Ethics Exam 2

Grace was lacking in several professional areas in relying on the client rather than external evidence. Arnold Schilder, Chair of the International Auditing and Assurance Standards Board (IAASB), cites which of the following traits to enable an auditor to maintain a skeptical mindset in executing an audit?

Independence, technical proficiency, and professional judgement

Framework for Understanding Ethical Decision Making in Business

Ethical Issue Intensity Individual Factors Organizational Factors Opportunity Business Ethics Intentions, Behavior, and Evaluations

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:

Ethical legalism and utilitarianism

Helen Strom is in an ethical dilemma due to a(n) ____________.

Finance self-interest threat

Organizational Ethics

Generally accepted principles and standards that guide behavior in organizational contexts.

Olympus attempted to cover up the losses by writing investments off as

Goodwill impairments

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?

Groups are prone to making quick decisions in order to avoid conflict

Carl Land's observation that "we push the envelope around here" is typical of the rationalization employed in _____________.

Groupthink tendency

The most important element of a high ethics organization would be:

Having a mission statement, values, and ethical code

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:

High-High

Organizational ethics can be thought of as

Principles and standards of behavior that guide business decisions

The key fraud issue in the Franklin Industries Whistleblowing Case is:

Retaliation for reporting an embezzlement fraud

Applying ethical reasoning to identify shareholder interests and the effect of actions on shareholders is inconsistent with which cognitive judgment trap?

Rush to judgment

A whistleblower is defined as a person who provides information to the _________ about a violation of the securities law.

SEC

Menendez was excluded from a meeting on accounting for a potential joint venture arrangement. This is a violation of which of the following?

Sarbanes-Oxley

A tobashi scheme involves which of the following?

Selling investments and buying them back disguised as advisory fees (shift clients loss among portfolio, flatter the profit)

External auditor communications with the audit committee include each of the following except:

Shareholder returns

Grace Sloan explained that the audit team pressured her to let certain matters go. By doing so, Grace succumbed to groupthink. Groupthink has a home in which of the following?

Stage 3 of the Kohlberg model

The CPA firm has created a product that is substantially similar to a transaction identified as a __________.

Tax avoidance transaction

SSTS No. 1 states that when a CPA specifically advises an appropriate tax strategy, there is evidence of a ___________.

Tax position

To encourage various groups to come forward and report fraud, Dodd-Frank extended whistle-blowing privileges and rewards to which of the following?

The CEO

Perhaps the most unusual thing about this case is that (olympus)

The CEO turned whistleblower

Research by Miceli and Near indicates that:

Whistleblowers hope their speaking out achieves the correction of an organization wrongdoing

Diane is a CFO at We Do What We Want, Inc. She was just instructed by her boss, the CEO, to accelerate the recording of revenue into an earlier year to meet financial analysts' earnings projections. In order to meet the ethical standards of the accounting profession, Diane must be certain that she:

Works through the chain of command within the company to avoid subordinating judgement

Halliburton was violating revenue recognition rules by recognizing revenue

before resembling the product, delivering the product, the risks of ownership had passed to the buyer

Dodd-Frank

established benefits for whistleblowers who aid in recovery of $1M or more and they can receive 10-30% of the recovery

Whistleblowers who meet the criteria are eligible to receive an award based on what was collected as a result of the monetary sanctions. This can vary from ___________.

10 to 30 percent

Since the PCAOB was formed, a mandatory quality inspection program was implemented. What is the average audit deficiency rate range since the program started?

30-40%

A CPA can accept a gift from a client as long as:

Adequate safeguards exist to prevent any threats to compliance with the Integrity and Objectivity rule

Which of the following starts from an initial numerical value and adjusts insufficiently in forming a final judgment?

Anchoring tendency

The reporting requirements for fraud are detailed in Section 10A of the Securities Exchange Act of 1934. Which of the following steps are NOT part of a prescribed process that should be followed in deciding whether to report fraud?

Determine who is responsible for the fraud

According to the ACFE survey, the most common type of occupational fraud scheme is:

Asset misappropriation

It appears Grace has fallen victim to which of the following?

Availability tendency

Which of the following may lead to judgment based on how accessible information is rather than a thorough analysis of the current situation?

Availability tendency

Which of the following are components of the KPMG Professional Judgment Framework?

B. Clarify issues and objectives. C. Consider alternatives. D. Articulate and document rationale. E. Gather and evaluate information.

Halliburton provided a flow chart on revenue recognition known as the

Bill-and-Hold Decision Tree

Which of the following leads to public perception that auditors may not act independent of their client's interests?

Commercialism

Which of the following is NOT an underlying trait of character of an effective leader identified by Johnson?

Confidence

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:

Corporate governance

The role of a leader in an organization is to:

Determine organizational climate and define norms

A unique aspect of Johnson & Johnson's Credo is that it:

It is an aspirational statement rather than the typical "thou shalt not" form of a code of ethics

The largest fine for marketing abusive tax shelters was levied on ____________ for $_________________.

KPMG, 456 million

According to the ACFE Global Fraud Study, which of the following was the most common behavioral indicator of fraud?

Living beyond means

Statement on Standards for Tax Services No. 1 establishes as a basic principle of providing tax services that the CPA:

Must have a good faith belief that the tax return position has a realistic possibility of success if challenged by the IRS

In the event that Carl and the CEO won't change their position, Helen should probably take her concerns to which of the following?

The audit committee

The most significant change in the Revised AICPA Code of Professional Conduct is:

The creation of three sections: one for members in public practice, members in business, and one for other members

Jones-Hiltebeitel model

looks at the role of one's personal code of conduct in ethical behavior within an organization •Moral intensity

At the very center of the KPMG framework is __________.

mindset

The allegiance of independent auditors to the interests of the public is known as the _____ _____ function.

public watchdog

IFAC Policy Position Paper #4 links the common benefits of serving the public interest through sound financial reporting to ______.

the application of high standards of ethical behavior