A unique aspect of occupational fraud is:
A. The misuse of company assets
B. The falsification of financial statements
C. The failure to disclose full and complete information
D. All of these
Answer:
A similarity between the Bernie Madoff situation and that of R. Allen Stanford is they
both were:
A. The head of a major U.S. stock exchange
B. The CEO of a company that went out of business after a major financial statement
fraud
C. Involved in Ponzi schemes
D. Exonerated in a trial because of lack of evidence of wrongdoing
Answer:
The difference between an auditor’s services regarding reports 10Q and 10K is
A. The auditor provides “limited assurance” regarding 10Q and “reasonable assurance”
regarding 10K
B. The auditor provides “reasonable assurance” regarding 10Q and “limited assurance”
regarding 10K
C. The auditor provides no assurance regarding 10Q and “limited assurance” regarding
10K
D. The auditor provides “limited assurance” regarding 10Q and “absolute assurance”
regarding 10K
Answer:
Which of the following author(s) emphasize(s) a “purposeful act by management in
pursuit of its own self-interests as might be the case when earnings are manipulated to
get the stock price up in advance of the exercise of stock options.”?
A. Dechow and Skinner
B. Healy and Wahlen
C. Schipper
D. Thomas E. McKee
Answer:
The ethical issue raised in the Beauda Medical Center case is similar to that in:
A. ESM Government Securities
B. PeopleSoft
C. Fund of Funds
D. Enron
Answer:
What is the motive behind the PCAOB Integrated Audit Concept?
A. Elevation of importance of internal controls
B. Improvement of the quality and integrity of both internal controls over financial
reporting and independent financial statement audits
C. Improvement of the speed and reliability of both corporate financial reporting and
independent financial statement audits
D. Elevation of importance of independent financial statement audits
Answer:
The SEC attempts to control insider trading in part by:
A. Prohibiting officers and directors from buying stock of the company they work
for/oversee
B. Prohibiting shareholders from buying stock of affiliated companies
C. Requiring officers, directors, and shareholders owning 10 percent of the class of
equity securities registered with the SEC to file reports concerning their ownership and
trading of the corporations securities
D. All of these
Answer:
The best way to minimize the penalty imposed on an organization under the Federal
Sentencing Guidelines is to
A. Have a chief ethics officer oversee the company’s compliance with FSGFO
B. Have a code of conduct
C. Have an effective ethics and compliance program
D. Have an external audit of the organization’s financial statements
Answer:
Which of the following partnership that Enron created eventually lead to its demise?
A. JEDI
B. Cactus
C. Chewco
D. Ironman
Answer:
The main difference between a discretionary and nondiscretionary accrual is:
A. Discretionary accruals are items that management has full control over
B. Discretionary accruals are based on changes in the fundamental performance of the
firm
C. Discretionary accruals arise from transactions considered normal for the firm
D. Discretionary accruals always lead to an increase in earnings
Answer:
The Solway case looks at the accounting issue of:
A. Recording of accruals to manage earnings
B. Recording of asset impairments to manage earnings
C. Premature revenue recognition
D. Setting up SPEs
Answer:
Agency costs refer to:
A. The costs incurred in monitoring managerial performance
B. The costs incurred because there is information asymmetry between the corporation
and outsiders
C. The costs incurred because insiders know more about a company than do outsiders
D. All of these
Answer:
In “Blues Brothers” the initial dilemma facing the internal accountant is whether to:
A. Prematurely record revenue and give in to pressure from the supervisor
B. Record revenue correctly and start looking for a new job
C. Record revenue correctly and go to the “Blues Brothers” and seek to change their
minds
D. Record revenue correctly refuse to budge from your position
Answer:
The noted researcher who studied how values in the workplace are influenced by
culture is:
A. Thomas Hobbes
B. Jeremy Bentham
C. Aristotle
D. Geert Hofstede
Answer:
When would it be appropriate for an auditor to withdraw from an engagement?
A. In order to avoid issuing an adverse opinion.
B. When that auditor cannot observe the taking of inventory or is unable to confirm
receivables.
C. When the auditor concludes that management cannot be trusted.
D. When the auditor has overbooked too much work.
Answer:
Eddie paid an $8 restaurant check with a $10 bill. The waitress gave him $12 back. The
most ethical action for Eddie is to:
A. Keep the extra $10
B. Inform the waitress of her overpayment
C. Inform the manager of the restaurant of the overpayment
D. Leave a larger tip for the waitress
Answer:
Aristotle believed that __________ always preceded the choice of action.
A. Empathy
B. Due Care
C. Deliberation
D. Loyalty
Answer:
Sarbanes-Oxley Act (SOX) sets new standards for governance that will ultimately
impact on which of the following?
A. Foreign companies listed on US exchanges only
B. SEC registrant companies, including foreign companies listed on US
C. NYSE listing companies
D. NASDAQ listing companies
Answer:
The accounting shenanigan used in the Dell Computer case can best be described as:
A. Recording revenue from exclusivity payments too soon or of questionable quality
B. Shifting current revenue from exclusivity payments to a later period
C. Shifting future expenses to the current period as a special charge
D. Shifting current expenses to a later period
Answer:
Which of the following is not correct about materiality?
A. The concept of materiality recognizes that some matters are more important for fair
presentation of financial statements
B. Materiality judgments are made in light of surrounding circumstances and
necessarily involve quantitative and qualitative judgments
C. Materiality should be predictable from audit to audit so that the readers of financial
statements know what constitutes materiality
D. An auditor’s consideration of materiality is influenced by the auditor’s perception of
the need of the readers of the financial statements
Answer:
In its investigation of ZZZZ Best, the House Subcommittee on Oversight and
Investigations looked into:
A. Why the board of directors failed to uncover the fraud at ZZZZ Best
B. How the company was able to create 80% or more fictitious revenue
C. How the company was able to create cookie jar reserves
D. All of these
Answer:
Which of the following is not a component of internal control?
A. Control environment
B. Information and communication systems
C. Monitoring of controls
D. Independence of the audit committee
Answer:
Which of the following immediate family members or close relatives would not have to
follow the independence rules that apply to the CPA according to Interpretation 101-1?
A. CPA’s spouse
B. CPA’s spousal equivalent
C. CPA’s uncle
D. CPA’s dependents
Answer:
In the Lincoln Savings & Loan failure during the period of failures at savings and loan
institutions, Lincoln was charged with:
A. Stealing $300 million from shareholders
B. Causing retirees to lose their life savings
C. Causing employees to lose their jobs
D. Engaging in a Ponzi scheme
Answer:
The committee that first recommended that the profession institute a voluntary program
for peer review was:
A. Metcalf committee
B. Cohen committee
C. The House Subcommittee on Oversight and Investigations
D. Mintz and Morris committee
Answer:
Given that IFRS is not currently required in the U.S., foreign companies that list their
stock on the New York Stock Exchange must:
A. Reconcile the financial statements in their home country GAAP to U.S. GAAP
B. Use IFRS in their financial statements
C. Either reconcile their statements to U.S. GAAP or use IFRS
D. Use their home country GAAP in their financial statements listed on the NYSE
Answer:
Each of the following represents a pressure that might lead to fraud except for:
A. Desire to maximize the value of stock options
B. Budget pressures
C. Meet financial analysts’ earnings expectations
D. Ability to carry out the fraud
Answer:
Gray uses Hofstede’s cultural values to identify four widely recognized accounting
values; these values include all of the following except for:
A. Transparency
B. Representational faithfulness
C. Uncertainty
D. Conservatism
Answer:
The confidentiality standard in the AICPA code provides for exceptions to the rule in:
A. In response to a validly issued court summons
B. To provide information to the CPA’s peer reviewers
C. To defend oneself in an ethics investigation
D. All of these
Answer:
Which of the following is true about PCAOB audit standards?
A. The required standards apply to all companies
B. The required standards apply to all public companies only
C. The required standards apply to all privately held companies only
D. The required standards apply to all not-for-profit entities
Answer:
A code of ethics for financial professionals is important under Sarbanes-Oxley
because:
A. It strengthens the relationship between financial professionals and shareholders
B. It supports the certification of financial statement requirement
C. It decreases the likelihood of whistleblowing
D. It enhances the ethics of the audit committee
Answer:
Which statement is correct with respect to a CPA’s ethical obligation to return client
books and records and CPA work papers:
A. Client-provided records in the custody or control of the CPA should be returned to
the client at the client’s request.
B. CPA work papers should be given to the client at the end of each audit.
C. CPA work product never has to be turned over to the client.
D. All of these
Answer:
The ethical dilemma in the “Shifty Industries” case can best be described as whether to:
A. Use tax depreciation for financial reporting issues
B. Manipulating earnings to maximize net income
C. Maximizing section 179 depreciation expense
D. Minimizing depreciation expense to maximize net income
Answer:
In the Gateway Hospital case, Troy:
A. Wants to be treated the same as Kristen with respect to expense reimbursement
B. Wants to be treated consistently with the company policy on expense reimbursement
C. Wants to be treated differently than Kristen with respect to expense reimbursement
because of personal considerations
D. Believes the company’s reimbursement policy is fair
Answer: