Acct Ethics Test 1
In the Capitalization versus Expensing case the main ethical issue is whether Gloria Hernandez should A. Capitalize or expense $1 million of expenditures B. Report her superiors actions to the CEO C. Talk to the Audit Committee D. Become a whistle blower
A
Utilitarian philosophers are divided into two types: act utilitarian and A. Rule utilitarian B. Individual utilitarian C. Ethical utilitarian D. Benefit utilitarian
A
What is a university's equivalent of a code of ethics? A. Honor code B. Student Handbook C. Faculty Handbook D. Statement of Values
A
Rest's components of a moral model include all but A. Moral sensitivity B. Moral development C. Moral judgment D. Moral character
B
To whom does the CPA owe ultimate allegiance in carrying out professional obligations? A. Stockholders B. Public interest C. Client D. Stakeholders
B
Which of the following is not part of standards for the quality of work? A. Planning and supervision B. Professional competence C. Professional data D. Professional care
C
An important modern contributor to the theory of utilitarianism is: A. Plato B. John Rawls C. Immanuel Kant D. Jeremy Bentham
D
Kevin Greenberg's actions in the "Supreme Designs" case can be said to have been: A. Selfish, in that he only thought of his own interests B. Disloyal to the company C. Unethical because he wrote checks to himself for unauthorized checks D. Undertaken with the intent to help out his supervisor
D
3. Which of the following is a permitted loan to a CPA from an audit client financial institution? A. Car loan collateralized by the car B. Credit cards with a limit greater than $25,000 C. Home mortgage D. Personal loan of less than $10,000
A
The country with the highest Uncertainty Avoidance is A. United States B. United Kingdom C. India D. China
A
What needs to be coupled with moral motivation to act on moral judgment? A. Courage B. External pressures C. Loyalty D. Internal pressures
A
The most likely rationalization a student might use to justify cheating on an exam is: A. Ethical relativism B. Situational ethics C. Deontological ethics D. Teleological ethics
B
Which of the following is not an ethical issue in business? A. Conflicts of interest B. Maximization of profits C. Discrimination D. Information technology
B
An ethical organization incorporates what into their decision-making process: A. Core values B. Strategic policies C. Reporting responsibilities D. All of these
D
Responsibility goes hand in hand with: A. Respect B. Loyalty C. Courage D. Accountability
D
A CPA who informs management of a material misstatement in the financial statements can go to the SEC with his/her concerns if: A . The CPA informed the client of this matter and the client did not inform the SEC within one business day of being informed by the CPA B. The CPA informed the client of this matter and the client refuses to correct the financial statements C. The CPA informs the client of this matter and the client fires the CPA D. All of these
A
A CPA would violate the Due Care Principle if he/she: A. Undertook a professional engagement without having the requisite background, knowledge and experience B. Discloses confidential information about a client C. Violates the Public Interest Principle D. Performs tax services for an audit client without audit committee approval
A
According to the 2012 Global Fraud Study of the ACFE, which fraud scheme posed the greatest risks to organizations throughout the world: A. Corruption and billing schemes B. Improper use of social media C. Illegal facilitating payments D. Economic extortion
A
An important issue in the Hewlett Packard pretexting case was: A. Using false pretenses to obtain confidential information about members of the board of directors B. Disclosing confidential client information without the approval of the client C. Producing fraudulent financial statements D. Twittering about a competitor and driving him out of business
A
Assume you were assigned a term paper and decided to surf the web to identify a provider of papers for a fee. You chose what you thought was the best paper available. With respect to Rest's model of morality it can be said that: A. Your actions lack moral sensitivity B. You are reasoning at stage 1 C. You are making judgments based on the utilitarian method D. You lack the courage of your convictions
A
CPAs should always adhere to the rules of conduct of the A. State board of accountancy B. AICPA C. IMA D. All of these
A
Diem-Thi Le felt retaliated against for whistle-blowing at the DCAA. Her persistence and determination to see audits change at DCAA exemplify A. Moral Character B. Moral Motivation C. Moral Judgment D. Moral Sensitivity
A
Each of the following is an outright restriction on providing nonattest services for an attest client except for: A. Tax services B. Financial information systems design and implementation C. Appraisal or valuation services D. Internal audit outsourcing services
A
Empathy entails all of the following characteristics of behavior except for: A. Being loyal to one's friends B. Being understanding of one's friends C. Being sensitive to the feelings of one's friends D. All of these
A
Fraud can be defined as: A. A deliberate misrepresentation to gain an advantage over another party B. A cover-up of a mistake made in the financial statements C. An error in preparing financial statements D. All of these
A
In "Blues Brothers" the initial dilemma facing the internal accountant is whether to: A. Prematurely record revenue and give in to pressure from the supervisor B. Record revenue correctly and start looking for a new job C. Record revenue correctly and go to the "Blues Brothers" and seek to change their minds D. Record revenue correctly refuse to budge from your position
A
In stage 1 of Kohlberg's model, ethical reasoning is motivated by: A. Fear of punishment B. Satisfaction of one's needs C. Following the law D. Acting based on universal ethical principles
A
In the ESM fraud discussed in this chapter, Jose Gomez violated the Independence standard because he: A. Had loans outstanding from the client B. Engaged in a business relationship with the client C. Had family members who owned stock directly in the client D. All of these
A
Kohlberg's model can best be described as: A. The various phases in one's moral development and related levels of moral reasoning B. A model of ethical action that is based on one's moral development C. A predictive tool to determine how a person will reason ethically based on one's moral development D. A model of age-specific levels of moral reasoning
A
Many critics say the biggest fault with deontological theories is A. no clear way to resolve conflicts between moral duties B. the separation of consequences from duties C. the requirement to respect people as human beings D. not being able to treat people as only a means
A
Role expectation or approval from others is a motive for doing right in which stage of Kohlberg's moral reasoning? A. Fairness to others B. Obedience C. Self-chosen principles D. Law and order
A
Sally is the only student from a foreign country in an Auditing class. On the day of the midterm exam, Sally asks the teacher whether she could use a dictionary to translate English words to her native tongue so she can better understand the questions. What do you think the instructor should do if she follows the ethical principle of justice? A. Allow Sally to use the dictionary since she is at a disadvantage B. Not allow Sally to use the dictionary because she should know enough English to get by C. Allow the other students to bring in some tool to give them an advantage D. None of these
A
Steve is in charge of accounting for the purchase of equipment at Cal Works, Inc. The company has a policy that all expenditures less than $1,000 must be expensed. Steve decides to take a $900 expenditure and separate $600 one and combine them into one $1,500 expenditure so that the total can be capitalized thereby eliminating the effects on income. Steve's actions can be characterized as: A. Lacking in of moral sensitivity B. Lacking in professional skepticism C. Loyal to the company's best interests D. All of these
A
Teleology deals with A. Consequences of actions B. Fairness to others C. Respecting the rights of others D. Following prescribed virtue characteristics
A
The "Milton Manufacturing" case illustrates: A. What can go wrong when a company sets a policy that potentially harms one area of its operations B. How the failure to exercise professional skepticism can cloud objective judgment C. The pressure that can be placed on accountants by top management D. All of these
A
The best restatement of Kant's categorical imperative is: A. Do to others as you would have everyone do unto you B. Consider others needs before you act C. That those with a smaller stake should have a smaller say compared to those with a bigger stake. D. Don't be cruel until someone is cruel to you
A
The case of Steve Jobs's Health deals with: A. Disclosure issues beyond financial information B. Disclosures required of members of board of directors C. Fiduciary obligations of a CEO D. Fiduciary obligations of a board of directors
A
The cognitive development approach refers to: A. The thought process followed in one's moral development B. The method of moral reasoning used in decision making C. The exercise of professional judgment in decision making D. All of these
A
The committee that first recommended that the profession institute a voluntary program for peer review was: A. Metcalf committee B. Cohen committee C. The House Subcommittee on Oversight and Investigations D. Mintz and Morris committee
A
The cost to the public to clean up 1,043 failed savings and loan institutions during the period of 1986- 1995 was: A. $152.9 billion including $123.8 billion of U.S. taxpayer losses B. $300 million including $123.8 million of U.S. taxpayer losses C. $400 billion including $152.9 billion of U.S. taxpayer losses D. $400 million including $152.9 billion of U.S. taxpayer losses
A
The ethical dilemma for Brenda in "The Tax Return" case can best be described as a: A. Conflict between loyalty to one's supervisor and doing the right thing B. Conflict between reporting an item of taxable income and ignoring it C. Lack of independence due to ties to the client entity D. All of these
A
The ethical domain in accounting and auditing refers to: A. The important constituent groups affected by accounting and auditing work B. The stages of the moral development of accountants and auditors C. The decision making process followed by accountants and auditors D. All of these
A
The ethics rules that applies solely to those who conduct an audit of a client entity is: A. Independence B. Objectivity C. Integrity D. All of these
A
The method of ethical reasoning that does not deal with making decisions after considering the interests of others is: A. Egoism B. Enlightened Egoism C. Utilitarianism D. Rights Theory
A
The method of ethical reasoning that evaluates actions in terms of harms and benefits is: A. Act Utilitarianism B. Rights Theory C. Justice D. Virtue
A
Thomas Jefferson's writing in the preamble of the Declarations of Independence is a perfect example of what theory? A. Rights Theory B. Virtue Theories C. Consequentialist Theories D. Applied Ethics
A
Under the IMA's standards of ethical practice, an accounting professional can consider informing authorities or individuals not employed by the organization when an ethical dilemma occurs about an accounting or financial reporting matter that remains unresolved if he/she: A. Believes there is a clear violation of the law B. Contacts his/her immediate superior who says to forget about the matter C. Informs the external auditors who tell him/her to inform the appropriate authorities D. Believes there has been an ethical violation
A
Which rule of professional conduct in the AICPA code does not apply both to internal and external accountants who are CPAs and members of the Institute? A. Independence B. Integrity C. Objectivity D. Due care
A
Which statement is correct with respect to a CPA's ethical obligation to return client books and records and CPA work papers: A.Client-provided records in the custody or control of the CPA should be returned to the client at the client's request. B. CPA work papers should be given to the client at the end of each audit. C. CPA work product never has to be turned over to the client. D. All of these
A
With respect to whistleblowing, the Sarbanes-Oxley Act: A. Protects employees of publicly traded companies who provide evidence in fraud cases B. Confers legal protection on managers who reported wrongdoing by top executives C. Confers legal protection on the board of directors for fraudulent actions by management D. All of these
A
. A strong and effective internal control environment can be enhanced by: A. Financial statements that present fairly financial position and results of operations B. Giving the internal auditors direct and unrestricted access to the audit committee C. Having the internal auditors report to the external auditors D. Having the external auditors report to the audit committee
B
. George is in the middle of a high stakes poker game when he notices what he thinks is cheating by another player. It appears to George that this player took a card from his lap and switched it with a card that he was dealt. If George is a utilitarian thinker, he should: A. Accuse the alleged cheater of cheating in front of all the other players B. Consider what might happen if he accuses the player of cheating and he is wrong C. Speak to the alleged cheater during a regularly scheduled break and tell him not to do it again D. Forget about the whole matter
B
. In the Bhopal case, in evaluating its exposure to possible future liability due to technology failures, Union Carbide used which of the following concepts: A. Professional skepticism B. Business risk C. Cost-benefit analysis D. Rights Theory
B
. Kohlberg's model suggests that a person A. is morally developed early in life and will not change B. continues to change decision priorities with education and experiences C. may change up or down one stage upon becoming an adult D. may only go backwards through the stages upon becoming an adult
B
A unique aspect of the HealthSouth case discussed in the text of this chapter is: A. The external auditors failed to assess whether the internal controls operated as intended B. Top management certified that the financial statements were accurate C . The external auditors violated the independence standards because they were involved in a business venture with members of top management D. Top management hyped the stock price to increase the value of their stock options
B
According to Kant, individuals may be treated as: A. means to an end B. an end and never as a means only C. other mammals since we are all equal D. an end and never as a means, in some circumstances
B
Cynthia Cooper's actions in the WorldCom case can be best characterized as demonstrating: A. Persistence and independence B. Persistence and courage C. Courage and loyalty D. Persistence and loyalty
B
Each of the following characteristics describes the importance of integrity in decision making except for: A. Acting out of moral principle B. Being loyal to one's superior C. Having the courage to do the right thing D. Not subordinating professional judgment to others
B
Each of the following is an element of the operational issues to be considered in the decision making model except for the: A. Culture of the organization B. Method of moral reasoning C. Internal controls D. Corporate governance system
B
In its investigation of ZZZZ Best, the House Subcommittee on Oversight and Investigations looked into: A. Why the board of directors failed to uncover the fraud at ZZZZ Best B. How the company was able to create 80% or more fictitious revenue C. How the company was able to create cookie jar reserves D. All of these
B
In reference to Rest's four-component Model of Morality, which component reflects an individual's willingness to place ethical values ahead of non-ethical values that relate to self-interest? A. Moral Character B. Moral Motivation C. Moral Sympathy D. Moral Judgment
B
In stage 3 of Kohlberg's model, ethical reasoning is motivated by: A. Satisfaction of one's needs B. Acting in the best interests of others C. Upholding the rights, values, and legal contracts of society D. Acting based on universal principles
B
In the Better Boston Beans case, what is the ethical dilemma facing Cindie? A. Loyalty of co-worker versus trust of co-worker B. Trust of co-worker versus the honesty of the workplace C. Honesty of the workplace versus the privacy of an individual D. Privacy of an individual versus loyalty of co-worker
B
In the Ethical Dissonance Model, a high person-organization fit requires: A. High organizational ethics, low individual ethics B. High organizational ethics, high individual ethics C. Low organizational ethics, high individual ethics D. Low organizational ethics, low individual ethics
B
In the Family Outreach case, Yimei finds three accounts all using the same documentation and amounts. Being skeptical, Yimei should consider doing all but: A. Report her findings to Kwami, her supervisor B. Talk to the agency's board of directors C. Examine more evidence to support her finding D. Check to see if the accounts were in the prior years' workpapers
B
In the Parable of Sadhu case, Bowen T. MCoy's friend Steve summed up the dilemma by saying: A.I feel that what happened with the sadhu is a good example of the breakdown between ethics in different cultures B.I feel that what happened with the sadhu is a good example of the breakdown between the individual and corporate ethics C. People tend to inevitably act in their own best interest D. All of these
B
In the PeopleSoft case, the auditors violated what aspect of independence? A. The auditor was exposed to an intimidation threat by the client B. The auditor was involved in a business relationship with the client C. The auditor served in a management decision making position with the client D. All of these
B
In which of the following is a CPA independent in fact and appearance? A. The CPA's brother is the controller of the company being audited. B. The CPA serves on the board of a non-profit with the CFO of the company being audited. C. The CPA borrowed money for a new car from the CEO of the company being audited. D. The CPA owes an office building that he leases to the client.
B
Keesha is the CEO of a publicly-owned company. She was informed by the CFO that the company's earnings were down 30 percent from the prior year due to the recession. The company's stock price has declined by 20 percent. The CFO comes up with a scheme to hide debt and inflate revenues by selling underperforming assets to a special purpose entity affiliated with the company. Keesha is concerned about possible effects on the creditors but ultimately she agrees to the accounting. Keesha is reasoning at: A. Stage 1 B. Stage 2 C. Stage 3 D. Stage 4
B
Rest's "Four Component Model of Morality" can best be described as: A. A description of the values that influence ethical decision making B. A model of the relationship between ethical action and one's level of moral development C. A model of moral judgment based on one's possession of certain virtues of behavior D. All of these
B
Section 302 of the Sarbanes-Oxley Act requires that management: A. Assess the company's internal controls B. Certify the financial statements C. Disclose all executive compensation D. All of these
B
The actions of Diem-Thi Li best illustrate A. System 1 thinking B. System 2 thinking C. Moral blindness D. Pursuit of self-interests
B
The best way to characterize the efforts of Diem-Thi Le is that of a A. Disgruntled employee B. Whistleblower C. Member of the audit committee D. The director of the DCAA
B
The due care principle in the AICPA code: A. Addresses the quality of the individual who performs professional services B. Addresses the quality of services performed by the CPA C. Addresses whether the independence standards has been met D. All of these
B
The main ethical issue in Healthcare Fraud case is: A. Maintaining two sets of accounting books. B. Inflating healthcare costs submitted to Medicare. C. Outsourcing operations to a firm known for maximizing expense reimbursements. D. All of these.
B
The method of ethical reasoning that requires selecting the correct moral rule that produces the greatest benefits over harms is: A. Act Utilitarianism B. Rule Utilitarianism C. Rights Theory D. Justice
B
The motivating factor for Sears to charge customers for repairs that were not needed was: A. Cover a loss from its business operations B. Greed C. Build up certain segments of its business D. All of these
B
The motive of "duty" is most associated with. A. Egoism B. Deontology C. Utilitarianism D. Justice
B
The primary ethical issue in United Thermostatic Controls is: A. Misappropriation of corporate assets B. Accelerating the recording of revenue into an earlier period C. Delaying the recording of expenses into a later period D. Failure to fully disclose all information
B
The question that arises in the First Community Church case is whether: A. The financial statements have been materially misstated B. There has been a misappropriation of assets C. The auditors lacked independence D. All of these
B
The requirement that there should be reasonable support for a tax return position before a CPA recommends it to a client most directly aligns with which tax standard: A. The tax return should not be based on a frivolous position B. There is a realistic possibility of success if the tax position is challenged C. It is more likely than not that the tax position will be upheld if challenged D. Contingent fees cannot be accepted when providing tax services for an audit client
B
The seven signs of a pending ethical collapse include all but: A. Pressure to make numbers B. Whistleblowing hotline C. Bigger than life CEO D. Doing good in the community
B
What is the agency problem? A. Managers place corporate goals ahead of personal goals. B. Managers place personal goals ahead of corporate goals. C. Managers place social goals ahead of personal goals. D. Managers place corporate goals ahead of social goals.
B
When is it appropriate to contact the audit committee about a difference of opinion with the CFO over an accounting or financial reporting manner? A. If the CFO does not agree to correct the financial statements B. The CEO supports the CFO and does not agree to correct the financial statements C. The external auditors support the CEO and do not agree to correct the financial statements D. The audit committee should always be the first to be informed about such a difference of opinion
B
Which of the following situations of a CPA's distant relatives does not impair the CPA's independence? A. CPA's parent holds a key position with an audit client. B. CPA's nephew is starting as a salesperson with an audit client. C. CPA's dependent roommate owns a material interest, and sits on the board, of an audit client. D. CPA's sister is chief counsel for an audit client.
B
Which tax service is still permitted by the PCAOB for audit clients following the KPMG tax shelter case? A. Aggressive tax shelter for audit clients B. Auditing of deferred taxes C. Tax services to audit client management or family members D. Tax services for a contingent fee
B
A client asks his accountant to ignore a mistake which overstated the accounts receivable account. The accountant decides that the accounts receivable account has to be corrected to state the correct amount. The accountant makes his decision based on his duty to society, respect for authority, and maintaining the social order. Which stage of Kohlberg' Stages of Moral Development is the accounting reasoning? A. Stage 2 B. Stage 3 C. Stage 4 D. Stage 5
C
A major allegation in the XTO Energy case was the: A. Insider trading B. Violation of FCPA C. Breach of fiduciary duties by board of directors D. Retaliation of whistleblower
C
A similarity between the Bernie Madoff situation and that of R. Allen Stanford is they both were: A. The head of a major U.S. stock exchange B. The CEO of a company that went out of business after a major financial statement fraud C. Involved in Ponzi schemes D. Exonerated in a trial because of lack of evidence of wrongdoing
C
A troubling result of the 2011 National Business Ethics Survey is: A. Increased witnessing of misconduct in the workplace. B. Decline in pressure to compromise ethics. C. Increased rate of retaliation against whistleblowers. D. Decline in negative view of supervisors' ethics.
C
Aristotle believed that __________ always preceded the choice of action. A. Empathy B. Due Care C. Deliberation D. Loyalty
C
Assume the external auditor of a client entity also served on the client's board of directors. What aspect of independence would be violated? A. The auditor may be exposed to an intimidation threat by the client B. The auditor is involved in a business relationship with the client C. The auditor serves in a management decision making position with the client D. All of these
C
At which stage of Kohlberg's view on ethical development is an individual's actions influenced by group norms? A. Stage 1 B. Stage 2 C. Stage 3 D. Stage 4
C
Compensation of executives has soared over the last forty plus years to more than 400 times the pay for average workers. Suggested remedies to rein in executive compensation especially during time of corporate wrongdoing include each of the following except for: A. Say on Pay rules B. Disgorgement C. Limits on executive compensation D. Clawbacks
C
During the investigations by the House Subcommittee on Oversight and Investigations, a question that was raised was: A. Why was fraud allowed to occur at some many companies B. Where was the board of directors in all these frauds C. Where were the auditors D. Why did the internal controls fail in some many frauds
C
Each of the following considerations should help to evaluate alternative courses of action in the decision making model except for: A. Whether the alternatives are consistent with professional standards B. Whether the alternatives are consistent with firm policies and its own code of ethics C. The stage of moral development of the decision maker D. The potential harms and benefits of alternative courses of action
C
Each of the following is a safeguard that helps to mitigate threats to independence except for: A. Safeguards created by the profession, legislation, or regulation B. Safeguards implemented by the attest client, such as a tone at the top C. Safeguards developed to ensure independence when performing nonattest services D. Safeguards implemented by the firm, including policies and procedures to implement regulatory requirements
C
Each of the following is an element of trustworthiness according to the Josephson Institute except for: A. Reliability B. Loyalty C. Fairness D. Honesty
C
How does Gilligan evaluate the solution to Heinz's dilemma? A. Women think saving a life is more important than keeping the law. B. Men think keeping the law is more important than saving a life. C. Men tend to think in terms of justice, and women in terms of caring. D. Men misunderstand and women understand.
C
In stage 5 of Kohlberg's model, ethical reasoning is motivated by: A. Acting in the best interests of others B. Following the law C. Upholding the rights, values, and legal contracts of society D. Acting based on universal principles
C
In the "Heinz and the Drug" case described in the chapter, Heinz's actions falls into which of Kohlberg's stages? A. Stage 1 B. Stage 2 C. Stage 3 D. Stage 4
C
In the Gateway Hospital case, Troy: A. Wants to be treated the same as Kristen with respect to expense reimbursement B. Wants to be treated consistently with the company policy on expense reimbursement C.Wants to be treated differently than Kristen with respect to expense reimbursement because of personal considerations D. Believes the company's reimbursement policy is fair
C
In the Giles and Regas case, the primary ethical issue can be stated as: A. Whether a subordinate should blow the whistle on a superior who has violated ethical policy B. Whether two staff members of the same rank should be allowed to date C. Whether a superior should become involved in a dating relationship with a subordinate D.Whether a student should renege on the acceptance of an offer from one firm after receiving an offer from a second firm
C
In the Phar-Mor case, Pat Finn's actions reflect ethical reasoning at what stage? A. Stage 1 B. Stage 2 C. Stage 3 D. Stage 4
C
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: A. Egoism and utilitarianism B. Enlightened egoism and rights theory C. Ethical legalism and utilitarianism D. Justice and rights theory
C
Internal control over financial reporting includes each of the following elements except for: A. Maintaining accurate financial records B.Providing reasonable assurance that receipts and expenditures are recorded based on proper authorization by management C. External audit conducted in accordance with generally accepted auditing standards D. Adhering to company policies and procedures
C
Jason is the fastest worker on the audit of a company for the firm Zits LLP. Other Zits workers take twice as long to complete the equivalent amount of work as Jason. One day Jason is approached by the other workers and is asked to slow down "You are exceeding the time budget for the audit and making the rest of us look bad," said one staff member. The best thing for Jason to do is: A . Tell the other staff members that he will use the time he saves on his budget to help them to meet their budget by picking up their slack B. Approach his supervisor to discuss the matter C. Ignore what is being asked and go about his work as he has always done D. Tell the other staff members to mind their own business
C
Moral sensitivity can be summarized as A. Being able to think of others first B. Being able to identify the best course of action C. Being able to identify an ethical situation D. Being able to react quickly
C
One of the Contributions of the Treadway Commission Report and the work of the Committee of Sponsoring Organizations (COSO) was: A. To establish a voluntary process for peer review B. To identify red flags that might lead to fraud C. To identify the tone at the top for management to create an ethical culture D. All of these
C
The 2011 National Business Ethics Survey indicates each of the following with respect to how employees view the ethics and ethical practices of organizations they work for except for: A. Misconduct at work has declined over the years B. Whistleblowing is up C. Ethical cultures are weaker D. Pressure to cut corners is lower
C
The Agency Theory can best be described as: A. The relationship between top management and the board of directors B. The relationship between the board of directors and shareholders C. The relationship between top management and the board of directors, and shareholders D. The relationship between the external auditors and top management
C
The Independence Principle in the AICPA Code applies to: A. All accountants and auditors B. All CPAs regardless of professional services C. All CPAs who render attestation services D. All members of the audit committee
C
The Public Interest Principle in the AICPA Code of Professional Conduct recognizes: A. The importance of integrity in decision making B. The importance of stakeholder groups C. The need to be independent of the client D. The importance of exercising objectivity in decision making
C
The ethical dilemma in the "Shifty Industries" case can best be described as whether to: A. Use tax depreciation for financial reporting issues B. Manipulating earnings to maximize net income C. Maximizing section 179 depreciation expense D. Minimizing depreciation expense to maximize net income
C
The ethical issue raised in the Beauda Medical Center case is similar to that in: A. ESM Government Securities B. PeopleSoft C. Fund of Funds D. Enron
C
The principle of ethical behavior in the AICPA Code that asks questions directly related to ethical courage is: A. Independence B. Objectivity C. Integrity D. Fraud prevention
C
The results of studies indicate that CPAs reason primarily at: A. Stages 1 and 2 B. Stages 2 and 3 C. Stages 3 and 4 D. Stages 4 and 5
C
The stakeholder view emphasizes the obligations of management to: A. The shareholders B. The shareholders and creditors C. All parties impacted by corporate decisions in a significant way D. The board of directors
C
The term disgorgement means: A. To give up one's meal after eating B. To return profits earned illegally C. To return ill-gotten gains D. To give up one's board position after a fraud incident
C
To avoid violating independence when engaged in nonattest services for an audit client, a CPA must: A. Make all management decisions and perform all management decisions B. Evaluate the adequacy and results of the services performed C. Avoid being biased when providing nonattest services for the audit client D. Avoid being pressured by the client when providing nonattest services for the audit client
C
To whom do the accounting codes of professional conduct (either the state board of public accountancy or AICPA) apply? A. Those CPAs in public accounting only. B. Those CPAs in industry, government, and education. C. Those CPAs in public accounting, industry, government, and education. D. Those CPAs in public accounting, doing auditing and taxation.
C
Ty is a rising star at Texas State Country & Western Stores. He is the controller of the company. His wife, Rosie, is the lead auditor of the CPA firm that examines Country & Western's financial statements and issues an audit opinion. Given the nature of the relationships, Rosie would violate what ethical standard if she is allowed to conduct the audit: A. Integrity B. Due care C. Independence D. Responsibility
C
Virtue ethics emphasizes development of good habits of character. What should be the greatest reward of practicing good habits of character, according to MacIntyre? A. External rewards B. Money C. Internal rewards D. Authority of rules
C
Wanda is faced with an ethical dilemma. She knows her supervisor, the CFO, wants to accelerate the recoding of revenue to an earlier period to "make the numbers," but Wanda is convinced this would violate GAAP. If Wanda reasons at stage 4 of Kohlberg's model she is most likely to: A. Make a decision based on what is in her own best interests B. Consider the interests of the stakeholders but decide based on what is in her best interests C. Refuse to record the transaction as desired by the CFO D. Inform the board of directors of the difference of opinion with the CFO
C
What are the fiduciary obligations of the board of directors? A. Maximize profits for the company and its shareholders B. Give excessive executive compensation C. Safeguard the organization's resources and interests of the company's stakeholders D. Allow high risk accounting practices
C
What are the four pillars of corporate governance? A. Respect, accountability, fairness and transparency. B. Responsibility, accountability, firmness and transparency. C. Responsibility, accountability, fairness and transparency. D. Respect, accountability, firmness and transparency.
C
What is the maximum amount of time an audit manager or partner may spend on nonattest services for an attest client? A. 20 hours B. 15 hours C. 10 hours D. 8 hours
C
What is the one virtue that people should want in a boss to trust the boss? A. Diligence B. Commitment C. Honesty D. Sense of humor
C
What should be the first step in decision making when faced with an ethical dilemma? A. Choose an ethical theory to follow B. Discuss with others your options C. Get the facts surrounding the problem D. Determine consequences
C
Which is a questionable ethical work behavior of an employee? A. Handing in all assignments on time. B. Taking time off without pay to attend to a family crisis. C. Using social media during the work day to update your Facebook page. D. Giving your best effort during work time.
C
Which of the following immediate family members or close relatives would not have to follow the independence rules that apply to the CPA according to Interpretation 101-1? A. CPA's spouse B. CPA's spousal equivalent C. CPA's uncle D. CPA's dependents
C
Which of the following is not used to overcome the agency problem? A. Executive compensation B. Audited financial statements C. Related party transactions D. Internal controls
C
Which of the following would be an example of due care? A. Audit documentation only supplied by the client. B. Audit documentation is a copy of last year's workpapers. C. Audit documentation obtained by the auditor with reviews by supervisory personnel. D. Audit documentation with misapplication of GAAP.
C
Why don't auditors prepare financial statements, as well as audit them? A. It would take away a job from the controller of the company. B. It would not eliminate errors in the financial statements. C. It would be a conflict of interest and violates ethical standards. D. It would streamline the process and be effective.
C
Your manager asks you to "cook the books" to support a loan application at the local bank. The manager insists it is a one-time request. If you are a person of integrity, what should you do? A. Go along with the manager's request B. Talk to others in the company to determine how they handled such situations C. Refuse to go along with the request D. Inform the audit committee
C
Yvonne is preparing a tax return for Jack. Jack wants to claim his nephew as a dependent even though he does not meet the criteria. Jack says if Yvonne does not list his nephew as a dependent, he will fire her and find a new tax accountant. Yvonne refuses because it is illegal to claim a dependent that does not meet the qualifications. Based on Yvonne's decision, she is likely reasoning in which stage of Kohlberg's moral development model? A. Stage 2 B. Stage 3 C. Stage 4 D. Stage 5
C
. In the Harvard Cheating Scandal case, using ethical reasoning who is at fault for situation? A. The professor B. Teaching assistants C. Students who cheated D. All of these
D
A unique aspect of Johnson & Johnson's Credo is that it: A. It is an aspirational statement rather than the typical "thou shalt not" form of a code of ethics B. It encourages employees to internalize the values of the company C. It follows a stakeholder approach to decision making D. All of these
D
Agency costs refer to: A. The costs incurred in monitoring managerial performance B. The costs incurred because there is information asymmetry between the corporation and outsiders C. The costs incurred because insiders know more about a company than do outsiders D. All of these
D
An important issue in the HP case with "event hostess" Jodie Fisher is: A. Conflict of interest of Mark Hurd B. Alleged sexual harassment of Jodi Fisher C. Disclosure of confidential client information by Hurd to Fisher D. All of these
D
Assume you are an ethical person and feel uncomfortable about the way your company is reporting earnings. You believe it is deliberately overstated. If you want to bring your concerns to upper management, in which person-organization fit is it most likely that you will do so? A. High organizational ethics, low individual ethics B. Low organizational ethics, high individual ethics C. Low organizational ethics, low individual ethics D. High organizational ethics, high individual ethics
D
Each of the following is a pillar of character according to the Josephson Institute except for: A. Caring B. Citizenship C. Respect D. Judgmental
D
Heinz stole the drug because: A. He loved his wife B. He couldn't come up with all the money to pay for it C. He was afraid his wife would die without the drug D. All of these
D
If a client refuses to accept an auditors' report that has been modified, the public accounting firm should withdraw from the engagement and give its reasons in writing to the board of directors except when: A. The auditor is unable to obtain sufficient appropriate evidence about a suspected illegal act B. The client fails to account for or disclose properly a material amount connected with an illegal act C. The auditor is unable to estimate amounts involved in an illegal act D. The auditor is unable to observe the physical inventory
D
Impairments of independence can occur when: A. A CPA owns a direct financial interest in a client B. A CPA owns a material indirect financial interest in a client C. Immediate family members of the CPA are in violation of the independence rules D. All of these
D
In Thorne's model of ethical decision making, the instrumental virtues relate to: A. Moral sensitivity B. Ethical reasoning C. Ethical motivation D. Ethical character
D
In the Amgen case, former employees, Shawn O'Brien and Kassie Westmoreland, sued the company for: A. Wrongful termination B. Fraudulent actions C. Discrimination D. Retaliation
D
In the Lee & Han, LLC case, Barbara Strom should: A. Report the situation to SEC under the Dodd-Frank Act. B. Change the audit workpapers to not reflect the market decline in inventory. C. Discuss the matter with Kate Boller. D. Report the situation to the firm's oversight or similar committee.
D
Individuals who reason at stage 6 incorporate ethical reasoning based on: A. The morality of law and duty to the social order B. A rational calculation of benefits and harms to society C. Universal ethical principles D. All of these
D
Integrity is measured in terms of what is right and just. What is a question that a CPA can ask to test decisions? A. Am I doing what another CPA would do? B. Am I serving the interests of my client? C. Am I protecting my self-interests? D. Have I retained my integrity?
D
James Doty, the chairman of the PCAOB, in his testimony before Congress on the financial crisis of 2007-2008, admitted that auditors should have been more vigilant—not just at Lehman Brothers, but across the board. Which audit areas did Doty signal out for criticism? A. Inventories and cash flow B. Capital and operating expenses C. Special purpose and related-party entities D. Valuations and end-of-period transactions
D
James Rest's model of ethical action involves four components inherent to the ethical decision-making process. Which of the following relates to a person's moral judgment? A. Interpreting a situation as a moral dilemma B. Willingness to place ethical values ahead of non-ethical values C. Intention to act ethically aligning to his values D. Outcome of one's prescriptive reasoning
D
Kevin Lowe's ethical dilemma in the Eating Time case can best be described as whether to: A. Date another staff member of the CPA firm B. Inform his supervisor about a lack of diligence of other staff accountants C. Quit his job because he can't meet the firm's expected quality of work D. Devote time on an audit and not charge it to the job
D
One concern in the Armadillo Foods case in the text of the chapter is: A. The failure of internal controls B. Pressure to go along with the misappropriation of assets C. The failure of the external auditors to catch fraud D. Pressure to meet financial analysts' earnings estimates
D
One of the duties of a board of directors is to protect the interests of stakeholders. Which of the following is an example of protecting such interests? A. Back dating options for executives B. Deceptive business practices C. Off balance sheet financing D. Transparent financial reporting
D
PricewaterhouseCoopers was investigated by the SEC for independence violations due to: A. Reporting systems that relied on self-reporting of violations B. Ownership of client stock C. Investments by PwC professionals in bank accounts of audit clients D. All of these
D
Rosie is the external auditor of Texas Two Steps, a privately-owned dance company in Texas. Rosie believes the owner of the company is skimming cash off the top. She approaches the owner who explains that the money will be replaced in the following month after he refinances his house. Rosie accepts the owner's explanation but reclassifies the expenditure as a receivable of the company from Rosie. Rosie's reasoning best reflects: A. Stage 1 B. Stage 2 C. Stage 3 D. Stage 4
D
Steve is deep in debt due to a gambling problem. He is the bookkeeper for a family-owned business, Cal Poly Greenery. The company has only three employees - Steve, the husband, and the wife. All three have been friends for many years. One day the loan shark who lent Steve $20,000 comes knocking at his door asking for repayment of the loan. Steve convinces the loan shark to give him another day. The following day Steve writes a check on the company's books to himself for $20,000. Since he reconciles the bank accounts and prepares the financial statements, Steve knows it's unlikely the owners will ever know about what he has done. From an ethical perspective, Steve has A. Violated the trust placed in him by the owners B. Risked his reputation if the owners find out C. Compromised his integrity D. All of these
D
The 2010 Dodd-Frank Act includes additional incentives for whistleblowers. What is the act's effect on whistleblowing by accountants? A. No accountant, internal or external, whether by job title or certification may receive a reward. B. All accountants who whistle-blow are protected against retaliation. C. Internal auditors who whistle-blow may receive a reward. D. A CPA may report a violation of a public accounting firm's performance in an audit.
D
The accounting issues at failed savings and loan institutions included: A. The failure to provide adequate allowances for loan losses B. The failure to disclose dubious deals between the S&Ls and some of its major customers C. The existence of inadequate controls to prevent inadequate allowances and control for dubious deals D. All of these
D
The actions of Sherron Watkins in the Enron case appears to reflect each of the following except for: A. Moral sensitivity B. Egoism C. Enlightened egoism D. Professional skepticism
D
The biggest problem in applying virtue theory to decision making is: A. It can be difficult to evaluate the effect of virtues on others in decision making B. It relies on moral absolutes in decision making C. It can be difficult to determine virtues to distinguish equals from unequal claims in decision making D. Conflicts between virtues may make decision making more difficult
D
The confidentiality standard in the AICPA code provides for exceptions to the rule in: A. In response to a validly issued court summons B. To provide information to the CPA's peer reviewers C. To defend oneself in an ethics investigation D. All of these
D
The country with the highest Power Distance score is A. United States B. United Kingdom C. Japan D. Russia
D
The ethical decision making model described in the chapter helps to: A. Organize the various elements of ethical reasoning and professional judgment B. Evaluate stakeholder interests using ethical reasoning C. Identify and select alternative courses of action D. All of these
D
The fiduciary duty of the board of directors includes all of the following except for: A. Safeguarding corporate assets B. Promoting shareholder interests C. Exercising care in carrying out their responsibilities D. Representing the interests of all stakeholders
D
The importance of framing the ethical issue in the decision making model is: A. Identify the stakeholders affected by intended actions B. Evaluating alternative courses of action using moral reasoning methods C. Identify the accounting issues present in a case D. Providing a perspective to apply the decision making model to specific facts of the case
D
The main accounting issue in the Juggyfroot case is: A. How to account for prepaid capacity B. How to account for and report special purpose entities C. How to account for inventory declines D. How to account for investments in marketable securities
D
The most important duty of public accounting is to the: A. Securities Exchange Commission B. Current stockholders C. Management D. Investing public
D
The noted researcher who studied how values in the workplace are influenced by culture is: A. Thomas Hobbes B. Jeremy Bentham C. Aristotle D. Geert Hofstede
D
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 A. Code of ethics B. Corporate sustainability C. Corporate responsibility D. Corporate governance
D
Thorne's "Integrated Model of Ethical Decision Making" can best be described as: A. A depiction of a model of moral development B. A depiction of how the Principles in the AICPA Code of Professional Conduct influences decision making C. A model of the role of virtue in decision making D. A model of the role of moral development and virtue in decision making
D
What are the implications of reasoning at stages 3 and 4? A. A CPA unable to apply technical accounting standards is unlikely to be influenced by others. B. A CPA is unlikely to be influenced by rules or authority. C. A CPA is unlikely to be influenced or give into pressures. D. A CPA unable to apply technical accounting standards is likely to be influenced by others.
D
What ethical rules are violated when a CPA auditing a client provides inside information about the client to a friend? A. Independence and objectivity B. Objectivity and due care C. Due care and confidentiality D. Confidentiality and integrity
D
What is the difference on contingent fees under the PCAOB rules versus the AICPA rules? A.Both rules allow contingent fees for an audit client if the contingency is based upon findings of government agencies. B. The AICPA prohibits contingent fees to an audit client. C. The PCAOB allows contingent fees for non-public company engagements. D. The PCAOB prohibits contingent fees in tax engagements performed for an audit client
D
When Sally is asked why she should share her toys with her sister, she responds by saying "Because my mom says I have to and if I don't I'll go to time-out." In which stage of moral development is Sally? A. Conventional Morality B. Fairness to Others C. Postconventional Morality D. Preconventional Morality
D
Which case in the text of the chapter illustrates the danger of a CPA accepting loans from an audit client? A. Tyco International B. Enron C. Adelphia D. ESM Government Securities
D
Which is not a permitted form of organization for a CPA practice? A. Sole proprietorship with name of sole proprietor B. Limited liability partnership C. Professional corporation D. Corporation
D
Which of the following relationships do not impair CPA-auditor independence? A. Financial relationships with the client B. Business relationships with the client C. Family relationships whereby an immediate family member holds a decision-making position with the client D. Relationships where a best friend serves in a financial reporting oversight role with the client
D
Which of the following services are allowed to be performed for an attest services client by Sarbanes Oxley Act? A. Financial information systems design and implementation B. Management functions or human resources C. Internal audit outsourcing services D. Pension plan audits
D
