What is the recommended strategy when stakeholders’ potential for threat is LOW and
the stakeholders’ potential for cooperation is HIGH?
a. Monitor
b. Involve
c. Discuss
d. Defend
e. None of the above
Which of the following is not a requirement imposed by the SOX Corporate
Governance Framework?
a. The audit committee must be comprised solely by independent directors
b. The audit committee is responsible for appointing the company’s external auditor
c. The audit committee must establish procedures to allow employees to submit
anonymous complaints
d. The audit committee must approve non audit services to be provided by the auditors
e. The audit committee must be comprised solely by financial experts
Effective crisis management could represent:
a. An opportunity to avoid costs
b. An opportunity to change employee’s perspectives on risk
c. An opportunity to enhance the company’s reputation
d. All of the above
e. None of the above
Mark-to-market accounting is usually related to all of the following items, except:
a. Derivatives and financial instruments
b. Firm’s long term cash flows
c. Firm’s short term taxes payable
d. Firm’s short term cash flows
e. Immediate recognition of unrealized gains and losses
This type of manipulation is known as “cookie jar” accounting:
a. Manipulation of profits through reserves or provisions
b. Incorrect classification of long term debt as equity
c. Incorrect classification of regular expenses as extraordinary items
d. Manipulation of profits through booking revenue in early periods
e. Manipulation of reserve for uncollectible amounts
The primary focus of an integrity-based ethics program is:
a. Preventing, detecting and punishing violations of the law
b. Define organizational values and encourage employee commitment
c. Improve image and relationship with stakeholders
d. Protect management from blame
e. All of the above
This philosopher argued that self-interest motivates people to form peaceful civil
societies:
a. Adam Smith
b. John Locke
c. Thomas Hobbes
d. Jeremy Bentham
e. John Rawls
In simple terms, the securitization process is:
a. A way to sell Structured Investment Vehicles (SIVs)
b. A way to sell accounts receivable by mortgage lenders to public investors
c. A way to create high-yield investments with little risk
d. All of the above
e. (a) and (c) only
This theory argues that equals should be treated equally in relationship to their relevant
equalities and differences:
a. Deontology
b. Distributive Justice
c. Utilitarianism
d. Moral Imagination
e. Virtue Ethics
Enron referred to this transactions as “monetizing” or ‘syndicating” its assets:
a. Buy more assets using syndicated loans
b. Sell assets to third parties and record cash income as earnings
c. Hedge the company’s assets
d. Lend money to third parties to buy assets
e. Recording profits on energy derivatives trading
The first resource for guidance when a businessperson or a professional accountant
faces an ethical problem should be:
a. Commonly accepted social norms
b. Corporate and professional codes of conduct
c. Ethical decision-making frameworks
d. Commonly accepted philosophical approaches
e. All of the above
Pastin’s approach adds the following concepts to stakeholder impact analysis:
a. Rule ethics
b. Ground rule ethics
c. End-point ethics
d. Social contract ethics
e. All of the above
A problem with this theory is that the categorical imperative does not provide clear
guidelines for deciding what is right and wrong when two or more moral laws conflict
and only one can be chosen:
a. Deontology
b. Distributive Justice
c. Utilitarianism
d. Moral Imagination
e. Virtue Ethics
Since the mid-1990s, both management and auditors have become increasingly:
a. Profit management oriented
b. Ethics oriented
c. Value management oriented
d. Risk management oriented
e. Marketing oriented
Examining the interests of stakeholders is probably required for:
a. High short-term profits
b. Optimal medium and longer-term profits
c. Continuing support from stakeholder groups
d. Effective risk management
e. All of the above
These regulators were aware of the problem and tried to blow the whistle in 2003:
a. Security and Exchange Commission and Federal Reserve Board
b. Iowa and North Carolina State Attorneys
c. Office of the Comptroller of the currency and Office of Thrift Supervision
d. Federal banking regulators
e. None of the above
A collateralized debt obligation (CDO):
a. Is an insurance policy that any investor can purchase
b. Is a bond that is secured by a portfolio of mortgages
c. Protects an investor in the event that the issuer of the mortgage defaults on the
contract
d. Acts as a hedge against changes in interest rates
e. Were outlawed with the passage of the Dodd-Frank Wall Street Reform and
Consumer Protection Act.
This is the preferred approach to deal with conflicts of interests
a. Management
b. Disclosure
c. Remediation
d. Avoidance
e. Awareness
The 1933 Glass-Steagall Act precluded banks from:
a. Subprime lending
b. Selling insurance
c. Underwriting insurance generating more than 10% of total banking income
d. Underwriting securities generating more than 10% of total banking income
e. Underwriting any securities
At the time of Enron’s collapse, the prevailing treatment for employee stock option
expense was:
a. Record stock options only when and if exercised, at exercise price
b. Record all stock options when issued, at exercise price
c. Record all stock options at market price
d. Record stock options only when exercised at market price
e. Record not exercised options at market price
SOX increased the time requirement and legal risk for company directors. These
requirements will likely:
a. Increase the number of directors in the board
b. Reduce the number of directors in the audit committee
c. Increase audit fees
d. Reduce the number of boards that each director sits on
e. All of the above
The U.S. Internal Revenue Service (IRS) implemented Circular 230 to remedy
problems found with regard to the marketing of tax shelters thought to:
a. Have no other purpose except to reduce taxes.
b. Have lower than 50% chance of success if challenged by the IRS.
c. Not be in accordance with client’s needs.
d. Create fictitious losses.
e. All of the above
A professional accountant is auditing client A and providing consulting services to
client B. Both clients are in the same industry. If the professional accountant uses
specific information from client A’s audit to prepare a business plan for client B, he will
be violating the following fundamental principle:
a. Integrity
b. Objectivity
c. Professional due care
d. Confidentiality
e. All of the above
Which of the following is not true?
a. Principles are more useful than rules because principles can be interpreted as new
circumstances require
b. Rules are more useful than principles because rules can be interpreted as new
circumstances require
c. A blend of principles and rules is often optimal
d. All of the above
e. (a) and (c) only
Using partners who do not report to audit partners for the provision of non-assurance
services to an assurance client would be an example of:
a. Safeguards reducing the risk of conflict of interest created by the profession,
legislation, or regulation
b. Safeguards reducing the risk of conflict of interest within a client
c. Safeguards reducing the risk of conflict of interest within a professional accounting
firm
d. All of the above
e. (a) and (c) only
The adoption of the following measures would reduce the expectation gap and lessen
public misunderstanding of the auditor’s role
a. Publish a statement of management responsibility
b. Auditor to report annually to audit committee
c. Expand audit report to clarify auditor’s role and the level of assurance
d. (a) and (b)
e. (a) and (c)
SOX imposed the following new penalties for executives:
a. Fines
b. Suspension
c. Criminal prosecution for executives
d. Return of ill-gotten gains
e. All of the above
This philosopher argued that social and economic inequalities are just if these
inequalities are to everyone’s benefit:
a. Adam Smith
b. John Locke
c. Thomas Hobbes
d. Jeremy Bentham
e. John Rawls
Investors relied on the judgment of credit rating agencies because:
a. Credit rating agencies are supposed to be the experts in evaluating credit risk
b. Information directly available to investors on mortgage pools was insufficient
c. Credit rating agencies are supposed to perform a thorough due diligence before rating
a given security
d. All of the above
e. (a) and (c)
The following would be a key control function of the Board of Directors:
a. Set guidance and boundaries
b. Appoint CEO
c. Approve the sale of company’s assets
d. Decide on the company’s auditor
e. All of the above
Which of the following is not a stakeholder right?
a. Life, heath and safety
b. To earn a reasonable return on an investment
c. Freedom of speech
d. Fair treatment before the law
e. All of the above are stakeholder rights
A professional accounting firm has several audit and tax clients; however, a single
client represents 40% of the firm’s revenue. This situation could result in the following
threat to professional independence:
a. Self-review
b. Intimidation
c. Advocacy
d. Familiarity
e. Over-dependence
The following performance component recommended by the Global Reporting
Initiative relates to customer health and safety, marketing communications and
customer privacy:
a. Labour practices
b. Human rights
c. Product responsibility
d. Society
e. Costumer rights
Most of the damage is usually done in this phase of a crisis:
a. Pre-crisis
b. Reputation restoration
c. Controlled
d. Uncontrolled
e. Post-crisis
The following are examples of ethics risks faced by employees:
a. Honesty and integrity
b. Fairness and compassion
c. Integrity and responsibility
d. Fairness and integrity
e. Responsibility and honesty