The philosophical belief that you should judge the result, not the action (end justifies
the means) is?
A. Utilitarianism
B. Deontology
C. Justice
D. Virtue ethics
Answer:
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
Answer:
Which of the following earnings management techniques were not used in the Lucent
Technologies, Inc.’s case?
A. Shifting Current Revenue to a later period
B. Boosting income with one-time gains
C. Recording revenue too soon or of questionable quality
D. Shifting current expenses to a later or earlier period
Answer:
The International Federation of Accountants (IFAC) research report, Rebuilding Public
Confidence in Financial Reporting: An International Perspective, has as its goal which
of the following:
A. Creating an international CPA certificate
B. Examine ways of restoring the credibility of financial reporting and corporate
disclosure from an international perspective
C. Establishing a global code of conduct
D. All of these
Answer:
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
Answer:
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.?
A. Community member who has already served on the board 15 years.
B. Investor who has a multi-million dollar joint venture with the CEO and CFO.
C. Retired controller of a Fortune 1000 company.
D. Community member who receives annual large consulting contracts from XYZ.
Answer:
Teleology deals with
A. Consequences of actions
B. Fairness to others
C. Respecting the rights of others
D. Following prescribed virtue characteristics
Answer:
Whistleblowing as a result of a financial fraud may be appropriate under
A. State laws such as state board of accountancy rules
B. Federal laws such as Dodd-Frank
C. AICPA rules
D. All of these
Answer:
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
Answer:
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
Answer:
Deliberately underbidding for an audit engagement to obtain a client and secure more
lucrative management advisory or consulting services is known as?
A. Opinion shopping
B. High-balling
C. Low-balling
D. Client shopping
Answer:
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
Answer:
The misappropriation of assets refers to:
A. The deliberate use of company assets for personal reasons
B. The deliberate overstatement of financial statements
C. The deliberate omission of disclosures from the statements
D. All of these
Answer:
One way to characterize the term “true and fair view is” that it:
A. It is used to determine which international auditing standards should be used
B. It is used to assess whether the entity has met the comply or explain provisions in
corporate governance codes
C. It is a governing criterion by which financial statements are to be judged
D. All of these
Answer:
Which of the following author(s) define(s) earnings management as “reasonable and
legal management decision making and reporting intended to achieve stable and
predictable financial results.”?
A. Dechow and Skinner
B. Healy and Wahlen
C. Schipper
D. Thomas E. McKee
Answer:
In the Sweat Construction case, the company tried to manipulate earnings through the
use of which accounting technique
A. Cookie jar reserves
B. Lease capitalization
C. Percentage of completion method
D. The Big Bath accounting
Answer:
“Earnings management either ignores or does not consider the rights of the investors
and creditors to receive accurate, reliable and transparent financial statements.” This
statement is from:
A. A virtue perspective
B. A utilitarian perspective
C. A rights perspective
D. A materiality perspective
Answer:
SAS No. 107 identifies the following aspects of disclosure amounts deemed to be
material except for:
A. Disclosing an item in one year but not in the next year
B. Qualitative aspects of the disclosure
C. Quantitative significance of the disclosure
D. Professional judgment
Answer:
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
Answer:
The comply or explain principle refers to:
A. Certification of financial statements by CEOs and CFOs
B. Explain any gaps between existing corporate governance practices and
recommendations by authoritative bodies/pronouncements and actual governance
policies
C. Explain any gaps between existing corporate governance practices and IFRS
requirements
D. Certification of corporate governance practices by CEOs and CFOs
Answer:
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
Answer:
Secret reserves are designed to conceal the true financial position and earnings, which
are different than shown on the balance sheet and income statement. The best statement
of how secret reserves are related to fraud and ethics is:
A. Secret reserves often lead to smoothing net income over time.
B. Secret reserves make the information in financial statements inconsistent.
C. Secret reserves are legal and normal operating practices in all countries around the
world.
Answer:
The ethical issue in the Telecommunications case can best be described as:
A. Is a payment to a foreign government official to grease the wheels for the delivery
of imported goods a violation of the Foreign Corrupt Practices Act
B. Is a bribe to a foreign government official to win a competitively bid contract a
violation of the Foreign Corrupt Practices Act
C. Is it a conflict of interests for employees to accept payments or other gifts when they
are involved in the decision or execution of a contract for the party making the payment
or gift
D. Is it a conflict of interest for a member of management to make a decision on
awarding a contract to one company when that person has a relative working for the
company
Answer:
The SEC is now calling the movement of U.S. GAAP to IFRS:
A. Comparability
B. Condorsement
C. Convergence
D. Conversion
Answer:
Mintz and Morris, both of whom are CPAs, became partners in a tax preparation
business in San Marcos, Texas. Which of the following ethics standards must be
followed by the two partners?
A. Ethics laws and regulations of the Texas Board of Accountancy
B. Ethics rules of the AICPA
C. Ethics rules of the Texas Society of CPAs
D. All of these
Answer:
Inherent risk refers to:
A. The possibility that a material misstatement will occur within the reporting
company’s accounting information system
B. The possibility that a material misstatement that has occurred will not be detected on
a timely basis by the company’s control system
C. The possibility that a material misstatement that has occurred will not be caught be
the independent auditor’s testing
D. The possibility that a material misstatement will occur in the financial statements
Answer:
The main focus of the Con-Way case is the company’s:
A. Bribery of Philippine customs officials
B. Payments to foreign officials at state-owned airlines doing business in the
Philippines
C. Failure to properly record and disclose illicit payments to Philippine customs
officials and officials at state-owned airlines doing business in the Philippines
D. All of these
Answer:
In the NYC Subway Death case, the reason that no bystanders helped Ki-Suck Han was
probably due to:
A. Moral blindness and ethical fading
B. Bystander effect and moral blindness
C. Blind spot and moral blindness
D. Ethical fading and bystander effect
Answer:
Which of the following was not true according to the Enron case?
A. Fastow developed the concept of buying up oil and gas companies to establish SPEs
B. Fastow worked to structure ventures that met the conditions under GAAP to keep
the partnership activities off Enron’s books and on the separate books of the partnership
C. Fastow created SPEs that borrowed money from banks and transferred it to Enron in
a sale of an operating asset no longer need by Enron
D. The SPE created by Fastow enabled Enron to keep debt off its books while
benefiting from transfer and use of the cash borrowed by the SPE
Answer:
The main accounting issues in the Nortel Networks case were:
A. Premature revenue recognition and hidden cash reserves
B. Capitalization of operating expenses and hidden cash reserves
C. Premature revenue recognition and off-balance-sheet entities
D. Capitalization of operating expenses and off-balance-sheet entities
Answer:
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
Answer: