These costs can be measured indirectly by using costs incurred in similar circumstances
or mirror image alternatives:
a. Surrogates
b. Externalities
c. Future impacts
d. Collateral damages
e. Ethical costs
Late in 2008, the International Accounting Standards Board allowed firms to:
a. Reclassify devaluated financial assets delaying recognition of losses
b. Estimate the value of the portfolio if there is no ready market for a derivative
portfolio
c. Reduce their capital requirements
d. Accelerate the recognition of losses through mark-to-market accounting
e. None of the above
Mortgage-backed securities lost their value when:
a. The underlying assets lost their value
b. Borrowers (the mortgagees) walked away without real obligation to repay
c. Mortgage originators went bankrupt
d. (a) and (b)
e. (b) and (c)
The following need is at the top of Maslow’s Hierarchy of Needs:
a. Esteem
b. Respect
c. Fulfillment
d. Safety
e. Affinity
Incomplete disclosure of the company’s revenue recognition policy is an example of:
a. Lack of transparency
b. Lack of integrity
c. Lack of accuracy
d. All of the above
e. None of the above
The difference between what the public thinks it is getting in audited financial
statements and what the public is actually getting is known as:
a. Credibility gap
b. Expectations gap
c. Audit gap
d. Stewardship gap
e. None of the above
Ethics and ethical corporate culture should likely play a vital role in setting:
a. Control environment
b. Risk assessment
c. Information and communication
d. Monitoring
e. Control activities
A conflict of interest exists when a given decision maker (D) and another person (P) are
in the following situation:
a. D has to exercise judgement in P’s behalf
b. P has to exercise judgement in D’s behalf
c. D has a special interest that interferes with proper judgement
d. (a) and (b)
e. (a) and (c)
According to distributive justice theory, there are three main criteria for determining the
just distribution:
a. Need, fairness, and merit
b. Need, arithmetic equality, and merit
c. Opportunity, fairness, and merit
d. Opportunity, fairness, and arithmetic equality
e. Need, arithmetic equality, and equivalence
Individuals may be ethical because of:
a. Religious concerns
b. Emotional attachment to other people
c. Enlightened self-interest
d. None of the above
e. All of the above
Under the U.S. accounting rules, the following conditions were required to consider
special purpose entities (SPEs) to be independent parties:
a. Independent investment of less than 3% of the SPE’s equity and independent control
of the SPE
b. Independent investment of at least 3% of the SPE’s equity and independent control of
the SPE
c. Substantive investment of at least 3% of the SPE’s equity and independent control of
the SPE
d. Independent investment of at least 3% of the SPE’s assets at risk and independent
control of the SPE
e. Substantive investment of less than 3% of the SPE’s assets at risk and independent
control of the SPE
Which of the following is a source of risk identified by both the AICPA/CICA and the
Institute of Internal Auditors:
a. Environmental
b. Informational
c. Financial
d. Operational
e. All of the above
Which of the following demonstrated extraordinary hubris?
a. Kenneth Lay
b. Bernie Ebbers
c. Arthur Andersen
d. Scott Sullivan
e. All of the above.
Two weaknesses of the following approach are (1) it is difficult to determine who
demonstrates integrity in the workplace, and (2) it is difficult to choose between
compassion and not betraying somebody’s trust:
a. Deontology
b. Distributive Justice
c. Utilitarianism
d. Moral Imagination
e. Virtue Ethics
If a professional accountant is billing an audit client for more hours than those actually
worked, he will be violating the following fundamental principle:
a. Objectivity
b. Professional due care
c. Integrity
d. Confidentiality
e. All of the above
A potential conflict of interest exists when a given decision maker (D) and another
person (P) are in the following situation:
a. P has a special interest that interferes with proper judgement
b. D may have to exercise judgement in P’s behalf
c. D has a special interest that interferes with proper judgement
d. (a) and (b)
e. (b) and (c)
Professional Accountants, in their fiduciary role, owe primary loyalty to:
a. The accounting profession
b. The client
c. The general public
d. Government regulations
e. All of the above
This code deals with ethics principles plus additional examples:
a. Credo
b. Code of ethics
c. Code of conduct
d. Code of practice
e. All of the above
The crisis in investor confidence in 2002 was caused by:
a. Lack of integrity of business leaders.
b. Manipulation of financial results.
c. Boards of Directors that did not provide proper oversight.
d. Findings of alert auditors
e. All of the above.
Which of the following is not a component of the COSO Enterprise Risk Framework?
a. Risk assessment
b. Risk review
c. Internal environment
d. Information and communication
e. Control activities
According to Kohlberg, at this stage of moral reasoning, adherence to moral codes or to
codes of law and order are a motive for doing right:
a. Pre-conventional
b. Conventional
c. Post-conventional
d. Autonomous
e. Principled
Ethical corporate behavior is expected to lead to:
a. Higher profitability in the short-term
b. Higher profitability both in the short-term and long-term
c. Lower profitability in the long-term
d. Higher profitability in the long-term
e. Lower profitability both in the short-term and long-term
This organization can issue auditing standards in the U.S.:
a. AICPA
b. FASB
c. SEC
d. PCAOB
e. All of the above
Ralph Nadar contributed to the lack of credibility of corporations by exposing their:
a. Excessive bonus schemes
b. Greed
c. Poor car safety
d. Poor environmental record
e. “Seller beware” attitude of toy manufacturers.
A professional accountant has been the partner in charge of a particular audit client for
the past eight years. This situation could result in the following threat to professional
independence:
a. Self-review
b. Intimidation
c. Advocacy
d. Familiarity
e. None of the above
This approach incorporates the expected future impacts of a decision into the analysis:
a. Virtue ethics
b. Consequentialism
c. Cost-benefit analysis
d. Risk-benefit analysis
e. All of the above
Under this approach what is important is that the decision was made for the right
reasons:
a. Deontology
b. Distributive Justice
c. Utilitarianism
d. Moral Imagination
e. Virtue Ethics
The U.S. Federal Sentencing Guidelines were introduced in 1991 to:
a. Help judges formulate sentences.
b. Avoid sentences that are too light.
c. Signal potential sentences to executives and directors.
d. Encourage executives and directors to avoid environmental damage.
e. All of the above.
The following duties are essential to maintaining a fiduciary relationship in the
accounting profession:
a. Development and maintenance of required knowledge and skills
b. Maintenance of trust
c. Maintenance of an acceptable personal reputation
d. All of the above
e. (a) and (b) only
The overall requirement of the Internal Revenue Service Circular 230 is to ensure that
tax professionals:
a. Know their clients
b. Always develop tax plans for their clients
c. Make tax planning suggestions that, even if they don”t have a chance of success, will
save the client some money in the short-term
d. Never develop tax shelters
e. Only be professional accountants