She maintained a personal relationship with a member of company management.
The business judgment rule refers to: a. faithfulness to one's obligations and duties b. honesty of purpose and caring c. decision making under uncertainty d. acting with due care and good faith
d. acting with due care and good faith
What is something employees should never do through social media?
discuss company information online
What is the difference between diversity and inclusion?
diversity is hiring and retaining employees of different backgrounds while inclusion is making employees feel apart of an organization
What are the 3 main Ethical and Legal Responsibilities of Officers and Directors?
duty of care, duty of loyalty, duty of good faith
What is the essence of caring?
empathy
What are the 3 key values necessary in the 21st century workplace?
equity, diversity, and inclusion (EDI)
What creates challenges to ethical decision making because they present barriers to meeting the requirements of the rules of conduct?
ethical conflicts
What is the explicit statement of values, beliefs and customs from top management?
ethical culture
What is the importance of the issue to the individual, work group and/or organization (intensity) based on values, beliefs and norms involved and pressures in the workplace?
ethical issue intensity
What is the difference between ethics and morals?
ethics leans towards decisions based upon individual character whereas morals emphasizes the societal norms about right and wrong
What is treating others equally, impartially, and openly?
fairness
What type of threat involves a CPA on the attest engagement team whose spouse is the client's CEO
familiarity threat
What type of relationships would impair independence?
financial relationships, business relationships, employment with attest clients, or providing nonattest services to clients
What type of threat involves having a loan from the client, from an officer or director of the client, or from an individual who owns 10% or more of the client's outstanding equity securities?
financial self-interest threat
What is the behavioral ethics approach with an emphasis on developing the capacity to effectively express one's values in a way that positively influences others?
giving voice to values
What are the 3 best practices for ethical corporate governance?
having independent directors, separation of duties between CEO and board, separate internal and external audit meetings
What are the four potential fit options associated with the ethical dissonance model?
high individual and high organizational, low individual and low organizational, low individual and high organizational, and high individual and low organizational
What is an example of cognitive dissonance?
how we think we should behave versus how we actually do behave
How is trust lost in the accounting profession?
if an organization no longer follows the guiding principles that created their reputation for trust
What is an unethical activity in which insiders use private company information to further their own fortunes or those of their family and friends?
insider trading
What is a commitment to do the right thing for the right people in the right way?
loyalty
what is professional judgement?
making decisions with professional skepticism and objectivity
What type of threat involves establishing and maintaining internal controls for the client?
management participation threat
What is called when one's ethical intentions match actions taken?
moral character
What is the idea that the characteristics of a moral issue influence ethical decision making?
moral intensity
What is the ability to reason through several courses of actions and making the right decision when faced with an ethical dilemma?
moral judgment
What is the single most influential factor of a person's moral behavior?
moral judgment
What is the influences that affect an individual's willingness to place ethical values ahead of non-ethical values?
moral motivation
What is the ability to identify what is moral and amoral?
moral sensitivity
What are the four main components of Rest's Model of Ethical Decision Making?
moral sensitivity (recognition), moral judgment (reasoning), moral focus (motivation), and moral character (action)
What is the use of one's position to misappropriate organization's resources or assets for personal gain?
occupational fraud
What is the term used to describe the conditions that limit or permit ethical or unethical behavior?
opportunity
What is the moral atmosphere and level of ethics practiced within a company?
organizational ethical climate
What is the generally accepted principles and standards that guide behavior in organizational contexts?
organizational ethics
Which level of Kohlberg's stages of moral development should accountants align with?
post-conventionalism
When is giving voice to values used?
post-decision making
What are the 3 levels of Kohlberg's stages of moral development?
pre-conventional, conventional, post-conventional
What are aspirational statements that form the foundation for the AICPA Code's enforceable Rules of Professional Conduct?
principles
What are the two sections of the AICPA code of conduct?
principles and rules
What do whistleblower laws do?
protect employees who provide information about fraud from retaliation
One builds ____________________ through favorable actions informed by ethical behavior.
reputational capital
What is treating every individual with dignity?
respect
What are the 6 principles associated with the AICPA code of conduct?
responsibilities, the public interest, integrity, independence, due care, scope and nature of services
What is the ability to reflect on alternative courses of action, persevere and carry out moral action diligently?
responsibility
what are controls that limit or reduce threat to independence?
safeguards
What type of threat involves preparing source documents used to generate the client's financial statements?
self-review threat
How does the bystander effect relate to accounting?
some accountants may not report incidents of wrong doing if they think someone else will
What are the 6 stages in Kohlberg's stages of moral development?
stage 1: obedience to rules; stage 2: satisfying one's own needs; stage 3: fairness to others; stage 4: law and order; stage 5: social contract; stage 6: universal ethical principles
Who regulates the licensing of CPAs?
state boards
what is the most prominent example of situation ethics?
student cheating
What is the term used to describe the position reflected on a tax return on which a CPA has specifically advised a taxpayer, or a position about which a CPA has knowledge of all material facts and, based on those facts, has concluded whether the position is appropriate?
tax return position
What does section 302 of SOX state?
the CEO and CFO must certify financial statements for material misstatements
What is the stakeholder orientation of CSR?
the degree to which an organization understands and addresses stakeholder demands
What is justice associated with?
the issues of rights, fairness, and equality
What are external mechanisms?
the mechanisms that ensure the interests of insiders aligns with the interest of shareholders
What is rational egoism?
the mindset that one's longterm self-interest is in accordance with reason
What is teleology?
the theory that an act is morally right or acceptable if it produces some desired result like pleasure
What is utilitarianism?
the theory that an act should result in the greatest good for the greatest number of people
What is Rawl's theory of justice?
the theory that each person is permitted the maximum amount of basic liberty compatible with others
What is deontology?
the theory that moral norms establish basis for action
What is egoism?
the theory that one should act in a way that promotes the greatest good for oneself
What is rule utilitarianism?
the theory that one should take the action that results in the greatest utility for all in accordance to the rules governing the action
What is act utilitarianism?
the theory that one should take the action that results in the greatest utility for all regardless of the rules governing the action (the end justifies the means)
What are cognitive biases?
the unconscious biases that can negatively influence ethical decision-making
What is moral relativism?
the view that moral or ethical statements are all equally valid and no one's right or wrong is better than others
What is framing?
the way an issue is posed; how an issue is framed can significantly affect decisions and judgments
What is the "moral point of view?"
the willingness of a decision-maker to take an action that may not be in his/her best interest
If correct, ethical relativism states that....
there can be no common framework to resolve moral disputes between different societies
What did the Dodd-Frank provisions accomplish for whistleblowing?
they established benefits for eligible whistleblowers who aid in the recovery of $1M or more of damages
How does professional judgment relate to professional skepticism?
through independent thought, objectivity, and due care
What concept was associated by Plato and Aristotle?
virtue ethics
What are instramental virtues defined as?
virtues that directly influence an individual's actions
What are intellectual virtues?
virtues that indirectly influence individual's intentions to exercise professional judgement
When are contingent fees allowed?
when CPAs are performing advisory services for nonattest clients
What are employees (former or current) who report suspected violations to persons or organizations that may be able to effect action?
whistleblowers
What are the cardinal virtues?
wisdom, courage, temperance, justice
