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CPAs can advertise and solicit clients as long as such practices are:
A. Conducted in a professional manner
B. Informative about the CPA's services
C. Not conducted in a misleading or deceptive manner
D. Paid for by outside parties
Answer:
In performing risk assessment the auditor should identify the following types of
misstatements:
A. Known and unknown misstatements
B. Likely and unknown misstatements
C. Known and likely misstatements
D. All material misstatements
Answer:
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
Answer:
All of the following are examples of "Recording revenue too soon or of questionable
quality" except for:
A. Recording sales that lack economic substance.
B. Recording revenue when future services remain to be provided.
C. Recording revenue before shipment or before the customer's unconditional
acceptance.
D. Recording revenue even though the customer is not obligated to pay.
Answer:
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:
A. High-High
B. High-Low
C. Low-High
D. Low-Low
Answer:
The basic ethical principle violated by Andy Fastow in his role as Enron's CFO and
involvement with SPEs was:
A. He lied to top management about what he was doing for the SPEs
B. He failed to exercise due care in setting up SPEs
C. He had a conflict of interests in his dual roles
D. All of these
Answer:
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
Answer:
Susie is an auditor with XYZ Audit firm. The Senior Audit member has told her that all
fieldwork must be completed by the end of the week. Susie knows that corners have
been cut and certain tests not completed due to the time constraints. The integrity of the
firm could be compromised. What should Susie do?
A. Do nothing.
B. Talk with the chain of command of the client to see that her concerns are dealt with.
C. Follow the chain of command of XYZ to see that her concerns are dealt with.
D. Talk with a reporter from the Wall Street Journal.
Answer:
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
Answer:
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
Answer:
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
Answer:
Which of the following is not one of the reporting standards of GAAS that guides
auditors in formulating the audit opinion?
A. The financial statements have followed GAAP.
B. Consistency in the application of GAAP.
C. Adequate disclosures exist in the statements.
D. Gathering sufficient audit evidence to warrant an opinion.
Answer:
To whom does the management owe its ultimate allegiance?
A. Employees
B. Creditors
C. Shareholders
D. Government
Answer:
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
Answer:
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
Answer:
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
Answer:
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
Answer:
Under the rules of the Sarbanes-Oxley Act of 2002, who must certify the public reports
filed with the SEC?
A. The independent auditor
B. The CEO
C. The CEO and CFO
D. The CFO
Answer:
A seemingly positive result of the 2011 National Business Ethics Survey is:
A. The percentage of employees who had reported misconduct at work is increasing
B. Pressure to compromise ethical standards has been decreasing
C. The rate of retaliation against whistleblowers has been decreasing
D. The percentage of employees who said they could question management without
fear of retaliation is decreasing
Answer:
In surveys of managers, which technique to manage earnings was considered most
acceptable?
A. Changing inventory valuation in order to influence earnings
B. Accounting manipulation
C. Manipulating operating decisions
D. Establishing cookie jar reserves
Answer:
In the Gee Wiz case, the main ethical issue was:
A. Independence of David in providing tax services to an audit client
B. Confidentiality in disclosing sensitive information about a client of the CPA firm
C. Integrity in providing tax services to an audit client through her own entity
D. Whistleblowing on a client
Answer:
The Autonomy case deals with which of the following accounting issues:
A. Valuation of the British software company
B. Secret reserves
C. Fraud committed by KPMG
D. All of these
Answer:
Under which of the following set of circumstances might the auditors disclaim an
opinion?
A. The financial statements contain a departure from generally accepted accounting
principles, the effect of which is material
B. The auditor is unable to obtain sufficient appropriate audit evidence on which to
base the opinion
C. There has been a material change between periods in the method of the application
of accounting principles
D. Differences with management that lead to trust issues on the part of the auditor
Answer:
The 2012 Global Fraud Survey of the ACFE points to the need for management to
"walk the talk" of ethics by:
A. Clearly demonstrating that noncompliance will lead to firing of the guilty employee
B. Treat different offenses the same to develop consistency in policies
C. Encourage whistleblowing to provide a mechanism to report wrongdoing
D. Being consistent for particular offenses to avoid the appearance of selective
enforcement
Answer:
The CIMA Code of Ethics identifies the following common threats to the fundamental
principles of professional behavior except for:
A. Self-motivated threat
B. Self-interest threat
C. Familiarity threat
D. Intimidation threat
Answer:
Which technique was used by both WorldCom and Waste Management to manage
earnings?
A. Manipulating asset net valuation amounts to minimize operating expenses for a
period
B. Accelerating the recording of revenue into an earlier period
C. Delaying needed repairs to a later period
D. All of these were used
Answer:
The auditor's responsibility with regard to illegal acts is greatest when:
A. The illegal acts have an indirect and material effect on financial statement amounts
B. The illegal acts have a direct and material effect on financial statement amounts
C. The illegal acts have a direct and immaterial effect on financial statement amounts
D. Illegal acts exist regardless of the effects on the financial statements
Answer:
When an employee is given a job evaluation, he has a right to expect
A. Fair, but honest evaluations
B. Glowing reports
C. 360 degree evaluations from everyone in the firm
D. Evaluations of technical, not personal skills
Answer:
The legal precedent that evolves from legal opinions issued by judges in deciding a case
and guides judges in deciding similar cases in the future is referred to as:
A. Business law
B. Tort law
C. Common law
D. Statutory law
Answer:
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
Answer:
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
Answer:
An ethical dilemma for professional accountants is when a conflict exists between each
of the following except for:
A. The auditor and client
B. Different accounting members of management
C. The CEO and board of directors
D. All of these
Answer:
