Which of the following is not true of “reasonable assurance”?
A. The auditors have exercised due care
B. The audit opinion is a guarantee that material misstatements have been identified
C. The audit has been properly planned and supervised
D. The auditors have followed GAAS
Answer:
Each of the following elements make up an integral part of what is meant by “ethics”
except for:
A. Accepted standards of behavior
B. Knowing the difference between right and wrong
C. Always following the law
D. The moral point of view
Answer:
The House Subcommittee on Oversight and Investigations made its recommendations
after looking into failures at:
A. ESM Government Securities
B. Continental Illinois National Bank and Trust
C. Penn Square Bank
D. All of these
Answer:
Henry is the chief accounting office of XYZ Co. He believes the financial statements
are accurate but he has been asked by the CFO to accelerate the recording of revenue at
the end of the year to push a material amount that should be reported next year into the
current year. If Henry is an ethical accountant he should react by:
A. Going along with the request as a one-time concession to the CFO
B. Refuse to go along with the request and report the matter to the board of directors
C. Discuss the matter with the CEO
D. Firing the CFO
Answer:
The IRS whistleblowing Case deals with
A. Ethics of retaliation
B. Professional whistleblowing for gain
C. Revenge whistleblowing
D. Ethics of whistleblowing
Answer:
What was the original motivation by FASB on SPEs?
A. To establish a mechanism to encourage companies to invest in needed assets while
keeping related debt of its books
B. To keep the large amount of debt off the books
C. To sell non-producing assets to the SPE
D. To select which assets to sell to the SPEs affecting the gain
Answer:
A common requirement/effect of the commissions and contingent fees rule is:
A. A CPA who accepts such a payment always violates independence
B. The CPA must disclose the acceptance of such a payment to the client
C. A CPA is prohibited from accepting such a form of payment when engaged in attest
services for a client
D. All of these
Answer:
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
Answer:
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
Answer:
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
Answer:
Which of the following would normally be considered sufficient to demonstrate due
care on the part of the auditor?
A. The auditor had its work reviewed by another audit firm
B. The auditor cites adherence to generally accepted auditing standards (GAAS)
C. No omissions or misstatements have been found in the client’s financial statements
D. The auditor signs a statement expressing its unmodified opinion as to the fairness of
the financial statements
Answer:
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
Answer:
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
Answer:
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
Answer:
In the Faulty Budget case, the primary ethical issue can be stated as:
A. Whether an accountant should admit to a mistake once he has discovered it
B. Whether an accountant should be given a poor performance review because of a
mistake
C. Whether an accountant should follow the advice of a friend in resolving an ethical
dilemma
D. Whether an accountant should inform the external auditors about a problem with the
budget
Answer:
The CPA firm that became involved in tax shelter controversies with the IRS was:
A. Ernst & Young
B. Deloitte & Touche
C. PricewaterhouseCoopers
D. KPMG
Answer:
In the Lone Star School District case, the auditors were mostly concerned about:
A. The behavior of a staff member toward client personnel
B. The falsification of the financial statements
C. The lack of independence of the audit team
D. The lack of documentation for travel and entertainment expenses
Answer:
“Do that action which will bring about the greatest good for the greatest number of
people,” is the basic concept of which ethical theory?
A. egoism
B. deontology
C. utilitarianism
D. virtue ethics
Answer:
The 2012 Global Fraud Survey conducted by the ACFE identifies each of the following
efforts to combat global fraud except for:
A. Evaluate the legal and regulatory enforcement environment
B. Assess risks to the company’s business, brand, and reputation
C. Create a level of independence from accountants and auditors so fraud can be more
easily detected
D. Educate the workforce about the risks of wrongdoing
Answer:
According to the 2012 Global fraud Study of the ACFE, the most common method of
initial detection of occupational fraud is:
A. Internal audit
B. Management review
C. External audit
D. Tip
Answer:
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
Answer:
In the SEC v. Siemens Aktiengesellschaft case, each of the following charges were
made against the company’s’ Managing Board except for:
A. The Board failed to ensure that Siemens met the U.S. regulatory and anti-bribery
provisions of the Foreign Corrupt Practices Act
B. The Board failed to meet its obligations with respect to compliance procedures at
Siemens
C. The Board failed to adequately supervise the auditors of Siemens
D. The Board created a corporate culture that contributed toward tolerating and even
rewarding bribery
Answer:
The first step for an auditor who concludes an illegal act exists is to:
A. Bring the matter to the attention of the audit committee
B. Bring the matter to the attention of the SEC
C. Assess the impact of the illegal act on the financial statements
D. Assess the impact of the illegal act on the auditor’s opinion
Answer:
An audit engagement letter
A. Offers an auditor’s services to a client
B. Is required by generally accepted auditing standards (GAAS)
C. Details the SEC’s expectations for the audit firm for a specific engagement
D. Formalizes the relationship between the auditor and the client for a specific
engagement
Answer:
Treating other fairly encompasses treating them:
A. Equally, impartially, and responsibly
B. Equally, responsibly, and openly
C. Impartially, openly, and diligently
D. Equally, impartially, and openly
Answer:
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
Answer:
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
Answer:
Which Act requires firms who engaged in international operations to have internal
controls and an audit committee?
A. The Foreign Corrupt Practices Act of 1977
B. The Foreign Exchange Regulation Act of 1973
C. The Foreign Exchange Management Act of 1999
D. The Foreign Management Practices Act of 1977
Answer:
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
Answer:
The North Face case deals with materiality and how auditors employ that metric in an
audit. The following are all true except:
A. North Face accounted for barter transactions with full normal margin recognized.
B. Crawford devised the 1997 barter transaction so that it was just beneath material
threshold.
C. Crawford followed the GAAP methods that Deloitte suggested.
Answer: