Chapter 11 & 12 MC

B) The social and environmental performance of a company is a significant factor in their investment decisions

Which is true of Socially Responsible Investors (SRIs)? A) They accounted for over half of all investments under professional management in 2016 B) The social and environmental performance of a company is a significant factor in their investment decisions C) They put more weight on social capital reporting when making investment decisions compared to the other sustainability issues (such as the environment or human capital) D) They all invest in the same standardized index of SRI-friendly companies

D) Changing the ownership structure of audit firms

Which of the following is a strategy adopted internationally to limit the auditor's liability? A) Decreasing the amount of disclosure in financial statements B) Limiting the amount of foreign direct investment in audit firms C) Increasing dependence of auditors on management of the company D) Changing the ownership structure of audit firms

D) All of these are sustainability reporting frameworks

Which of the following is not a sustainability reporting framework? A) Carbon Disclosure Project (CDP) B) Sustainability-related standards published by the International Standards Organization (ISO) C) RobecoSAM Corporate Sustainability Assessment (CSA) D) All of these are sustainability reporting frameworks

D) All answers are correct

Which of the following is the responsibility of an audit committee? A) Oversee the internal control systems B) Oversee internal auditing and the independent public accounting function C) Monitor the financial reporting process D) All answers are correct

D) Product quality and safety

Which of the following sustainability topics is most likely to be highly material to a pharmaceutical company, such as Pfizer? A) Fuel management B) Child labor in the factories of suppliers C) Scope 1 greenhouse gas emissions D) Product quality and safety

B) Child labor in the factories of suppliers

Which of the following sustainability topics is most likely to be highly material to an apparel company, such as Nike? A) Data security B) Child labor in the factories of suppliers C) Biodiversity impacts on endangered species. D) Product safety

B) Such litigation is inconsistent with Japanese values of interpersonal harmony.

Why is litigation against external auditors, which is very common in the United States, virtually unknown in Japan? A) Japanese auditors rarely make mistakes in their professional work. B) Such litigation is inconsistent with Japanese values of interpersonal harmony. C) Japan lacks a sophisticated court system for handling complex cases involving accounting matters. D) External auditors are not responsible for the quality of work performed for a corporate client.

B) Integrated Reporting

An alternative to a stand-alone sustainability report is a system in which sustainability disclosures are woven into the company's annual report. This system is called: A) Traditional Reporting B) Integrated Reporting C) Consolidated Reporting D) Incorporated Reporting

B) Environmental, Social, and Governance

ESG is an acronym for: A) Environmentally Specific Gases B) Environmental, Social, and Governance C) European Sustainability Goals D) Ecologically Safe Groundwater

D) All of the above

The International Standards Organization (ISO) has published standards explicitly relating to: A) Anti-bribery management systems B) Social responsibility C) Environmental management D) All of the above

B) Stakeholder Theory

The theory that sustainability reporting emerged as a response to stakeholders' demands for environmental and social information is called: A) Legitimacy Theory B) Stakeholder Theory C) Consumer Theory D) Social Responsibility Theory

B) Hiring a third party to attest to the claims made in a sustainability report

What does external assurance mean in the context of sustainability reporting? A) Insurance purchased to cover fines for environmental damage B) Hiring a third party to attest to the claims made in a sustainability report C) Hiring a third party to publicize the company's sustainability initiatives D) Hiring a third party to provide environmental consulting

A) It requires all companies, including foreign enterprises, listed on U.S. stock exchanges to have an internal audit function.

What is the position of the U.S. Securities and Exchange Commission (SEC) with respect to internal auditing? A) It requires all companies, including foreign enterprises, listed on U.S. stock exchanges to have an internal audit function. B) Since 2000, the SEC has been silent with respect to internal auditing. C) Internal auditing is recommended by the SEC, but it is not required for listed companies. D) Only multinational companies are required to have internal auditing systems.

B) To provide assurance and consulting services to improve an organization's operations

What is the role of internal auditing? A) To substitute for the external auditor whenever possible B) To provide assurance and consulting services to improve an organization's operations C) To assist the audit committee in negotiations with the external auditor D) To mediate disagreements between the external auditor and corporate management

B) A growing demand for risk management skills possessed by internal auditors

What reason can be given for the importance of internal auditing in multinational corporations? A) A serious lack of external auditors available to audit an international company B) A growing demand for risk management skills possessed by internal auditors C) Reluctance by multinational corporations to hire external auditors to comply with international regulations D) Decline in the reputation of external auditors

B) Since creditors and investors are not major players in these economies, there is little need for audited financial statements.

What reason has been given to explain the lack of well-developed auditing professions in less developed economies? A) Inability to train auditors given the lack of educational systems. B) Since creditors and investors are not major players in these economies, there is little need for audited financial statements. C) Investors and creditors in these countries do not want external auditors attesting to financial statement reliability. D) In these cultures, financial statements are presumed to be accurate and therefore do not require independent audits.

B) Universal, Economic, Environment, and Social

Which best describes the categories in which GRI standards are organized? A) Environmental, Social, and Governmental B) Universal, Economic, Environment, and Social C) Economic, Governmental, and Social D) Governmental, Private, and Economic

B) SASB's reporting system is designed to inform shareholders' investment decisions, while the GRI's goals are broader and more general

Which is an accurate comparison between the SASB and GRI? A) The SASB only considers the government's perspective while the GRI considers the perspective of a broad range of stakeholders B) SASB's reporting system is designed to inform shareholders' investment decisions, while the GRI's goals are broader and more general C) Both the SASB and the GRI are only geared toward those who qualify as Socially Responsible Investors D) SASB's reporting system is designed to inform shareholders' investment decisions, while the GRI's goals are broader and more general & Both the SASB and the GRI are only geared toward those who qualify as Socially Responsible Investors

A) Efficient cost-cutting is likely to reduce the consumption of energy, water, packaging, and other resources

Which is an accurate statement about the positive correlation found between companies' sustainability performance and traditional financial performance? A) Efficient cost-cutting is likely to reduce the consumption of energy, water, packaging, and other resources B) Environmentally responsible companies are much more likely to underperform in the long run C) More social and environmental responsibility is negatively correlated with traditional financial performance D) All of these are accurate

C) It was developed for the EU and later adopted by the US

Which is not true of the Sustainability Accounting Standards Board (SASB)? A) Its counterpart in traditional financial reporting is FASB B) Its intended audience is explicitly the investment community C) It was developed for the EU and later adopted by the US D) All of the above are true.

B) Civil liability

If an auditor breaks a contractual obligation, such as failing to complete an audit within the time frame specified in the engagement letter, what kind of liability does the auditor face? A) Criminal liability B) Civil liability C) Professional sanctions D) None of the above

D) All of the above

In Germany, who do external auditors consider as their clients? A) The government B) Board of directors C) Society as a whole D) All of the above

A) The composition of a company's audit committee

Which of the following is NOT a key driver of audit quality based on the 2008 U.K. FRC publication "The Audit Quality Framework"? A) The composition of a company's audit committee B) The culture within an audit firm C) The effectiveness of the audit process D) The skills and personal qualities of audit partners and staff

A) He/she willingly participates in defrauding the company's stockholders.

An auditor may be subject to criminal liability under which of the following situations? A) He/she willingly participates in defrauding the company's stockholders. B) He/she breaks a contract with the client. C) He/she violates a rule on the manner of advertising allowed by the professional accounting and auditing association. D) None of the above

B) Global Reporting Initiative

GRI is an acronym for: A) Global Research Institute B) Global Reporting Initiative C) Greenhouse Reporting for Industries D) Green Regulation Initiative

D) None of the above

In what area is external auditing consistent internationally? A) Audit report B) Auditing standards C) Regulation of the profession D) None of the above

C) Countries that follow common law

In what countries would one expect auditing standards to evolve based on the needs perceived by the auditing profession? A) Code law countries B) Members of the European Union C) Countries that follow common law D) Countries with strong accounting laws

D) In Business Description, Legal Proceedings, Risk Factors, and Management Discussion and Analysis

In what parts of a company's Form 10-K does Release No. 33-9106 (issued by the SEC in 2010) require companies to include threats and opportunities posed by climate change? A) Only in the Management Discussion and Analysis section B) In Risk Factors and Legal Proceedings C) In Management Discussion and Analysis and Risk Factors D) In Business Description, Legal Proceedings, Risk Factors, and Management Discussion and Analysis

B) requires that the auditor's report include whether the financial statements present a "true and fair view."

The Fourth Directive of the European Commission: A) aims at harmonizing the educational and training prerequisites necessary to become a statutory auditor. B) requires that the auditor's report include whether the financial statements present a "true and fair view." C) mandates for the new members of the auditing profession to hold a university degree in accountancy. D) requires that the auditor of the company to be the officer or employee of the company being audited.

D) Legitimacy Theory

The theory that sustainability reporting is a means of dealing with the firm's exposure to political, economic, and social pressures is called: A) Government Accountability Theory B) Stakeholder Theory C) Consumer Theory D) Legitimacy Theory

B) It requires that appropriate internal control systems be maintained by publicly traded U.S. companies.

What does the Foreign Corrupt Practices Act have to do with accounting? A) It requires that U.S. companies properly record bribes made to obtain business from foreign clients. B) It requires that appropriate internal control systems be maintained by publicly traded U.S. companies. C) It mandates the use of the temporal method of translating assets obtained illegally in foreign countries. D) It demands that publicly traded U.S. companies follow international best-practices

B) It is a subset of a corporate board of directors with oversight of the auditing function

What is an audit committee? A) It is a group of audit firms that develop national or international standards for auditing practice. B) It is a subset of a corporate board of directors with oversight of the auditing function. C) It is the team of external auditors (i.e. CPAs) that conducts audit testing and prepares the audit report. D) It is a management group responsible for negotiating the audit engagement with a public accounting firm.

C) Assuring that financial statement information is high quality

What is the primary role of external auditing in multinational corporations? A) Preparing the annual report to corporate shareholders B) Designing a working system of internal accounting controls C) Assuring that financial statement information is high quality D) Selecting independent members for the board of directors

B) Corporate governance

What term is used to describe the relationships between a company's management, its board, shareholders, and other stakeholders that create a structure through which the objectives of the company are set, attained, and monitored? A) Management control B) Corporate governance C) Internal auditing D) Government regulation

A) It is another term for sustainability reporting

Which is true of corporate social responsibility reporting (CSR)? A) It is another term for sustainability reporting B) It is the standardized term for sustainability reporting in the EU C) It is a variant of traditional financial reporting required by the SEC D) It is another term for sustainability reporting & It is the standardized term for sustainability reporting in the EU

C) Materiality has two dimensions: importance to stakeholders and importance to the company's operating decision makers

Which of the following best describe the concept of materiality as used by the GRI? A) Companies should avoid using toxic materials B) Companies should disclose information if it has the potential to significantly affect stock prices. C) Materiality has two dimensions: importance to stakeholders and importance to the company's operating decision makers D) Companies should disclose information if it has the potential to significantly affect stock prices & Materiality has two dimensions: importance to stakeholders and importance to the company's operating decision makers

B) International Auditing and Assurance Standards Board (IAASB)

Which of the following groups is responsible for developing international auditing standards? A) International Accounting Standards Board (IASB) B) International Auditing and Assurance Standards Board (IAASB) C) International Organization of Securities Commissions (IOSCO) D) Organization for Economic Cooperation and Development (OECD)

D) Independence of the auditor

Which of the following is NOT a factor influencing the probability that an auditor will detect an accounting error? A) Competence of the auditor B) Quality review and monitoring C) Financial reporting requirements D) Independence of the auditor

D) Monitoring risks and assessing their effect on the company

Which of the following is a main function of internal auditing in multinational corporations? A) Preparing the annual report to corporate shareholders B) Selecting independent members for the board of directors C) Helping external auditors with the financial statement audit D) Monitoring risks and assessing their effect on the company

C) The CDP works with over 6,000 companies worldwide to promote greenhouse gas emissions reporting

Which of the following is true of the Carbon Disclosure Project (CDP)? A) The CDP is a system of mandatory reporting B) The CDP was established by the U.S. SEC C) The CDP works with over 6,000 companies worldwide to promote greenhouse gas emissions reporting D) The CDP was established by the U.S. SEC & The CDP works with over 6,000 companies worldwide to promote greenhouse gas emissions reporting

D) It augments traditional financial reporting and can be presented as a standalone additional report or as an integrated report.

Which of the following statements is true of sustainability reporting? A) It replaces traditional financial reporting outside the United States, but is only an optional supplementary reporting system within the US. B) It is required by law on a global level for all public companies. C) There is only one standard method for presenting sustainability reporting, and it is used by a majority of companies who choose to publish their sustainability metrics. D) It augments traditional financial reporting and can be presented as a standalone additional report or as an integrated report.

A) Data security

Which of the following sustainability topics is most likely to be highly material to a social media company, such as Facebook? A) Data security B) Child labor in the factories of suppliers C) Biodiversity impacts on endangered species. D) Product safety

A) Corporate shareholders

Who is considered to be the client for external auditors in the United Kingdom? A) Corporate shareholders B) The government C) Society as a whole D) All of the above

D) It depends on a country's laws governing auditor liability

Who may bring civil litigation against an auditor? A) Only the client company B) Only shareholders C) The client company and shareholders D) It depends on a country's laws governing auditor liability

C) To assure international capital markets that auditing has been consistent across companies.

Why is international harmonization of auditing standards important? A) To be consistent with harmonized international accounting standards. B) To ensure the independence of external auditors of multinational corporations. C) To assure international capital markets that auditing has been consistent across companies. D) To reduce the authority of individual governments to enact accounting laws.

A) General information about the entity's reporting policies

Within the GRI, Universal Standards provide users with: A) General information about the entity's reporting policies B) Basic economic data about the entity C) Information about ethical issues, such as corruption or anti-competitive behavior D) All of the above