ETHICS 1335 TEST 1

Who does the AICPA Code of Professional Conduct apply to: a. Members in Public practice b. Members in Industry c. Members in Government d. Members in Education e. All of the above

All of the above

Who may practice before the internal Revenue Services? Attorney Certified public accountants Enrolled agents Enrolled actuaries All of the above

All of the above

Which of the following is false? a. A hypernorm is a value that is almost universally respected by stakeholder groups b. The three basic philosophical approaches for corporate decision makers are consequentialism, deontology, and virtue ethics. c. Hypernorms involve the demonstration of the following basic values: Honesty, Fairness, Compassion, Integrity, Predictability, and Responsibility. d. None of the above

None of the above

Stakeholder impact analysis as a form of ethical decision making commences with which of the following: a. Identification of significant stakeholders. b. Investigation of stakeholder interests. c. Ranking of stakeholder interests. d. All of the above.

Identification of significant stakeholders

Ethical dilemmas arise when: Norms and values are in conflict There is only one alternative course of action available Norms and values are not in conflict There are several theories of ethical decision making All of the above

Norms and values are in conflict

Which of the following is NOT considered a stakeholder? a- Employees b- Government c- Suppliers d- None of the above

None of the above

Which entity has final approval of financial accounting and reporting rules and regulation for publically traded companies in the United States of America? a. IRS b. DOJ c. PCAOB d. AICPA e. all of the above

PCAOB

To sign a tax return as a tax return preparer you need which of the following? a. CPA License b. PTIN holder c. Enrolled Agent d. Attorney e. All the above may sign a tax return as a return preparer

PTIN holder

Which of the following laws was enacted as a result of the corporate scandals of Enron, Arthur Anderson, and WorldCom? a. Sarbanes-Oxley Act of 2002 b. Securities Act of 1933 c. Securities Act of 1934 d. Jones Act

Sarbanes-Oxley Act of 2002

Gary Daman's CPA firm has been engaged in Beast Hungary Inc.'s financial audit for the past 3 years. Gary Daman also files personal tax return for Scott Beast, a member of the Beast Inc. Under what circumstance Gary Daman is still considered independent of Beast Hungary Inc.? a. Scott Hungary is the CEO of Beast Inc. b. Scott Hungary is the CFO of Beast Inc. c. Scott Hungary is a member of Board of Directors of Beast Inc. d. Scott Hungary is the Controller of one of the Beast Inc.'s subsidiaries.

Scott Hungary is the Controller of one of the Beast Inc.'s subsidiaries.

Enron referred to this transactions as "monetizing" or "syndicating" its assets: Buy more assets using syndicated loans Sell assets to third parties and record cash income as earnings Hedge the company's assets Lend money to third parties to buy assets Recording profits on energy derivatives trading

Sell assets to third parties and record cash income as earnings

All of the following are approaches of comprehensive ethical decision making known as stakeholder impact analysis except for? Five Questions Approach. Moral Standard Approach. Stakeholder Impact Analysis Approach. Pastin Approach.

Stakeholder Impact Analysis Approach.

Which of the following was not a conflict of interest that Arthur Andersen's personnel encountered? Auditing their own work as SPE consultants Losing a very large client A partner reviewed another partner's work Internal debates about Enron's questionable accounting treatments were not discussed with the audit committee Audit staff leaving the firm to work for Enron

A partner reviewed another partner's work

A practitioner who knows that the client has not complied with the revenue laws of the United States must: a. Advise the client promptly of the fact of such noncompliance b. Advise the client of the consequences of such noncompliance c. Advise the IRS promptly d. Advise the client promptly of the fact and the consequences of such noncompliance

Advise the client promptly of the fact and the consequences of such noncompliance

Which of the following are NOT examples of stakeholders? a. Employees b. Customers c. Suppliers d. Borrowers e. All above could be stakeholders

All above could be stakeholders

A member of the AICPA must: A. Undertake only those professional services that the member of member's firm can reasonably expect to be completed with professional competence. B. Exercise due professional care in the performance of professional services. C. Adequately plan and supervise the performance of professional services. D. All of the above.

All of the above

A practitioner may be censured, suspended or disbarred from practice before IRS due to incompetence and disreputable conduct, including: a. Conviction of any criminal offense under the revenue laws of United States. b. Conviction of any criminal offense involving dishonesty or breach of trust. c. Conviction of any felony under federal or state law for which the conduct involved renders the practitioner unfit to practice before the IRS. d. All of the above. e. None of the above.

All of the above

According to Article 2 in the Code of Professional Conduct, members should act in a way that will: a. Serve the public interest b. Honor the public trust c. Demonstrate commitment to professionalism d. All of the above e. None of the above

All of the above

According to Chapter 1, which of these determinant factors define a corporation's reputation? Credibility. Reliability. Responsibility. Trustworthiness. All of the above.

All of the above

According to Circular 230, Part 10.33, which of these is the best practice for tax advisors? a. Communicate clearly with the client the terms of the engagement. b. Establish the facts (relevance, reasonableness of assumptions, applicability to law, derived conclusions). c. Advise client import of conclusions. d. Act with fairness and integrity. e. All of the above.

All of the above

Individuals may be ethical because of: Religious concerns Emotional attachment to other people Enlightened self-interest All of the above None of the above

All of the above

Norman Jones, CPA is not independent of his audit client, Nora Jones when a) he charges a contingent fee for audit services b) he charges a commission for audit services c) all of the above

All of the above

The IRS recommended in 2011 a number of steps that it plans to implement for future filing seasons, including: a. Requiring all paid tax return preparers who must sign a federal tax return to register with the IRS and obtain a preparer tax identification number (PTIN). These preparers will be subject to a limited tax compliance check to ensure they have filed federal personal, employment and business tax returns and that the tax due on those returns has been paid. b. Requiring competency tests for all paid tax return preparers except attorneys, certified public accountants (CPAs) and enrolled agents who are active and in good standing with their respective licensing agencies. c. Requiring ongoing continuing professional education for all paid tax return preparers except attorneys, CPAs, enrolled agents and others who are already subject to continuing education requirements. d. Extending the ethical rules found in Treasury Department Circular 230 -- which currently only apply to attorneys, CPAs and enrolled agents who practice before the IRS -- to all paid preparers. This expansion would allow the IRS to suspend or otherwise discipline tax return preparers who engage in unethical or disreputable conduct. e. All of the above.

All of the above

Under PCAOB rules the "Audit and professional engagement period" include(s): a. the period covered by any financial statements being audited b. the period of the engagement to audit or review the audit client's financial statement c. all of the above d. none of the above

All of the above

What is a positive way to maintain a quality relationship with a client? a. Have written fee agreements, with clearly defined terms (i.e. billing) and, if needed, provide cost estimates. b. Complete work at agreed upon deadlines. c. Use appropriate phone protocol to maintain confidentiality with clients. d. Monitor quality of all work, including drafts as well as client status reports. e. All of the above.

All of the above

Which of the following is true for a publicly traded company? An audit partner cannot serve as the engagement partner or the concurring partner for over five concurrent years. Public Company Accounting Oversight Board consists of five CPAs Auditors may offer actuarial services if permitted by the client's Audit Subcommittee. None of the above.

An audit partner cannot serve as the engagement partner or the concurring partner for over five concurrent years.

Effective crisis management could represent: An opportunity to avoid costs An opportunity to change employee's perspectives on risk An opportunity to enhance the company's reputation All of the above None of the above

An opportunity to enhance the company's reputation

Joe the Client requests that Mike the CPA return to him all of his records so that Joe the Client can comply with his Federal Tax obligations. Mike the CPA must return: a. Any and all records necessary to fulfill the tax obligation, even if there is a fee dispute. Mike the CPA is not allowed to make copies of these records. b. Any and all records necessary to fulfill the tax obligation, unless there is a fee dispute. In such case, Mike the CPA will not return the records until fee dispute is solved. c. Any and all records necessary to fulfill the tax obligation, even if there is a fee dispute. Mike the CPA is allowed to make copies of these records. d. Any records that Mike is not using at the time.

Any and all records necessary to fulfill the tax obligation, even if there is a fee dispute. Mike the CPA is allowed to make copies of these records.

Who may practice before the IRS? a. Anybody b. Any person with a college degree c. A CPA candidate d. Any licensed attorney(s) in good standing

Any licensed attorney(s) in good standing

In Circular 230, means any person who is a member in good standing of the bar of the highest court of any State, territory, possession of the United States, including a Commonwealth, or the District of Columbia. a. CPA b. Attorney c. Commissioner d. Enrolled agents.

Attorney

5) Which of the following is NOT a trend described in Chapter 1 as having an impact on the ethics of business? a. Directors' legal liability b. Management's stated intention to protect reputation c. Auditors' legal liability d. Management's assertions to shareholders on the adequacy of internal controls e. Management's stated intention to manage risk

Auditor's legal liability

The Board of Director's of ABC Corporation have three broad duties that stem from the fiduciary status of corporate directors. Those three duties are the duties of obedience, loyalty, and care. The duty of obedience requires the director to: a. Ensure committing acts beyond the scope of the powers of ABC Corp. as defined by its charter or laws of the state of corporation. b. Avoid committing acts beyond the scope of the powers of ABC Corp. as defined by its charter or laws of the state of corporation. c. Avoid committing acts within the scope of the powers of ABC Corp. as defined by its charter or laws of the state of corporation. d. None of the above.

Avoid committing acts beyond the scope of the powers of ABC Corp. as defined by its charter or laws of the state of corporation.

According to the AICPA Code of Professional Conduct, Rule 101-Independence, an audit requires that an individual perform his or her services with integrity and objectivity. There must be reasonable assurance that this is being done during the engagement. What must an accountant do to be in compliance with the generally accepted auditing standards? a. Be independent in fact. b. Be independent in appearance. c. Both. d. Neither.

Both

The Sarbanes Oxley Act of 2002 provides for the reform of: a. Corporate Governance b. Accounting Profession c. Both of the above d. None of the above

Both

A practitioner who, having been retained by a client with respect to a matter administered by the IRS, knows that the client has not complied with the revenue laws of the U.S. or has made an error in or omission from any return, document, affidavit, or other paper which the client submitted or executed under the revenue laws of the U.S., MUST: a. advise the client promptly of the fact of such noncompliance, error, or omission. b. stay silent because informing the client of such noncompliance, error, or omission now makes the practitioner liable. c. advise the client of the consequences as provided under the Code and regulations of such noncompliance, error, or omission. d. Both A and C.

Both A and C

6) Which corporate report discusses subjects that include environmental, health and safety, philanthropic and other social impacts? a. Corporate annual report b. Corporate social responsibility report c. Corporate quarterly report d. Corporate stakeholder report e. Corporate ethics committee report

Corporate social responsibility report

John Fry, the Chairman and CEO of XYZ Corp., was arrested for using, growing, and selling marijuana out of his home in Austin, TX. As a result, the stock price of XYZ Corp. plummeted. The reason being is because John Fry's actions affected the corporate reputation of his company. The four determinates of corporate reputation are: a. Credibility, trustworthiness, reliability, and responsibility. b. Productivity, sales, cash flow, and equity. c. Fairness, compassion, integrity, and honesty. d. None of the above

Credibility, trustworthiness, reliability, and responsibility.

"Stakeholders increasingly expect that a company's activities will respect their values and interests. To a large extent, this respect for stakeholder values and interests determines the ethical standing and success of a corporation." (Brooks, P. 2) Which of the following entities is not considered a "stakeholder" of a company? a. Creditor. b. Debtor. c. Employee. d. Stockholder.

Debtor

"The new SOX governance framework will focus the attention of directors and management on issues that are of critical importance to the proper governance and reporting process." (Brooks, P. 93) Which one of the following developments is NOT the result of SOX framework? a. Strengthening of the role of the audit committee. b. Clarification of roles, responsibilities, and competencies of directors and board subcommittees. c. Decrease of the demand of qualified audit personnel. d. Increased penalties for wrongdoing.

Decrease of the demand of qualified audit personnel.

This philosophical approach requires that an ethical decision depends upon the duty, rights, and justice involved: Consequentialism Virtue ethics Duty ethics Righteousness Deontology

Deontology

4) The difference between what the public thinks it is getting in audited financial statements and what the public is actually getting is known as: a. Credibility gap b. Expectations gap c. Audit gap d. Stewardship gap e. None of the above

Expectations Gap

2) The 5 E's of the accounting profession in Texas are Ethics, Enthusiasm, Education, Examination and Experience. a. True b. False

False

A CPA may conduct a financial statement audit when he or she is not independent, but the audit report must be modified to disclose the lack of independence. True False

False

The following is true about return of client tax related records: a. Generally client records do not have to be returned if there is a dispute over fees. b. Generally a practitioner must, at the request of the client, return any and all records of the client. c. A practitioner may not keep copies of client records. d. A Practitioner has no obligation to allow a client to view their tax file.

Generally a practitioner must, at the request of the client, return any and all records of the client.

Ethical corporate behavior is expected to lead to: Higher profitability in the short-term Higher profitability both in the short-term and long-term Lower profitability in the long-term Higher profitability in the long-term Lower profitability both in the short-term and long-term

Higher profitability in the long-term

A value that is almost universally respected by stakeholder groups is: Super norm Alfa norm Value norm Hypernorm General norm

Hypernorm

Which of the following was not among Arthur Andersen's shortcomings in conducting Enron's audit? Lack of competence Failure of quality control standards Misunderstanding of auditor's fiduciary role Inconclusive testing of control Insufficient information provided by Enron's staff

Inconclusive testing of control

In order to ensure an investment-grade credit rating, Enron began to emphasize the following three actions: Reducing accruals, increasing cash flow, and lowering debt Smoothing accruals, increasing cash flow, and lowering debt Increasing cash flow, lowering debt, and smoothing earnings Increasing cash flow, lowering earnings and decreasing option expense Increasing cash flow, lowering debt, and decreasing option expense

Increasing cash flow, lowering debt, and smoothing earnings

Jason has a hearing scheduled before a panel of IRS appeals officers relating to his 2005 Individual Federal Income Tax Return. Due to business travel he won't be able to attend & represent himself. Which of the following individuals can represent Jason at his hearing? A) Jason's best friend, a seasonal employee for H&R Block, who prepared and signed his 2005 return as the preparer. B) Jason's aunt, an employee at the 5th Circuit Federal Court of Appeals, who advised him on the tax deductions he claimed on his 2005 return C) Jason's mother who is employed as a bookkeeper at a local bank D) Jason's brother-in-law, who is a former CPA who practiced in the State of Texas

Jason's mother who is employed as a bookkeeper at a local bank

Johnson CPAs practice before the IRS and have implemented a policy requiring all tax refund checks of its clients be sent to the firm. a. Johnson CPAs may endorse its client's refund checks and deposit the checks into Johnson CPAs' operating accountant if the client has not paid its bill for the preparation of the tax return. b. Johnson CPAs may require that its client endorse the check and then negotiate the check by depositing the check into its operating account if the client has not paid its bill for the preparation of the tax return. c. Johnson CPAs may hold a refund check until its client picks up the check. d. All of the above. e. None of the above.

Johnson CPAs may hold a refund check until its client picks up the check.

Incomplete disclosure of the company's revenue recognition policy is an example of: Lack of transparency Lack of integrity Lack of accuracy All of the above None of the above

Lack of transparency

These companies are more likely to voluntarily adopt improved governance measures: Larger companies Less profitable companies Foreign companies Smaller companies Private companies

Larger companies

In regards to solicitation of clients, Jim Matter, C.P.A. would not be in violation of Circular 230 in which of the following scenarios: a. Mr. Matter had been persistently soliciting and contacting a potential client. He has been so persistent because he feels that, if he could sign this client, it would generate huge profits for his firm. However, the client in question has asked Mr. Matter to stop contacting him. Even after he has clearly told Jim to stop contacting him because he did not want Jim's services, Mr. Matter still keeps pursuing the client. b. Jim Matter has published a fee schedule that specifically states his hourly rate for preparing 1040's is $125/hour. A potential client calls Jim up 6 weeks later after the brochure has been published and tells Mr. Matter that she would like him to prepare her 1040. Under the assumption that his going rate is $125/hour, the client in question is shocked when she receives her bill for preparation of her 1040. Mr. Matter charged her $135/hour, rather than the published rate of $125/hour. c. Jim has taken it upon himself to mail out a brochure to a list of people he has obtained through a friend. The brochure is an advertisement of all of the services offered by Jim and his firm. The list of names that Jim is going to mail brochures to are not current clients, have not invited Jim to contact them through direct mail, and are not seeking the type of services offered by a CPA. Mr. Matter only kept copies of the brochures mailed out to these people for 24 months after they were mailed. d. Mr. Matter's brochures explicitly state that he is certified by the Internal Revenue Service to perform tax services.

Mr. Matter's brochures explicitly state that he is certified by the Internal Revenue Service to perform tax services.

1) Which of the following (according to Charles Fombrum) is not one of the four determinants that influence a company's reputation? a. Credibility. b. Reliability. c. Profitability. d. Responsibility.

Profitability

Under the Sarbanes-Oxley Act (SOX), management is responsible for, must assess, and certify by signature which of the following: a. The attestation standards, including quality control and independence standards of the auditing firm performing contract internal work for the company. b. The five members (only two of which can be CPAs) of the Public Company Accounting Oversight Board (PCAOB) are certified in the Company's headquarters. c. The non-audit services of the auditing company were performed according to the appropriate SARS. d. Quarterly and annual financial reports, SEC forms, and period reports on systems of internal control.

Quarterly and annual financial reports, SEC forms, and period reports on systems of internal control.

At the time of Enron's collapse, the prevailing treatment for employee stock option expense was: Record stock options only when and if exercised, at exercise price Record all stock options when issued, at exercise price Record all stock options at market price Record stock options only when exercised at market price Record not exercised options at market price

Record stock options only when and if exercised, at exercise price

SOX increased the time requirement and legal risk for company directors. These requirements will likely: Increase the number of directors in the board Reduce the number of directors in the audit committee Increase audit fees Reduce the number of boards that each director sits on All of the above

Reduce the number of boards that each director sits on

__________ includes the culture, processes, and structures that are directed towards the effective management of potential opportunities and adverse effects. a. Risk Management b. Hypernorms c. Ethics d. Synergy

Risk Management

Which of the following was NOT a committee in Enron's Board? Risk Management Committee Executive Committee Finance Committee Audit and Compliance Committee Nominating Committee

Risk Management Committee

What is risk? a. Risk is the culture, processes, and structures that are directed towards the effective management of potential opportunities. b. Risk includes the systematic application of management policies and procedures. c. Risk is when the stock market goes down. d. Risk is the chance of something happening that will have an impact on objectives.

Risk is the chance of something happening that will have an impact on objectives.

SOX of 2002 is primarily regulated and overseen by A. SEC B. PCAOB C. AICPA D. all of these

SEC

Taxes R Us, a CPA firm, has notified Mr. Jones that his federal income tax return and extension for 2006 is complete and ready to be mailed to the IRS. Mr. Jones requests an estimate of his payment. He then complains that Taxes R Us accounting fees are too high priced and demands his records so he can go elsewhere. What must Taxes R Us do? a. Taxes R Us must return the entire file of records provided by Mr. Jones at once because those are his personal belongings. b. Taxes R Us must allow Mr. Jones to only review and copy all the records he had provided. c. Taxes R Us must return the documents that the IRS requires attached to a return and allow Mr. Jones to copy the remaining records needed to abide by his Federal tax responsibility. d. None of the above.

Taxes R Us must return the documents that the IRS requires attached to a return and allow Mr. Jones to copy the remaining records needed to abide by his Federal tax responsibility.

Which of the following organizations licences CPAs: a. AICPA. b. Texas Society of CPAs. c. Texas State Board of Public Accountancy. d. All of the above. e. None of the above.

Texas State Board of Public Accountancy.

Which of the following is NOT a requirement imposed by the SOX Corporate Governance Framework? The audit committee must be comprised solely by independent directors The audit committee is responsible for appointing the company's external auditor The audit committee must establish procedures to allow employees to submit anonymous complaints The audit committee must approve non audit services to be provided by the auditors The audit committee must be comprised solely by financial experts

The audit committee must be comprised solely by financial experts

The expectations gap has been coined to describe: a. the gap between what the public expects of a certain stock and what value the stock actually closes on that day. b. the difference between how the public believes a company will perform and how the company actually performs after one year. c. the difference between what the public thinks it is getting in audited financial statements and what it is actually getting. d. Both B and C.

The difference between what the public thinks it is getting in audited financial statements and what it is actually getting.

Regarding the fees of registered independent accounting firms on a audit engagement the following is true: a. The firm may charge a client a commission based on recovery received due to finding an issue on the financials. b. The firm may charge a flat fee for all work. c. The firm may charge a fee based on the number of errors it find in the clients financials. d. The firm can receive commissions from third parties for work performed on a client.

The firm may charge a flat fee for all work.

Professional Accountants, in their fiduciary role, owe their primary loyalty to: The accounting profession The client The general public Government regulations All of the above

The general public

Gary Daman, CPA, determined to have a conflict of interest with a client, Lisa Billup. Gary Daman is NOT allowed to represent Lisa Billup before the IRS when: a. Gary reasonably believes that he will be able to provide competent and diligent representation to Lisa Billup. b. The representation is not prohibited by law. c. Lisa Billup gives informed consent, confirmed in writing. d. The representation of Lisa Billup will be directly adverse to Gary's another client, Carol O'Neil.

The representation of Lisa Billup will be directly adverse to Gary's another client, Carol O'Neil.

Which of the following does not belong to the checklist for maintaining good client relations? a. Have written fee agreements. b. Return all phone calls promptly. c. Maintain professional office appearance. d. They all belong to the checklist.

They all belong to the checklist.

Weasel & Mink, CPAs prepared an original tax return for Ms. Fleece and charged her $5,000 for the preparation of the return. In the event the Internal Revenue Service does not sustain her tax deductions on her chinchilla farm, Weasel & Mink, CPAs will refund Ms. Fleece $500. a. This is a lawful practice because Weasel & Mink, CPAs made a mistake on the tax return. b. This is not lawful practice because Weasel and Mink, CPAs because CPAs cannot refund for work already performed. c. This is a lawful practice because Weasel & Mink, CPAs can reimburse a client for all or a portion of a fee in the event that the position taken on the tax returned is challenged by the Internal Revenue Service. d. This is not lawful practice because Weasel and Mink, CPAs cannot charge a contingent fee for preparing an original tax return. e. None of the above.

This is not lawful practice because Weasel and Mink, CPAs cannot charge a contingent fee for preparing an original tax return.

The Board of Directors' paramount duty is: To determine management's compensation To safeguard the interest of the company's stakeholders To safeguard the company's assets To formulate the company's strategy To safeguard the interest of the company's shareholders

To safeguard the interest of the company's shareholders

The following is a fundamental factor in having an effective ethical corporate culture: Tone at the top Inefficient oversight by the company's Board of Directors Unenforced code of conduct None of the above All of the above

Tone at the top

3) The P in CPA stands for Public? a. True b. False

True

A CPA license issued by the State of Texas is a form of a social contract between the CPA license holder and the public and the State of Texas. a. True b. False

True

A public accounting firm must be independent of the firm's audit client throughout the audit. a. True b. False

True

The PCAOB is charged with overseeing, regulating, inspecting, and disciplining accounting firms in their roles as auditors of public companies. a. True b. false

True

The goal of the State Board of Public Accounting is to protect the public? a. True b. False

True

The Director of Practice will maintain roasters of all the following individuals: a. Persons that have been granted active enrollment to practice before the IRS. b. Persons that have been placed in inactive status for failure to meet the requirements for renewal of enrollment. c. Persons who have been censured, suspended, or disbarred from practice before the IRS. d. All of the above.

d. All of the above.