Ethics Ch. 6

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

d. Is always lawful under the Foreign Corrupt Practices Act

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

d. Never permissible

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

a. A determination by an IRS Administrative Board

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

a. Ethical

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

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

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

a. Permissible always

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

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

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

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

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

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

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

b. Not jeopardized her professional license

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

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

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

b. She does not possess non-public information

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

b. Travel and Entertainment Expense

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

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

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

c. Definitely jeopardized her professional license

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

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

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

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

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

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

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

d. A bribe

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

d. A bribe

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

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

SOLUTION: A 20. Under insider trading rules applicable to publicly traded companies, an accountant is considered to be an "insider": a. Only if she Is a full-time accounting staff member of a company b. Only if she is an internal auditor of a company c. Only if she serves in a financial reporting oversight role d. Even if she is only temporarily on the company's premises as an external auditor

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

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

d. Ignore this discovery

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

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