The COSO report states that management should enact five components related to
internal control objectives including each of the following except for:
A. Control environment
B. Risk assessment
C. Risk activities
D. Monitoring
Answer:
What is the difference on contingent fees under the PCAOB rules versus the AICPA
rules?
A. Both rules allow contingent fees for an audit client if the contingency is based upon
findings of government agencies.
B. The AICPA prohibits contingent fees to an audit client.
C. The PCAOB allows contingent fees for non-public company engagements.
D. The PCAOB prohibits contingent fees in tax engagements performed for an audit
client.
Answer:
The Credit Alliance v. Arthur Andersen & Co. case established three tests that must be
satisfied for holding auditors liable for negligence to third parties. All of the following
are tests described except for
A. Knowledge by the accountant that the financial statements are to be used for a
particular purpose
B. The intention of the third party to rely on those statements
C. Some action by the accountant linking him or her to the third party that provides
evidence of the accountant’s understanding of intended reliance
D. The identity of the third party must be directly known to the auditor
Answer:
Each of the following is a pillar of character according to the Josephson Institute except
for:
A. Caring
B. Citizenship
C. Respect
D. Judgmental
Answer:
Integrity is measured in terms of what is right and just. What is a question that a CPA
can ask to test decisions?
A. Am I doing what another CPA would do?
B. Am I serving the interests of my client?
C. Am I protecting my self-interests?
D. Have I retained my integrity?
Answer:
Objectivity may be impaired when a CPA prepares a tax return for a client because:
A. The CPA violates the independence rule
B. The CPA violates the integrity rule
C. The CPA serves in a tax advocacy position for the client
D. The CPA must prepare the tax return solely based on the information provided by
the client
Answer:
When courts find accountants liable for constructive fraud, the implication is that
A. Auditors should always be liable when investors lose money due to deceit
B. Accountants may be liable for fraud even when they had no knowledge of deceit
C. Auditors should be able to detect all deceit by management
D. Accountants may be held liable even to third parties to whom they did not have a
duty
Answer:
Section 10A of the Securities Exchange Act of 1934 establishes each of the following
requirements for auditors of public companies with respect to illegal acts except for
A. Determine whether it is likely that an illegal act has occurred
B. Determine what the possible effect of the illegal act is on the financial statements
C. Determine whether management participated in the illegal act
D. Inform management and assure that the audit committee knows about any material
illegal act that has been detected
Answer:
The Private Securities Litigation Reform Act imposes additional requirements on public
companies reporting to the SEC and their auditors when:
A. The illegal act has a material effect on the financial statements
B. Senior management and the board have not acted properly to correct for the act
C. The failure to correct for the action is reasonably expected to warrant a departure
from the standard audit report
D. All of these are additional requirements
Answer:
What is the culture at Enron that discussed in the case?
A. Employees worked later and later.
B. Employees were evaluated in groups; the goal was to remove the bottom 20% of
each group every year.
C. Enron had a cutthroat system and encouraged a “yes” culture.
D. All of these
Answer:
Kelly is the controller of a small company. One day the CFO comes in and tells her to
lower the estimate of uncollectible accounts receivable. Kelly insists her numbers are
correct as is. The CFO tells her it will mean her job at the company if she doesn’t go
along with the smaller estimate. The primary virtue that would enable Kelly to resist the
pressure to manipulate the number is:
A. Loyalty
B. Integrity
C. Caring
D. Civic responsibility
Answer:
In stage 1 of Kohlberg’s model, ethical reasoning is motivated by:
A. Fear of punishment
B. Satisfaction of one’s needs
C. Following the law
D. Acting based on universal ethical principles
Answer:
George is in the middle of a high stakes poker game when he notices what he thinks is
cheating by another player. It appears to George that this player took a card from his lap
and switched it with a card that he was dealt. If George is a utilitarian thinker, he
should:
A. Accuse the alleged cheater of cheating in front of all the other players
B. Consider what might happen if he accuses the player of cheating and he is wrong
C. Speak to the alleged cheater during a regularly scheduled break and tell him not to
do it again
D. Forget about the whole matter
Answer:
The 2011 National Business Ethics Survey indicates each of the following with respect
to how employees view the ethics and ethical practices of organizations they work for
except for:
A. Misconduct at work has declined over the years
B. Whistleblowing is up
C. Ethical cultures are weaker
D. Pressure to cut corners is lower
Answer:
Empathy entails all of the following characteristics of behavior except for:
A. Being loyal to one’s friends
B. Being understanding of one’s friends
C. Being sensitive to the feelings of one’s friends
D. All of these
Answer:
In the PeopleSoft case, the auditors violated what aspect of independence?
A. The auditor was exposed to an intimidation threat by the client
B. The auditor was involved in a business relationship with the client
C. The auditor served in a management decision making position with the client
D. All of these
Answer:
Which was the ethical concern exists in the PeopleSoft case?
A. Family relationships between PeopleSoft top managers and EY
B. Tax services provided for PeopleSoft top management by EY
C. Independence in appearance and fact of EY in providing services to PeopleSoft
D. Information systems design and installations services provided for PeopleSoft by
EY
Answer: