Each of the following is a pillar of corporate governance except for:
A. Responsibility
B. Accountability
C. Fairness
D. Independence
Answer:
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
Answer:
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
Answer:
The main issue in the Reneging on a Promise case is:
A. Should the student who accepted an offer from one CPA firm back off from that
promise in order to accept the offer of another firm deemed more preferable to the
student
B. Should Regas back off from the dating relationship she developed with Giles
C. Should the CPA firm renege on its offer of employment to a student after realizing it
made one offer too many to student candidates for staff positions
D. Should Tybell quit the firm because of conflicts with his superiors
Answer:
PCAOB Auditing Standard No.16 require the auditor to communicate with the audit
committee all but?
A. Significant accounting policies and practices
B. Critical accounting practices and policies
C. Significant unusual transactions
D. The procedures followed by the auditor in evaluating evidence
Answer:
Auditors are responsible to detect and correct errors when they are:
A. Material
B. Material or immaterial
C. Due to an illegal act
D. Management fails to correct for the error
Answer:
Under the Securities Act of 1933, if damages were incurred and there was a material
misstatement or omission in the financial statements, the CPA will most likely lose the
lawsuit unless
A. The management intentionally deceived the auditors
B. The damages were incurred to a third party that was not a signatory to the contract
C. The CPA can shift the burden of proof to the investors
D. The CPA rebuts the allegations
Answer:
The Dunco Industries case deals with issues related to:
A. The timing of revenue recognition and shipping date of merchandise
B. The timing of revenue recognition and delivery date of merchandise
C. The timing of expense recognition on accrual accounts
D. Manual entries after the quarter’s close that lacked sufficient supporting
documentation
Answer:
Objectivity requires that a CPA should:
A. Maintain a mental attitude of impartiality
B. Maintain a mental attitude of intellectual honesty
C. Be free of conflicts of interest
D. All of these
Answer:
The relationship between legal and ethical is that
A. Ethical always follow the law
B. Ethical requires less than legal
C. Legal and ethical are the same thing
D. Ethical behavior requires us to do more than required by the law and less than the
law allows
Answer:
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
Answer:
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
Answer:
In which of the following circumstances would a qualified opinion be appropriate?
A. The statements are not in conformity with generally accepted accounting principles
regarding stock options plans and but does not have pervasive effect on the financial
statements.
B. The statements are not in conformity with generally accepted accounting principles
regarding stock options plans and has pervasive effect on the financial statements.
C. The auditor has been unable to obtain sufficient competent evidential matter.
D. The principal auditors decide to withdraw from the engagement due to distrust of
management.
Answer:
A member body of the International Federation of Accountants (IFAC) should follow
the provisions of the home country’s code of ethics rather than the Code of Ethics for
Professional Accountants (IFAC Code) when:
A. The home country standards of the member body are more stringent than those in
the IFAC Code.
B. The member body disagrees with IFAC Code provisions.
C. The home country standards of the member body are less strict than those in the
IFAC Code.
D. All of these.
Answer:
A reason that Bernie Madoff was able to pull off the Ponzi scheme for so long was:
A. He was trusted by those who invested with him
B. The SEC failed to act on tips about Madoff’s questionable practices
C. The auditors either looked the other way or didn’t look too hard to find the fraud
D. All of these.
Answer:
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
Answer:
All of the following are examples of “Boosting Income with One-Time Gains” except
for:
A. Recording sales that lack economic substance
B. Boosting profits by selling undervalued assets
C. Including investment income or gains as part of revenue
D. Including investment income or gains as a reduction in operating expenses
Answer:
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
Answer:
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
Answer:
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
Answer:
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.
Answer:
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
Answer:
The Serious Frauds Office in the UK identified each of the following as a “red flag”
indicating corruption may exist except for:
A. Abnormal cash payments
B. Payments made through a third-party country
C. Payments made behind schedule
D. Agreeing to contracts not favorable to the organization
Answer:
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
Answer:
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
Answer:
A unique aspect of the DHB (Point Blank Solutions) case is that it deals with
A. The complicity of outside directors and audit committee members in the fraud
B. A modified audit report that did not go far enough in identifying material
weaknesses in the internal controls
C. Enforcement powers under Dodd-Frank
D. All of these
Answer:
The difference between an error in the financial statements as compared to fraud is:
A. An error is always an intentional act designed to deceive another party
B. Fraud is always an intentional act designed to deceive another party
C. An error always leads to a qualification of the auditors’ opinion
D. Fraudulent financial reporting is always material in amount
Answer:
The Insider Trading and Accounting Professionals case deals with
A. Whether insider trading is legal by an employee of a CPA firm not working on the
audit of a client
B. Whether tipping a fellow employee in a CPA firm to inside information about an
audit client is legal
C. Whether a partner with no involvement in an audit client can own stock of that
client
D. All of these
Answer:
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
Answer:
The expectations gap refers to:
A. The space that exists between a train coming into the station and the platform used
to board the train
B. The difference between what the public expects an audit to uncover and what the
profession believes is the purpose of an audit
C. The difference between projected earnings based on analysts’ expectations and
actually earnings
D. The difference between what the audit sets out to discover and what it actually does
discover
Answer:
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
Answer:
Backdating options refers to:
A. Crossing out the date of exercise on the option certificate and changing it to an
earlier date when the stock price was lower
B. Changing the grant date of the options to lower the exercise price and reduce
reported earnings
C. Granting options to employees working for the company in years prior to the
granting of the options
D. Changing the future exercise price to correspond market increases in the stock price
Answer:
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
Answer:
The biggest problem in implementing a rights approach to decision making is:
A. The interests of others may be subservient to self-interests
B. It is difficult to weigh harms and benefits
C. It relies on moral absolutes
D. It can be difficult to determine criteria to distinguish equals from unequal claims
Answer:
The swap transactions used in the Solutions Network case to manage earnings can best
be described as:
A. Going to a swap meet and capitalizing purchases instead of expensing them
immediately against swap revenue
B. Recording revenue on software systems transactions in an earlier period than when
obligated to buy the same in a later period
C. Using a cookie jar reserve to delay the recording of revenue into a later period
D. Recording as operating revenue on onetime gains from the sale of underperforming
assets
Answer: