Ethics Final

Acting based on a desire to comply with a legal statute, even though you disagree with that statute, corresponds to which of the following stages of moral development? a. The pre-conventional stage b. The conventional stage c. The post-conventional stage d. All of the above

b. The conventional stage

Acting based on fear of disappointing your close friends corresponds to which of the following stages of moral development? a. The pre-conventional stage b. The conventional stage c. The post-conventional stage d. All of the above

b. The conventional stage

Which of the following is not expressly addressed by the principle of the AICPA Code of Conduct concerning integrity? a. The duty to maintain objectivity b. The duty to respect client personnel c. The duty to not subordinate one's opinion in favor of the client's viewpoint d. The duty to avoid conflicts of interest

b. The duty to respect client personnel

Which of the following rights customarily is not given absolute protection by deontology? a. Property rights b. The right to never be imprisoned c. The right of free association d. The right to be left alone

b. The right to never be imprisoned

Rawls was a proponent of: a. The universality principle b. The veil of ignorance c. The reversibility principle d. Our current system of federal income tax rates

b. The veil of ignorance

The "books and records" requirement of the Foreign Corrupt Practices Act require a firm involved in international commerce to maintain especially tight internal controls over transactions involving: a. Depreciation expense on real estate situated in foreign countries in which it does business b. Travel and Entertainment Expense c. Bonds Payable d. The amortization of Bond Discounts and Premiums

b. Travel and Entertainment Expense

Stealing from the rich to give to the poor: a. Definitely violates the precepts of deontology b. Definitely violates the precepts of consequentialism c. Is a categorical imperative d. Is a classic example of the reversibility principl

a. Definitely violates the precepts of deontology

Rawls believed that society should strive for: a. Equality of resource allocation among all b. Equality of resource allocation among the most productive members of society c. Inequality of resource allocation at birth, to spur hard work and innovation d. Variability in resource allocation, which he called the difference principle

a. Equality of resource allocation among all

A cheese manufacturing plant utilizes portions of milk in the cheese-making process and sends the remainder of the milk into a nearby river. The milk effluence pollutes the river, making it unusable for recreational use by local residents. This effluence has a foul odor, but it does not pose a health hazard. a. Evaluate the company's actions from a utilitarian perspective. b. Evaluate the company's actions from a deontological perspective. c. What are the practical problems in applying consequentialism in this situation? d. What are the practical problems in applying deontology in this situation?

Regarding utilitarianism/consequentialism: The relative utility of being free from foul odors and the relative joy from enjoying the recreational use of a river are difficult to measure. Similarly, the relative benefit of having abundant, affordable cheese products is also difficult to measure. Identification of the relevant stakeholders is likewise challenging. Regarding deontology: Deontology views property rights as a categorical imperative. In this case, the property rights of the cheese manufacturer conflict with the rights of local residents to be free from the physical intrusion caused by the foul odor.

A student at a local elementary school recently returned from a trip to a region of the world where there is a plague of a dreaded disease called the "Crazy Curse." According to medical doctors, the odds of this student infecting fellow classmates with this disease are "lower than zero." However, many parents have asked the school to disclose whether this student did in fact travel to the region where the "Crazy Curse" is spreading rapidly. School authorities know that, if they make such a disclosure, the student will be ostracized and many parents will refuse to send their children to school. As a result, the school is considering various options, including making an announcement that "the student in question did not travel" to the region where the Crazy Curse is spreading. a. What actions should the school consider? b. What action do you recommend? c. Is your decision consistent with deontology? d. Is your decision consistent with consequentialism?

SOLUTION: Deontology precludes ever lying, even if the ends arguably seem to justify the means. Consequentialism must take into account all benefits and costs, including reputational harm and the loss of credibility regarding all future pronouncements and warnings that will occur in the future if the school is caught lying in the future.

What rule in the IFAC Code of Conduct governs an accountant's responsibilities when the accountant is offered a bribe?

SOLUTION: IFAC Rule 360

What rule or rules in the AICPA Code of Conduct govern an accountant's responsibilities when the accountant is offered a bribe?

SOLUTION: No specific rule expressly governs this situation. However, other rules, relating to independence, integrity, and objectivity, among others, apply.

What are the different approaches that jurisdictions apply in regulating or punishing accountants who accept bribes in their capacities as employees of privately-held companies? How do you believe that this offense should be treated?

SOLUTION: Some consider commercial bribery to be a felony, some consider it to be a misdemeanor, and a few view solely as a civil matter between the employer and the employee.

A poor family went to the market to purchase fried chicken for dinner tonight. Unfortunately, this family's beloved cat ran into the street and was killed by a passing car. Rather than bury the cat, the family decided to cook the cat and eat it for dinner instead of eating fried chicken. Was the family's decision unethical?

SOLUTION: Under consequentialism, the family is better off because it saved money. Also, by eating the dead cat and not eating the chicken, it saved the life of one chicken, all else equal. There does not appear to be any stakeholders who were made materially worse off. Eating a dead cat, although disgusting to many, does not appear to violate any of deontology's categorical imperatives. Perhaps some will say that it violates the dignity of the cat or of all animals generally, and therefore, offends human dignity.

Your client told you that it needed to have "a completed compilation of its financial statements, in good form" for presentation to its bank this upcoming Friday in order to obtain a needed working capital loan. Although you had promised to accomplish this task on time, you were arrested for drunk driving on Thursday and had to spend most of the day at the police station arranging to post bail. You knew that, if you had told your client the truth, the client would have terminated your professional relationship. This in turn would have required you to layoff Garza, your superb accounting analyst who is financially responsible for the care of her aged parents. As a result, you told the client that your child had to go to the emergency room for stitches after she inadvertently sat on the sharp point of scissors while working on an art project. Your client relayed this excuse to the bank as the reason that the submission of its financial statements would be delayed. a. Evaluate your conduct from the standpoint of deontology. b. Evaluate your client's statements to the bank from the standpoint of deontology. c. Evaluate your conduct from the standpoint of consequentialism.

SOLUTION: Your lie violated deontology. The bank merely relayed your excuse and was not intentionally or knowingly deceiving the bank, so it did not violate deontology. Perhaps the preservation of jobs at your firm exceeded the harm caused by lying. Thus, a consequentialist might contend that your actions were acceptable.

When the probability of cheating being detected is zero, the Becker Rational Model predicts that people will: a. Cheat, without limit b. Cheat, by weighing the clear-cut benefits against the uncertain harm to their self-esteem c. Not cheat at all if they are believers in virtue ethics d. Not cheat, as long as the severity of punishment in society is severe

a. Cheat, without limit

A CPA needs money to be able to pay for surgery that will correct a jaw deformity that results in her young child speaking with a noticeable lisp. The lisp is not a danger to the child's physical health, but it has made it difficult for her to communicate with friends, and it results in her being teased and bullied. The CPA, concerned that this problem will create permanent psychological damage, asked her employer for a $5,000 loan to pay for the needed corrective procedure, but her employer refused this request. The CPA knows that embezzling the money would be easy to do because her employer is "financially illiterate" and could never detect her misconduct. The CPA plans to take the money and repay it, along with interest, over two years. Consider the following reasoning: a. I will not take the money because I was not raised in a family that disrespects the law. b. I won't take the money because I will lose my job. c. I will take the money because, by the time that my actions are discovered, I will have made many, or even all, of the repayments so my boss will understand and be lenient. d. I will take the money because my spouse and child will be proud of me for protecting my child against permanent psychological damage. e. I will not take the money because I am a role model for my child and I would never want her to think that I am a dishonest or devious person. f. I will take the money because I am willing to risk being criminally prosecuted for embezzlement because it would be a greater wrong if I did not make every possible effort to protect my child against permanent harm. g. I won't take the money because I could go to jail. h. I will take the money because the boss will never discover my actions. i. I will take the money because our legal system would never punish a mother for protecting her child against permanent psychological damage. j. I will take the money because a parent's first duty is to protect her child against permanent harm. k. I will take the money because I am willing to risk losing my job to protect my child against permanent harm.

a. 4 b. 1 c. 2 d. 3 e. 3 f. 6 g. 1 h. 1 i. 2 j. 5 k. 6

Contingency fee arrangements are always allowed in tax matters if the amount of the fee an accountant is entitled to receive depends on: a. A determination by an IRS Administrative Board b. An "all or nothing" determination c. A percentage of the taxes saved d. The accountant's testimony in court being competent and persuasive to the judge or jury

a. A determination by an IRS Administrative Board

Ethical absolutism means that: a. All cultures share a common set of ethical values b. Ethical duties are absolute requirements that are, if necessary, imposed by laws c. Value systems absolutely vary over time as societal views progress d. A person has an absolute duty to follow ethical principles, even if they diverge from legal mandates

a. All cultures share a common set of ethical values

A musician believed that his record company was not paying him the agreed-upon royalty on all songs downloaded by fans from a well-known music Internet site. This musician hired a CPA to perform a royalty audit of the record company's sales revenues. The musician and the CPA agreed that that the CPA will be entitled to receive 5% of all amounts recovered by the musician as a result of this royalty audit. They also agreed to keep the results private. This arrangement is: a. Ethical b. Unethical under all circumstances c. Unethical if the amounts recovered exceed fair compensation for the CPA's time and effort d. Unethical, unless a court or other administrative body, such as the American Federation of Musicians, approves of this fee arrangement

a. Ethical

If a single woman is working as a professional accountant outside the United States, joining IFAC is: a. Impossible b. Mandatory c. Permitted only if an existing IFAC member recommends her d. Optional but highly recommended as a reputational tool for attracting and retaining clients

a. Impossible

Which of the following principles of the AICPA Code of Conduct is not applicable to accountants employed in a financial reporting capacity at a corporation? a. Independence b. Integrity c. Objectivity d. Due care

a. Independence

According to the Responsibility Principle of the AICPA's Code of Professional Conduct, accountants should always: a. Make sensitive moral judgments b. Pursue the public interest c. Maintain client confidentiality d. Use the highest degree of care in performing all professional activities

a. Make sensitive moral judgments

A CPA wishes to accept a commission from one client for marketing the client's software product to other clients served by the CPA. The CPA: a. May do so as long as the CPA discloses this commission to these potential software purchasers and the potential purchasers are not audit clients b. Always may do so as long as the CPA discloses this commission to these potential purchasers c. May do so as long as the CPA discloses this commission to these potential software purchasers and the potential purchasers are not tax return preparation clients d. Never may do so

a. May do so as long as the CPA discloses this commission to these potential software purchasers and the potential purchasers are not audit clients

A homeowner would never steal money from her neighbors, but she does not hesitate to cheat on paying her dues owed to the local Homeowners' Association. This homeowner's actions can best be explained by the concept of: a. Moral compartmentalization b. Moral reminders c. The proximity effect d. The magnitude of the consequences effect

a. Moral compartmentalization

If a CPA charges a contingent fee in connection with providing management consulting services to a non-audit client, the CPA's fee arrangement is: a. Permissible always b. Permitted only if the fee arrangement is expressed in a clear writing signed by the client c. Permitted only if the CPA is not a member of the AICPA d. Never permissible

a. Permissible always

The term "System 1" is used to describe how our brains make ethical decisions in a: a. Rapid, intuitive manner b. Rigorously analytical manner c. Dual-processing mode that utilizes all available mental resources d. Single-processing mode that is deliberative and meticulous

a. Rapid, intuitive manner

The AICPA and IFAC Codes of Conduct are: a. Substantially similar, but not identical b. Identical, except that the AICPA Code applies to Certified Public Accountants and the IFAC Code applies to other professional accountants c. Identical, except that the AICPA Code applies to accountants licensed in the United States and the IFAC Code applies to professional accountants licensed outside the United States d. Identical, except that the AICPA Code applies to individual accountants and the IFAC Code applies to accounting firms and other organizations of accountants

a. Substantially similar, but not identical

The AICPA's Code of Professional Conduct expresses professional standards: a. That are mandatory minimum rules of behavior that all members of the AICPA must comply with b. That, when violated, constitute crimes under most, if not all, state accountancy licensing statutes c. That are aspirational goals, but yet are rarely achieved by most professional accountants d. That establish worldwide standards that all professionals accountants must, at minimum, comply with

a. That are mandatory minimum rules of behavior that all members of the AICPA must comply with

Kohlberg concluded that most people's moral development reflects: a. The conventional stage b. The pre-conventional stage c. The post-conventional stage d. Unconventional activity that cannot be classified according to his model of behavior

a. The conventional stage

Virtue ethics focuses on: a. The development of integrity b. The achievement of due care in all personal and professional interactions c. Accomplishing sound decision-making d. Implementing a systematic approach to the virtuous resolution of ethical dilemmas

a. The development of integrity

The Becker Rational Model is an economic model that weighs: a. The likely benefits from cheating against the likely costs b. The actual marginal benefits from cheating against the actual marginal costs c. The magnitude of harm that likely will arise from cheating against the probability of cheating being detected d. The expected maximum benefits from cheating against the expected maximum costs

a. The likely benefits from cheating against the likely costs

People who cheat are more likely to do so when: a. The line separating an ethical act from an unethical act is unclear b. The line separating an ethical act from an unethical act is clear c. They are well-rested d. They have a low self-image, but consider their self-image to be important

a. The line separating an ethical act from an unethical act is unclear

Acting based on fear of punishment corresponds to which of the following stages of moral development? a. The pre-conventional stage b. The conventional stage c. The post-conventional stage d. All of the above

a. The pre-conventional stage

Virtue ethics focuses principally on: a. The preparation for being ethical, rather than on the achievement of end results b. End results, like consequentialism does c. Actions, like deontology does d. The development of mental cues for evaluating the success, or failure, of past decisions

a. The preparation for being ethical, rather than on the achievement of end results

The law of eminent domain allows a local government to take a person's property for public use, such as building a freeway that has been designed to cross land owned by this landowner. The landowner, by law, is entitled to be paid the fair market value of her land. The law of eminent domain is an example of: a. Utilitarianism b. Deontology c. Ethical relativism d. Ethical absolutism

a. Utilitarianism

If a CPA violates one of the Principles of the AICPA's Code of Professional Conduct, the CPA: a. Will never be subject to disciplinary action by the AICPA b. May lose the right to practice accounting for a period of time unless the violation was justified c. Definitely will lose the right to practice accounting for a period of time unless the violation was justified d. May or may not lose the right to practice accounting, depending on the severity of the violation

a. Will never be subject to disciplinary action by the AICPA

Mary, a CPA, accepted a fee from Rajiv, a CPA, for referring one of Mary's clients to him. Mary's client was not informed of this referral fee. Was Mary's acceptance of this fee permitted by applicable professional rules? e. No a. Yes, if Rajiv possesses specialized skills that Mary lacked b. Yes, if Rajiv possesses specialized skills that Mary lacks and Rajiv agreed to a non-contingent referral fee arrangement with Mary prior to provide services to the referred client c. Yes, as long Mary's fee arrangement is a lump-sum amount rather than a percentage of the amount that Rajiv bills this client for his services

a. Yes, if Rajiv possesses specialized skills that Mary lacked

The principal proponent of deontology was: a. John Stuart Mill b. Emanuel Kant c. Jeremy Bentham d. Aristotle

b. Emanuel Kant

When there is no chance of their cheating being detected, some people do not cheat at all. This conclusion is: a. Consistent with the Becker Rational Model b. Inconsistent with the Becker Rational Model c. Consistent with the "cheater's high" theory d. Consistent with the "depleted resistance" theory

b. Inconsistent with the Becker Rational Model

An unethical act: a. Is always illegal as well b. Is not necessarily illegal c. Must, at minimum, violate a government regulation d. Is determined for the accounting profession by the FASB

b. Is not necessarily illegal

Virtue ethics requires people to ask the following question of themselves: a. "How should I act?" b. "Who should I be?" c. "Did I make an error in judgment?" d. "Did my decision optimally protect the rights of others?"

b. "Who should I be?"

Milton Friedman espoused the view that: a. A corporation's sole duty is to make money, regardless of the means utilized b. A corporation should sacrifice profit maximization if doing so is necessary to comply with legal mandates c. A corporation has a compelling obligation to engage in socially responsible activities, even at the sacrifice of profits d. All of the above

b. A corporation should sacrifice profit maximization if doing so is necessary to comply with legal mandates

Which of the following would most likely be classified as a facilitation payment? a. A payment that encourages a high-ranking government official to facilitate a new business deal with a foreign supplier b. A payment that encourages a lower-level government official to perform a routine service more rapidly than it otherwise would be performed c. A payment that encourages a private-sector company to accelerate the delivery of goods or services in an international shipping transaction d. A payment that provides a lawful commission to a foreign agent or representation to enable a plant or other operational facilities to bypass certain regulations established by the Foreign Corrupt Practices Act

b. A payment that encourages a lower-level government official to perform a routine service more rapidly than it otherwise would be performed

A focus on the importance of categorical imperatives distinguishes: a. Utilitarianism from consequentialism b. Deontology from utilitarianism c. The philosophies espoused by Kant from deontology d. The philosophies espoused by Mill from utilitarianism

b. Deontology from utilitarianism

Accounting staff members at a major corporation received an all-expense paid vacation to Hawaii from a hedge fund trader. In return, they shared company earnings results with a hedge fund trader two days prior to the public release of these results. The accounting staff members' actions are consistent with: a. Deontology b. Egoism c. Virtue ethics d. No recognized philosophy

b. Egoism

A CPA, acting on behalf of a client company, makes a payment to a foreign government official to ensure that goods that are entitled to be exported into that country are processed more rapidly than other competing shipments into that country are processed. By doing so, the CPA has: a. Committed a direct violation of the Foreign Corrupt Practices Act's provision concerning "financial professionals and other client representatives" b. Not jeopardized her professional license c. Jeopardized her professional license if she also performed sales tax reporting services for that client during the same reporting period d. Definitely jeopardized her professional license

b. Not jeopardized her professional license

The key difference between bribery of a public official and bribery of a corporate employee is that: a. Only bribery of a public official is ever unlawful under anti-bribery criminal laws b. Only bribery of a public official is unlawful under the Foreign Corrupt Practices Act c. Only bribery of a public official can ever result in a prison sentence in the United States d. Bribery of a corporate employee may exclusively be enforced through a civil action for damages by the corporation and never by government prosecution

b. Only bribery of a public official is unlawful under the Foreign Corrupt Practices Act

The AICPA's Code of Professional Conduct: a. Applies only to accountants who work in public accountant practice as licensed CPAs b. Potentially applies to all licensed CPAs, whether they work in government, industry, academia, or public practice c. Provides a comprehensive definition of the accounting standards that collectively comprise GAAP d. Provides a comprehensive set of the accounting standards that comprise both GAAP and GAAS

b. Potentially applies to all licensed CPAs, whether they work in government, industry, academia, or public practice

The Assistant Controller of a publicly-traded company may buy company stock as long as: a. She agrees to hold company stock for a minimum of six months b. She does not possess non-public information c. Her trading activities are authorized by her employment contract d. All of the above

b. She does not possess non-public information

A public opinion poll concluded that rich people tend to favor a lower estate tax on wealth, while poor people tend to favor a higher estate tax. This finding: a. Is consistent with the veil of ignorance, which Rawls contends makes rich people irrational b. Shows why policy-makers would tend to evaluate decisions more objectively by applying a veil of ignorance c. Is a classic, real-world example of the veil of ignorance in action d. Is a prime example of Aristotle's view of how unequals should be treated

b. Shows why policy-makers would tend to evaluate decisions more objectively by applying a veil of ignorance

When a person is asked to evaluate an ethical dilemma in a secondary language rather than in the primary language learned at birth, researchers have discovered that the person's decision-making tends to be: a. Less rational b. Skewed in favor of a choice that reflects the viewpoint of consequentialism c. More likely to favor the deontology viewpoint d. Emotionally-driven, especially among men

b. Skewed in favor of a choice that reflects the viewpoint of consequentialism

In Kohlberg's Six Stages of Moral Development, striving to act in accordance with laws occurs at: a. Stage 2 b. Stage 4 c. Stage 5 d. Stage 6

b. Stage 4

According to behavioral psychologists, which of the following compensation packages would most people rank as the least desirable? a. A guaranteed base salary of $54,000 b. A base salary of $50,000, plus a 50% chance of earning a $4,000 bonus for meeting minimum productivity requirements c. A base salary of $54,000, with a 50% chance of sustaining a $4,000 penalty for failing to meet minimum productivity requirements d. Choices (b) and (c) are, by an overwhelming majority of people, ranked as being equally undesirable

c. A base salary of $54,000, with a 50% chance of sustaining a $4,000 penalty for failing to meet minimum productivity requirements

The key difference between a kickback and a contingent fee is: a. The amount involved b. Whether the percentage of the gain shared is equal or not c. A kickback refers to an unlawful transaction and contingent fees relate to lawful transactions d. All of the above

c. A kickback refers to an unlawful transaction and contingent fees relate to lawful transactions

According to the Objectivity and Independence Principle of the AICPA's Code of Professional Conduct, accountants should always be independent in providing: a. All professional services b. All services to their employer c. All audit services d. All tax advisory services

c. All audit services

IFAC is often referred to as: a. The "Global Watchdog" b. The "Global Accounting Police" c. An "Organization of Organizations" d. The "AICPA's Little Brother"

c. An "Organization of Organizations"

One of Carol Gilligan's key conclusions is that: a. Men are more ethical than women b. Women are more ethical than men in resolving dilemmas that hinge on issues of fairness and justice c. At higher stages of moral development, women are more focused on issues of compassion for those in need than men are d. At higher stages of moral development, women are more focused on issues of equality of opportunity for all than men are

c. At higher stages of moral development, women are more focused on issues of compassion for those in need than men are

The usury laws: a. Are an example of ethical absolutism b. Are an example of ethical relativism c. Bar excessively high interest rates on certain types of loans d. Reflect the consensus among all countries that interest rates need to regulated by a universal body or multi-governmental entity

c. Bar excessively high interest rates on certain types of loans

Your expected gain from cheating is $600. The expected financial penalty from cheating is $300 and the expected probability of your cheating being detected is 25%. You also will experience a loss of self-esteem that has an estimated value to you of $500, whether or not your cheating is detected. You are likely to: a. Cheat, due to the copycat effect b. Not cheat, due to moral compartmentalization c. Cheat, applying the principles expressed by the Becker Rational Model d. Not cheat because cheating would be irrational

c. Cheat, applying the principles expressed by the Becker Rational Model

A CPA, acting on behalf of a client company, makes a payment to a foreign government official to ensure that goods that are not entitled to be exported into that country are indeed allowed to enter that country. By doing so, the CPA has: a. Given a lawful facilitation payment b. Committed a direct violation of the Foreign Corrupt Practices Act's provision concerning "financial professionals and other client representatives" c. Definitely jeopardized her professional license d. Jeopardized her professional license only if she also performed auditing services with respect to that client during the same reporting period

c. Definitely jeopardized her professional license

Virtue ethics is principally concerned with: a. Ensuring that employees are loyal to their employers b. Ensuring that partners are loyal to one another c. Developing a person's character d. Deterring breaches of trust without the need for imprisonment

c. Developing a person's character

Which of the following is not one the four stages in Rest's Four-Component Model of Ethical Decision-Making? a. Developing moral sensitivity b. Developing sound moral judgment c. Developing a willingness to challenge unjust laws d. Developing the character to initiate actions

c. Developing a willingness to challenge unjust laws

Legal mandates and ethical mandates are: a. Identical b. Different, with legal mandates usually imposing higher behavioral requirements than ethical mandates c. Different, with ethical mandates usually imposing higher behavioral requirements than legal mandates d. Both imposed on professional accountants, with legal mandates typically having broader application

c. Different, with ethical mandates usually imposing higher behavioral requirements than legal mandates

To act ethically, a person always must: a. Follow the formal expression of a law b. Follow both the spirit and the formal expression of a law c. Do the right thing, even if violates a law d. Adhere to the spirit, intent, and formal expression of a law

c. Do the right thing, even if violates a law

Membership in the AICPA: a. Automatically makes a CPA a member of IFAC as well b. Automatically subjects a CPA to the ethical rules established by the IFAC Code as well c. Does not entitle a CPA to join IFAC d. Entitles a CPA to join IFAC upon payment of additional dues

c. Does not entitle a CPA to join IFAC

The substantial similarity of the AICPA and IFAC Codes of Conduct tends to support the concept of: a. The ethical conformity doctrine b. Self-regulation c. Ethical absolutism d. Ethical relativism

c. Ethical absolutism

According to the issue-contingent model, the importance of an ethical issue to people generally does not depend on the degree to which an issue: a. Has an impact that is distant in time b. Affects members of one's own cultural group c. Has an impact on the religious tenets of a society d. Has a high probability of harm

c. Has an impact on the religious tenets of a society

Self-regulation of the auditing profession in the United States: a. Has always been, and remains, a distinguishing feature of the auditing profession b. Historically has characterized the oversight of auditors of privately-held companies, but no longer does c. Historically has characterized the oversight of auditors of publicly-held companies, but no longer does d. Never has been a characteristic of the auditing profession because government understandably recognizes the need to assure strict compliance with ethical standards designed to protect the investing public

c. Historically has characterized the oversight of auditors of publicly-held companies, but no longer does

Normative ethics focuses on: a. How people normally behave b. How people have been observed to behave, based on one or more empirical studies c. How people should behave d. The conduct of accountants that is most prevalent in their profession

c. How people should behave

Under the Foreign Corrupt Practices Act, a company can be held criminally liable: a. If it is more probable than not that it committed bribery b. In a lawsuit filed by a government other than the United States c. If it engaged in "willful blindness" to acts of bribery that furthered its economic interests d. Only if documentary evidence confirms the existence of bribery

c. If it engaged in "willful blindness" to acts of bribery that furthered its economic interests

Under the viewpoint of virtue ethics, which of the following is not a commonly recognized virtue? a. Loyalty b. Trustworthiness c. Independence of thought and action d. Courage

c. Independence of thought and action

The disclosure of conflict minerals in SEC filings is historically significant because: a. The Dodd-Frank Act revolutionized depletion accounting rules for natural resource properties b. Investors now will be better able to evaluate the risks of firms that are highly dependent upon minerals from war-torn areas of the world c. Investors receive superior information that better enables them to hold companies accountable if they engage in socially irresponsible behavior d. Investors now will be better able to evaluate the foreign currency risks to which global corporations are subject

c. Investors receive superior information that better enables them to hold companies accountable if they engage in socially irresponsible behavior

An Enrolled Agent is subject to the AICPA's Code of Professional Conduct: a. Automatically b. Only if she also holds a state CPA license as well c. Only if she is granted membership in the AICPA d. Only if she performs auditing services as an employee or partner in a CPA firm that is an AICPA member

c. Only if she is granted membership in the AICPA

"Triple bottom line" accounting emphasizes the measurement of a company's: a. Net Income, Net Cash Flow, and Net Capital Expenditures b. Corporate spending on the "three C's" of charitable, civic, and cultural causes c. Profitability, environmental sustainability practices, and employee welfare d. Payments of taxes for the public interest, payment of wages to worker-stakeholders, and profits for shareholders

c. Profitability, environmental sustainability practices, and employee welfare

The "books and records" provisions of the Foreign Corrupt Practices Act: a. Potentially imposes criminal liability on internal auditors who fail to detect bribery or corruption in a firm's record-keeping system b. Potentially imposes criminal liability on external auditors who fail to detect bribery or corruption in a firm's record-keeping system c. Requires publicly-held companies to devise and maintain adequate internal controls over payments that constitute bribes d. Requires companies to document the amounts, purpose, and recipients of facilitation payments to ensure that their federal income tax reporting is accurate

c. Requires publicly-held companies to devise and maintain adequate internal controls over payments that constitute bribes

The veil of ignorance illustrates the viewpoint that: a. Most people are woefully uninformed about the meaning of fairness b. Justice should be applied blindly, without regard to a person's innate character traits, such as race or religion c. Resource allocation decisions should be made as if a decision-maker did not know his or her eventual status, or lack of status, in life d. Random distributions of societal wealth might well be superior to the system in effect in many societies today

c. Resource allocation decisions should be made as if a decision-maker did not know his or her eventual status, or lack of status, in life

According to many behavioral scientists, the degree to which people cheat varies inversely with: a. Their social status b. Their financial and wealth status c. The degree to which they value their self-image d. The degree to which they have close family interactions

c. The degree to which they value their self-image

Some societies believe that justice is best determined by juries comprised of ordinary citizens, but other societies believe that justice is best administered by judges. This is an example of: a. Ethical relativism b. Ethical absolutism, with certain groups differing in their application of a core ethical principle c. The ethical standardization doctrine d. Ethical self-determination

c. The ethical standardization doctrine

Acting in a manner that is inconsistent with the stated rules of a legal statute, knowing that your actions are incompatible with that statute, corresponds to which of the following stages of moral development? a. The pre-conventional stage b. The conventional stage c. The post-conventional stage d. All of the above

c. The post-conventional stage

Acting on principle, knowing that the party you hurt would have done the same thing if the roles had been reversed, corresponds to which of the following stages of moral development? a. The pre-conventional stage b. The conventional stage c. The post-conventional stage d. All of the above

c. The post-conventional stage

The rules governing contingent fee arrangements do not permit a tax practitioner to charge a contingent fee for rendering: a. Tax planning services b. Payroll tax processing services c. The preparation of a request for a refund of previously overpaid taxes d. Taxpayer advocacy in an IRS administrative hearing

c. The preparation of a request for a refund of previously overpaid taxes

Many people choose to submit payroll forms to their employers that result in more income taxes being withheld than these employees actually will owe in income taxes. According to behavioral scientists, the most likely explanation for this behavior is that: a. The IRS, in paying tax refunds, pays generous interest rates on excess amounts withheld from taxpayers' earnings during the year b. Over-withheld taxes are viewed favorably by credit reporting agencies, which enhances taxpayers' self-esteem c. The principle of loss aversion d. The principle of moral reminders

c. The principle of loss aversion

Which of the following best describes deontology? a. It has few, if any, protections for cultural minorities b. It often conflicts with important rights, such as freedom of contract c. The set of rights protected by this philosophy are ill-defined d. It favors the rights of broader society over the rights of individuals

c. The set of rights protected by this philosophy are ill-defined

. In the Issue-Contingent Model, the term "temporal immediacy" refers to the notion that issues evoke a stronger emotional response when they: a. Are magnified, or replicated, by a copycat effect b. They induce brain activity in the temporal lobe c. They have a present-day impact d. Their future impact can be estimated instantly and easily

c. They have a present-day impact

Aristotle believed that: a. Unequals should be treated equally to ensure a just society b. Unequals should be treated differently than equals, with unequals given just basic necessities for survival c. Unequals should be treated unequally, with the relative difference in treatment being proportionate to the degree to which members of society are unequal d. Unequals should be treated unequally, but fairness dictates that the amount sacrificed by the inferior party should be comparatively modest to ensure a tranquil society

c. Unequals should be treated unequally, with the relative difference in treatment being proportionate to the degree to which members of society are unequal

A focus on achieving the least overall harm for members of society is best reflected in the philosophy of: a. Deontology b. Consequentialism, but not necessarily utilitarianism c. Utilitarianism, but not necessarily consequentialism d. Emanuel Kant

c. Utilitarianism, but not necessarily consequentialism

Carol Gilligan's key thesis is that: a. Women are less willing to violate laws and established societal norms than men are b. Women are less willing to engage in risky, unethical behavior than men are c. Women are more focused on principles of compassion than principles of justice d. Women have greater compassion for those who deviate from ethical norms than men have

c. Women are more focused on principles of compassion than principles of justice

A real-world difficulty of applying utilitarianism is that: a. It can be difficult to identify all stakeholders affected by a decision b. It can be difficult to measure utility c. Some benefits, such as the enjoyment of privacy, are difficult to quantify d. All of the above

d. All of the above

A company makes a payment to a political campaign committee that supports the reelection of a foreign government official. The company's goal was to ensure that the government official authorizes goods that are not entitled to be exported into that country to indeed be allowed to enter that country. However, the company never had any direct communications with that government official. The company has given: a. A facilitation payment b. An unlawful referral fee c. A lawful bribe d. A bribe

d. A bribe

If a company makes a payment to a foreign government official to ensure that goods that are not entitled to be exported into that country are indeed allowed to enter that country, the company has given: a. A facilitation payment b. An unlawful referral fee c. A lawful referral fee d. A bribe

d. A bribe

Which of the following is not an "insider" for purposes of the insider trading rules? a. An internal auditor b. An independent member of the Board of Directors who does not own any company stock c. A shareholder who owns 7% of a company's stock and her husband owns 4% of the company's stock d. A investors who owns 20% of a company's general obligation bonds that are trading at a price roughly equal to their market value

d. A investors who owns 20% of a company's general obligation bonds that are trading at a price roughly equal to their market value

One hallmark of a profession is: a. Its members' unrelenting dedication to clients' interests over the countervailing public interest b. Its classification as a profession by the U.S. Department of Labor c. Its members' willingness to cooperate with clients by subordinating their judgments in deference to clients' desires d. A member's exercise of independent judgment

d. A member's exercise of independent judgment

The term "proximity," as it is used in the issue-contingent model, describes: a. The immediacy with which harm is expected to occur b. The geographic distance between the location where harm occurs and the location of the decision-maker c. The degree of likelihood that harm actually will arise d. A person's affinity for the person or group harmed

d. A person's affinity for the person or group harmed

The AICPA's Code of Professional Conduct expressly applies to: a. All CPAs who are compelled by state law to join the AICPA b. All CPAs who have valid CPA licenses in good standing c. All CPAs who have valid CPA licenses, even if their licenses temporarily are suspended due to misconduct d. All CPAs who voluntarily join the AICPA

d. All CPAs who voluntarily join the AICPA

A CPA who is a member of the AICPA failed to abide by the AICPA's Code of Professional Conduct. The state in which she practices accounting requires all CPAs to abide by "all professional standards." This CPA's license to practice accounting will potentially be: a. Suspended b. Revoked c. Not affected d. All of the above

d. All of the above

A CPA who is a member of the AICPA failed to abide by the AICPA's Code of Professional Conduct. The state in which she practices accounting requires all CPAs to abide by "all professional standards." This state requirement mandates that the CPA follow: a. Generally accepted accounting principles b. Generally accepted auditing standards c. The AICPA's Code of Professional Conduct d. All of the above

d. All of the above

A CPA who is not a member of the AICPA failed to abide by the AICPA's Code of Professional Conduct. The state in which she practices accounting requires all CPAs to abide by "all professional standards." This CPA's license to practice accounting will potentially be: a. Suspended b. Revoked c. Not affected d. All of the above

d. All of the above

Which of the following is, or are, commonly accepted definitions of CSR? a. A corporation fully complies with all applicable laws and regulations b. A corporation engages in activities that are both socially responsible and profit-enhancing c. A corporation engages in activities that are socially responsible, even if they are not profit-enhancing d. All of the above

d. All of the above

The IFAC Code of Conduct applies to: a. All accountants, even if they are not licensed by the IFAC itself b. All professional accountants who work in industry c. All professional accountants who work in auditing, including both internal and external auditing d. All professional accountants

d. All professional accountants

The Becker Rational Model would likely be most helpful in: a. Assisting law enforcement authorities in setting the level of punishment imposed on a particular cheater after unlawful behavior has occurred b. Assisting potential cheaters in assessing the expected likelihood of getting caught c. Assisting potential cheaters in assessing the expected punishment they will endure, if and when they are caught d. Assisting potential cheaters in assessing the net economic gains they will garner from cheating

d. Assisting potential cheaters in assessing the net economic gains they will garner from cheating

The membership rules of IFAC: a. Prevent CPAs from joining it if they are not actively in practice b. Encourage CPAs from around the world to join it c. Deny membership to CPAs who are unwilling to abide by its rules of ethical conduct d. Deny membership to all individual CPAs

d. Deny membership to all individual CPAs

Rawls believed that: a. There should be perfect equality of resource allocation in society b. Imperfect resource allocation benefits society because it encourages innovation and hard work c. Resource allocation should resemble a normal statistical distribution, with most people concentrated around the median d. Disproportionately greater resource allocations to some in society is acceptable as long as it results in a higher standard of living for those with lower incomes

d. Disproportionately greater resource allocations to some in society is acceptable as long as it results in a higher standard of living for those with lower incomes

Under insider trading rules applicable to publicly traded companies, an accountant is considered to be an "insider": a. Only if she Is a full-time accounting staff member of a company b. Only if she is an internal auditor of a company c. Only if she serves in a financial reporting oversight role d. Even if she is only temporarily on the company's premises as an external auditor

d. Even if she is only temporarily on the company's premises as an external auditor

Creation of the PCAOB was an important event in the development of the accounting profession because it altered the accounting profession's historical policy of self-regulation in the area of: a. Internal auditing b. Tax return preparation c. Tax advocacy on behalf of clients accused of fraud d. External auditing of publicly-traded companies

d. External auditing of publicly-traded companies

An auditor has discovered that its audit client made numerous facilitation payments to foreign officials over the past two years. This client's stock trades on the New York Stock Exchange. The auditor should: a. Inform the SEC b. Inform authorities at the stock exchange c. Inform the companies' Audit Committee d. Ignore this discovery

d. Ignore this discovery

A facilitation payment: a. Is never lawful under the Foreign Corrupt Practices Act b. Is lawful under the Foreign Corrupt Practices Act as long as it does not involve the exportation of merchandise from the United States c. Is lawful under the Foreign Corrupt Practices Act as long as it does not involve the importation of merchandise into the United States d. Is always lawful under the Foreign Corrupt Practices Act

d. Is always lawful under the Foreign Corrupt Practices Act

Which of the following typically is not a real-world difficulty of applying utilitarianism? a. It give undeservedly high weight to human emotion b. It cannot readily measure societal values, such as the value of eradicating discrimination based on religion c. It can be difficult to determine if an act makes society better off d. It focuses on the good of the majority and does not place any value on the protection of minorities' rights

d. It focuses on the good of the majority and does not place any value on the protection of minorities' rights

f a firm engages in activities that simultaneously are profit-optimizing and socially responsible: a. Economists that adopt the stakeholder theory, but not the shareholder theory, will agree with its conduct b. Economists that adopt the shareholder theory, but not the stakeholder theory, will agree with its conduct c. Economists uniformly will criticize its claims of social responsibility as being highly unlikely, if not impossible d. Its behavior is commendable in accordance with both the shareholder and the stakeholder theories

d. Its behavior is commendable in accordance with both the shareholder and the stakeholder theories

The overconfidence bias: a. Leads people to have an exaggerated fear of loss b. Leads people to overestimate the risks inherent in generating a possible gain c. Leads people to unduly fear losses d. Leads people to unduly minimize the odds of loss

d. Leads people to unduly minimize the odds of loss

The law of eminent domain allows a local government to take a person's property for public use, such as building a freeway that has been designed to cross land owned by this landowner. The landowner, by law, is entitled to be paid the fair market value of her land. However, in a recent action, a local government took a landowner's property under eminent domain and paid that landowner less than fair market value. Under utilitarianism, this government's action: a. Definitely was suboptimal b. Definitely was optimal because the government saved money for the benefit of society c. Definitely was optimal because any act that shifts resources away from a private individual to broader society satisfies the precepts of utilitarianism d. May have been optimal or suboptimal, but further inquiry into relevant facts is needed

d. May have been optimal or suboptimal, but further inquiry into relevant facts is needed

If a CPA violates the Principles section of the AICPA Code of Professional Conduct, the CPA is subject to professional disciplinary actions: a. By the SEC or by the AICPA's Disciplinary Committee b. By the state accountancy board in the state where the CPA practices accounting c. Only if the CPA is still an active (non-retired) accounting practitioner d. Never

d. Never

The rules of the AICPA are required to be: a. Identical to the rules of the IFAC b. Developed by the international professional accounting community through IFAC and then applied through the IFAC to professional accountants practicing in the United States c. More rigorous than IFAC's rules due to the mandates imposed by American stock exchange trading rules d. Never more lenient that the rules of the IFAC

d. Never more lenient that the rules of the IFAC

In California, a CPA may: a. Always receive a referral fee in connection with the referral of a non-audit client b. Always pay a referral fee in connection with the referral of a non-audit client c. Never pay or receive a referral fee, in accordance with the AICPA's Code of Professional Conduct d. Never pay or receive a referral fee, even if the AICPA's Code of Professional Conduct otherwise might authorize it

d. Never pay or receive a referral fee, even if the AICPA's Code of Professional Conduct otherwise might authorize it

If a CPA charges a contingent fee in connection with providing professional services to a review client, the CPA's fee arrangement is: a. Permissible always b. Permitted only if the fee arrangement is expressed in a clear writing signed by the client c. Permitted only if the fee is reasonable in amount d. Never permissible

d. Never permissible

The SEC had: a. A primary role in the development of the AICPA Code of Professional Conduct b. A secondary role in the development of the AICPA Code of Professional Conduct c. No role in the development of the AICPA Code of Professional Conduct, but it retains the authority to override this code of conduct concerning the behavior of both internal and external auditors performing services relating to the financial activities of regional and local financial institutions d. No role in the development of the AICPA Code of Professional Conduct

d. No role in the development of the AICPA Code of Professional Conduct

If a CPA who is a member of the AICPA fails to abide by the Principles section of the AICPA's Code of Professional Conduct, but otherwise acts in conformity with the Code, the CPA's membership in the AICPA will potentially be: a. Suspended for a period of up to 30 days b. Suspended for a period of up to one year c. Revoked, with the right to apply for reinstatement after one year d. Not subject to any form of punishment regarding the license to practice accounting

d. Not subject to any form of punishment regarding the license to practice accounting

Under the insider trading rules, a staff accountant who manages the collection and recording of a publicly-traded company's Accounts Receivable is: a. Never considered to be an insider b. Prohibited from ever trading in the company's stock c. Prohibited from trading in the company's stock, unless the purchases are made in a retirement fund in which numerous other employees also participate d. Prohibited from trading in the company's stock if she possesses material, non-public information

d. Prohibited from trading in the company's stock if she possesses material, non-public information

The "Dead President's" Effect refers to people's propensity, when cheating, to: a. Favor monetary rewards over nonmonetary rewards b. Prefer liquidity over illiquidity c. Favor rewards that are vivid and simple to understand over rewards that are abstract and complex d. Refrain from stealing cash

d. Refrain from stealing cash

Kohlberg's three levels of moral development, in order, focus on: a. Self-interest, achieving justice, and achieving peer approval b. Self-interest, adhering to principles over laws, and learning to disregard the need for peer approval c. The avoidance of punishment, compliance with laws, and compliance with societal expectations d. Self-interest, achieving peer approval, and the pursuit of justice

d. Self-interest, achieving peer approval, and the pursuit of justice

The AICPA's Code of Professional Conduct establishes: a. The rules of conduct for structuring and conducting audits and other attestation engagements b. The rules of conduct for conducting audits, but no other forms of attestation c. The rules for resolving technical judgments in achieving a fair presentation of financial statements d. The normative rules of ethical behavior that guide professional accountants

d. The normative rules of ethical behavior that guide professional accountants

A real-world difficulty of applying deontology is that: a. It can be difficult to identify all stakeholders affected by a decision b. It can be difficult to measure utility c. Some benefits, such as the right to the protection of trade secrets, are difficult to quantify d. Two or more rights protected by deontology sometimes are in conflict

d. Two or more rights protected by deontology sometimes are in conflict