Ethics for Accountants

The Full Disclosure: The Case of a Morally Challenged AP clerk involves the issue of:

Embezzling money by processing fictitious invoices

Under certain situations, internal accountants are eligible to become Dodd-Frank whistleblowers. Which of the following is not one of those situations?

Disclosure to the SEC is needed to prevent "substantial injury" to the audit firm

Which of the following is NOT an ethical or legal responsibility of officers and directors?

Duty of Fair Pay

The level of care expected of a reasonable person under similar circumstances in meeting one's fiduciary duty is called:

Duty of care

Which of the following was the most frequent anti-fraud control identified in the 2014 ACFE Global Fraud Survey?

External audit of financial statements

Which of the following was not a finding of the ACFE Report to the Nation on Occupational Fraud?

External auditors discover about 15 percent of the frauds

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

Living beyond means

Which of the following is least likely to be used by a manager to set the right tone to foster ethical leadership?

Make decisions that do not harm others

An example of revenue overstatement is:

Recording gross, rather than net, revenue

Trust in business is important because:

Stakeholders need to feel confident that relationships with organizations will be consistent and reliable

Corporate governance structures and relationships are shaped by internal and external mechanisms. Which of the following is an external mechanism?

State and federal statues require a baseline corporate governance system

The primary ethical issue in United Thermostatic Controls is:

Accelerating the recording of revenue into an earlier period

The business judgment rule refers to:

Acting with due care and good faith

In the Parable of Sadhu case, Bowen T. McCoy's friend Stephen summed up the dilemma by saying:

I feel that what happened with the sadhu is a good example of the breakdown between the individual and corporate ethics

Which of the following is NOT a component of an effective internal control environment in COSO Internal Control - Integrated Framework?

Risk abatement

What is the main fiduciary duty of the board of directors?

Safeguard the interests of corporation and its shareholders

Which of the following is not considered a behavioral indicator of fraud?

Satisfaction with pay

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

Shareholder returns

To ensure audit committee independence, the committee should meet separately with each of the following groups except:

Shareholders

Jodie Fisher's allegations of sexual harassment are made believable due to Mark Hurd's:

All of the above

The SEC has increased focus on identifying and penalizing misstatements in public company financials. What is one method that the SEC is using to identify companies, CEOs, and CFOs that are misstating financial statements?

Analyzing patterns of internal control problems even absent a restatement of the financials.

What is the significance of the Menendez v Halliburton, Inc.?

Appeals court panel ruled that Menendez (an internal accountant) had been retaliated against for blowing the whistle.

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

Asset misappropriation

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

Determine who is responsible for the fraud.

Which of the following is NOT an element of internal control over financial reporting?

Developing a code of conduct and whistle-blowing procedures

What non GAAP accounting method did Tony Menendez cite in blowing the whistle on Halliburton?

Bill and hold revenue recognition

The 2013 Ethics Resource Center National Business Ethics Survey indicates each of the following results with respect to how employees view the ethics and ethical practices of organizations they work for except:

Ethical cultures are weaker

What are the five elements of the framework for understanding ethical decision making in business?

Ethical issue intensity; individual factors; organizational factors; opportunity; and business ethics intentions, behavior, and evaluations.

In the Pinto case, Ford relied on which approaches to ethical reasoning to decide on a course of action with respect to the faulty gas tank placement:

Ethical legalism and utilitarianism

An ethical climate is enhanced by all of the following except:

Fear of retaliation

A strong and effective internal control environment can be enhanced by:

Giving the internal auditors direct and unrestricted access to the audit committee

Which of the following is not an element of an ethical corporate culture?

Having an effective external audit

The ethical dissonance model looks at the ethical fit of the organizational and individual values. The optimal fit for an individual with high individual ethics would be:

High-High

Which of the following is not a component of the Framework for Understanding Ethical Decision Making in Business?

Internal controls

What was the result of the annual inventory audit of the inventory shrinkage and improper accounting at Walmart?

Inventory shrinkage decreased by 90 percent

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

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

Backdating of stock options is unethical because:

It purposefully manipulates the option criteria that determine their value

Has SOX accomplished its intended goal of reliable financial reporting by public companies?

Maybe, as laws are needed but they serve as only a minimum standard of ethical conduct and may not lead to ethical conduct.

As a manager in her firm, Lucy concerns herself with the effectiveness of internal controls. Her main focus is how efficient and effective the company's internal controls are over time. Which component of internal control is Lucy engaging in?

Monitoring

Which of the following is NOT an element of the corporate governance system?

Monitoring by top management

With respect to the importance of moral issues in business, Thomas Jones posited that:

Moral issues of high intensity are more pronounced than those of low intensity

The difference between occupational and financial statement fraud is:

Occupational fraud is generally committed by employees

A common ethical problem where there is an unrealistic expectation to meet expected results and the ends justifies the means can be best described as:

Pressure to maintain the numbers

Organizational ethics can be thought of as:

Principles and standards of behavior that guide business decisions

With respect to whistleblowing, the Sarbanes-Oxley Act:

Protects employees of publicly traded companies who provide evidence in fraud cases

Proper tone at the top includes all of the following except:

Rarely enforcing the code of conduct

Which of the following is not a fraud method to overstate revenues?

Recording sales based on F.O.B. shipping point

Examples of improper asset valuation includes all of the following except:

Recording sales that never took place

Compensation of executives has soared over the last forty plus years to more than 271 times the pay for average workers. Remedies to rein in executive compensation include all but:

Restrictions by the law as to the maximum total compensation allowable

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

Retaliation for reporting an embezzlement fraud

Strong corporate governance relies on a strong board of directors. Which of the following would be a strong candidate to be a board director for XYZ, Inc.?

Retired controller of a Fortune 500 company.

Which of the following is NOT one of the audit committee's responsibilities?

Review all financial reporting judgments

Section 301 of the Sarbanes-Oxley Act requires

The establishment of procedures to accept employee complaints

Under the Sarbanes-Oxley Act, which of the following bodies must contain members that are 100% independent of management?

Audit committee

The stakeholder view emphasizes the obligations of management to:

All parties impacted by corporate decisions in a significant way

An ethical corporate culture includes:

An explicit statement of values.

The Olympus case was unique from a corporate governance perspective because it deals with:

Cultural differences between Japanese management and western style of management

The role of a leader in an organization is to:

Determine organizational climate and define norms

The Clawback rule allows:

recovering compensation from CEOs who engage in financial statement misconduct

The 2010 Dodd-Frank Act includes additional incentives for whistleblowers. What is the act's effect on whistleblowing by accountants?

A CPA may report a violation of a public accounting firm's performance in an audit.

Fraud can be defined as:

A deliberate misrepresentation to gain an advantage over another party

Section 404 of the Sarbanes-Oxley Act requires

A report of the company's internal control over financial reporting

In the Loyalty to the Boss case, what is the primary ethical issue?

Capitalizing expenses as inventory

Section 302 of the Sarbanes-Oxley Act requires that management:

Certify the financial statements

The 2016 State of Compliance Study of PwC indicates that:

Compliance and ethics functions have become more visible with their Board of Directors and senior leaders

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

Confidence

The relationship between the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy and rule of law is known as:

Corporate governance.

DeGeorge thinks that "corporations have a moral obligation not to harm." Which of the following would be one of his criteria for morally permitted whistleblowing?

The employee should report a firm's actions that will do serious and considerable harm to others to her supervisor, and keep reporting all the way up to board until the actions are corrected.

A unique aspect of occupational fraud is:

The misuse of company assets

The ACFE found that the most common way that fraud is first detected is:

Tip

In the business world, the term disgorgement means:

To return ill-gotten gains

What is the ethical issue in the Rite Aid Inventory Surplus Fraud case?

Vice Presidents of the company were involved in a material, nine year surplus inventory sales and kickback scheme.

The Ethical Dissonance Model helps to evaluate:

Whether the organization's ethics aligns with individual ethics

Research by Miceli and Near indicates that:

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

The seven signs of a pending ethical collapse include all but:

Whistleblowing hotline

A troubling result of the 2013 National Business Ethics Survey is:

a high percentage of misconduct is conducted by management