In the Bhopal case, in evaluating its exposure to possible future liability due to
technology failures, Union Carbide used which of the following concepts:
A. Professional skepticism
B. Business risk
C. Cost-benefit analysis
D. Rights Theory
Answer:
Respect is an important character of behavior because:
A. It entails a loyalty obligation to one’s superior
B. It enables one to perform professional services competently
C. It is critical to maintaining one’s integrity
D. It encompasses attributes of how we should treat others
Answer:
In the Giles and Regas case, the primary ethical issue can be stated as:
A. Whether a subordinate should blow the whistle on a superior who has violated
ethical policy
B. Whether two staff members of the same rank should be allowed to date
C. Whether a superior should become involved in a dating relationship with a
subordinate
D. Whether a student should renege on the acceptance of an offer from one firm after
receiving an offer from a second firm
Answer:
Which of the following was not a technique used by Enron to manage earnings?
A. Used reserves to increase earnings when reported amounts were too low.
B. Deliberately over stated the allowance for uncollectibles and adjusted it downward
in future years
C. Used mark-to-market estimates to inflate earnings in violation of GAAP
D. Selected which operating assets to ‘sell” to the SPEs, affecting the gain on transfer
and earnings effect.
Answer:
Which of the following situations of a CPA’s distant relatives does not impair the CPA’s
independence?
A. CPA’s parent holds a key position with an audit client.
B. CPA’s nephew is starting as a salesperson with an audit client.
C. CPA’s dependent roommate owns a material interest, and sits on the board, of an
audit client.
D. CPA’s sister is chief counsel for an audit client.
Answer:
The motive of “duty” is most associated with.
A. Egoism
B. Deontology
C. Utilitarianism
D. Justice
Answer:
The Diamond Foods case addresses each of the following issues except for:
A. Crop payable recorded in the wrong year
B. Increasing revenues but stagnating cash flows
C. Depreciation of almond trees
D. Clawbacks of stock and cash
Answer:
There are several aspects of Enron fraud that are dealt with directly in SOX further
connecting Enron to reform in the accounting profession. Which of the following is
true?
A. SOX permitted the provision of internal audit service for audit clients
B. Off-balance-sheet financing activities were prohibited for all companies
C. Related-party transactions require disclosure in the notes
D. All of these
Answer:
Your manager asks you to “cook the books” to support a loan application at the local
bank. The manager insists it is a one-time request. If you are a person of integrity, what
should you do?
A. Go along with the manager’s request
B. Talk to others in the company to determine how they handled such situations
C. Refuse to go along with the request
D. Inform the audit committee
Answer:
The seven signs of a pending ethical collapse include all but:
A. Pressure to make numbers
B. Whistleblowing hotline
C. Bigger than life CEO
D. Doing good in the community
Answer:
A distinguishing characteristic(s) of corporate governance in India is the importance of:
A. Some government ownership of Indian entities
B. Family ownership of Indian entities
C. A large industrial group may own shares in an Indian entity
D. All of these
Answer:
According to the 2012 Global Fraud Study of the ACFE, which fraud scheme posed the
greatest risks to organizations throughout the world:
A. Corruption and billing schemes
B. Improper use of social media
C. Illegal facilitating payments
D. Economic extortion
Answer:
To ensure audit committee independence, the committee should meet separately with
each of the following groups except for:
A. Senior executives
B. Internal auditors
C. External auditors
D. The audit committee should meet separately with all of these
Answer:
The importance of framing the ethical issue in the decision making model is:
A. Identify the stakeholders affected by intended actions
B. Evaluating alternative courses of action using moral reasoning methods
C. Identify the accounting issues present in a case
D. Providing a perspective to apply the decision making model to specific facts of the
case
Answer:
The due care principle in the AICPA code:
A. Addresses the quality of the individual who performs professional services
B. Addresses the quality of services performed by the CPA
C. Addresses whether the independence standards has been met
D. All of these
Answer:
Financial statement fraud includes all but:
A. Overstating revenues.
B. Understating expenses.
C. Overstating warranties on new product.
D. Improper asset valuations.
Answer:
The 2010 Dodd-Frank Act includes additional incentives for whistleblowers. What is
the act’s effect on whistleblowing by accountants?
A. No accountant, internal or external, whether by job title or certification may receive
a reward.
B. All accountants who whistle-blow are protected against retaliation.
C. Internal auditors who whistle-blow may receive a reward.
D. A CPA may report a violation of a public accounting firm’s performance in an audit.
Answer:
The Restatement (Second) of Torts Approach
A. Expands an accountant’s legal liability to third parties identified by the client as
intended recipients of work
B. Limits an accountant’s legal liability to only those parties with which it has a privity
relationship
C. Limits an accountant’s legal liability to only those parties that have been named by
the client
D. Expands an accountant’s legal liability to all possible users of the audited financial
statements
Answer:
Michael Trent Reznor, the lead singer in the band Nine Inch Nails, filed a lawsuit
against Richard Szekelyi and the Navigent Group in the Reznor v. JAM, Inc. case
alleging:
A. Negligence, breach of fiduciary duty, and aiding and abetting fraud
B. Fraudulent financial statements were prepared by the accountants
C. The auditors failed to discover material misstatements in the financial statements
D. All of these
Answer:
Congress passed the “Sarbanes-Oxley Act” on July 30, 2002. Which of the following is
NOT true?
A. All companies are required to include in their annual reports a report of
management on the company’s internal control over financial reporting.
B. New audit standards include a prohibition against independent auditors providing
many non-audit services and mandatory audit engagement partner rotation.
C. Only U.S. companies are subject to the disclosure requirements of the Act.
D. All public companies must change auditors every ten years.
Answer:
The primary ethical issue in United Thermostatic Controls is:
A. Misappropriation of corporate assets
B. Accelerating the recording of revenue into an earlier period
C. Delaying the recording of expenses into a later period
D. Failure to fully disclose all information
Answer:
Lease standards in the U.S. can be manipulated to achieve the desired goal of:
A. Determining lease payments at their present values to record an asset instead of an
expense
B. Determining lease payments at their present values to record an expense instead of
an asset
C. Emphasizing form over substance
D. All of these
Answer:
The Act that enables a whistleblower to receive compensation for blowing the whistle if
the claims are deemed to be valid and the individual is not precluded from receiving
such an award is:
A. The Sarbanes-Oxley Act
B. The Foreign Corrupt Practices Act
C. The Private Securities Litigation Reform Act
D. The Dodd-Frank Financial Reform Act
Answer:
When making a donation at the local Goodwill, Martha tells the clerk that her old
computer is in perfect working order when she knows it is not, just so she can deduct
more on her taxes. Which theory best describes Martha’s behavior?
A. Utilitarianism
B. Deontology
C. Egoism
D. Justice
Answer:
One failure with respect to the internal controls at Tyco and Adelphia was:
A. Falsification of bank statement balances
B. Top executives manipulated financial statement amounts
C. Top executives used hundreds of millions of dollars from interest-free loans for
personal purposes
D. Top management engaged in a Ponzi scheme
Answer:
The requirement that there should be reasonable support for a tax return position before
a CPA recommends it to a client most directly aligns with which tax standard:
A. The tax return should not be based on a frivolous position
B. There is a realistic possibility of success if the tax position is challenged
C. It is more likely than not that the tax position will be upheld if challenged
D. Contingent fees cannot be accepted when providing tax services for an audit client
Answer:
Which of the following is not part of the fraud triangle?
A. Incentives
B. Opportunity
C. Materiality
D. Rationalization
Answer:
Statement on Standards for Tax Services No. 1 establishes as a basic principle of
providing tax services that the CPA:
A. Must have a good faith belief that the tax return position can be justified if
challenged
B. Must have a good faith belief that the information provided by the client is accurate
C. Can never recommend a tax position to the client when it is frivolous
D. All of these
Answer:
The ethical domain in accounting and auditing refers to:
A. The important constituent groups affected by accounting and auditing work
B. The stages of the moral development of accountants and auditors
C. The decision making process followed by accountants and auditors
D. All of these
Answer:
Which is a questionable ethical work behavior of an employee?
A. Handing in all assignments on time.
B. Taking time off without pay to attend to a family crisis.
C. Using social media during the work day to update your Facebook page.
D. Giving your best effort during work time.
Answer:
In the Pinto case, Ford relied on which approaches to ethical reasoning to decide on a
course of action with respect to the faulty gas tank placement:
A. Egoism and utilitarianism
B. Enlightened egoism and rights theory
C. Ethical legalism and utilitarianism
D. Justice and rights theory
Answer:
The auditors’ determination of whether the financial statements “present fairly” is based
on:
A. Whether the users are able to assess the reliability of the financial statements
B. Whether the statements have been prepared in accordance with the same GAAP
used from one year to another
C. Whether the auditor has been able to gather sufficient evidence to warrant the
statement that the financial statements present fairly
D. Whether the accounting principles used are appropriate in the circumstances
Answer:
In the Phar-Mor case, Pat Finn’s actions reflect ethical reasoning at what stage?
A. Stage 1
B. Stage 2
C. Stage 3
D. Stage 4
Answer:
Vorhies identities four perspectives to help CPAs identify key internal control
exceptions under the Sarbanes Oxley Act including:
A. An internal control deficiency caused by accounting manipulations
B. A large variance in an accounting estimate compared with the actual determined
amount
C. A misstatement that changes a loss into income or vice versa
D. All were identified
Answer: