ACCT 439

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1. (TCO 1) The maintaining of a good reputation of the profession is fundamental to the ability of the profession to continue to enjoy its current rights and privileges. The privileges of our profession, as a CPA can be described as all of the following except: (Points : 6)

       Not substantial, hence of little concern if they are lost.

       Including autonomy in discipline of its members.

       Setting of accounting standards.

       Recognition by the public and government that new competing professional organizations need not be created to serve the public.

Question 2.2. (TCO 2) On October 26, 2002, a special subcommittee was formed from the Enron Board of Directors. This subcommittee was headed by William Powers, Jr. and its report was known as the Powers Report. This report found and reported upon several findings. Which of the following findings was not contained in the Powers Report? (Points : 6)

       The original accounting treatments for the Chewco and LJMI transactions were wrong.

       Transactions were otherwise aboveboard and disclosed the proper information necessary to be properly audited.

       Employees enriched themselves by millions without proper approvals.

       Partnerships were established and used to enter into various transactions that could not be arranged with independent entities; were designed to five favorable financial results; and did not conform to U.S. accounting rules.

Question 3.3. (TCO 3) When considering professional codes of conduct as guidance in various states, countries, and around the world, the author believes (Points : 6)

       the codes are essentially identical, so only one code needs to be learned.

       regardless of various state or local codes, the national code will control its members.

       convergence of all organizations toward global ethical principles holds promise to improve ethical governance of the accounting profession.

       the AICPA should set worldwide standards.

Question 4.4. (TCO 4) A professional accountant is expected to exercise the values of honest objectivity and due care. Some professional codes of conduct require “disassociation” from misleading information. For example the accountant might have to leave his or her job for refusing to misrepresent receivables, but he or she might not discuss the reasons for leaving the former employer. When the professional code requires this silence, for the sake of confidentiality of the accountant, there is an ethical risk that (Points : 6)

       the professional accountant cannot find another job.

       unsuspecting shareholders will be left to their fate.

       the accountant's professional reputation can be improved.

       trust of the public will be maintained.

Question 5.5. (TCO 4) In the code of professional conduct of the AICPA, certified public accountants are encouraged to (Points : 6)

       engage in discreditable acts.

       advertise and solicit business, even if it involves some harassment of potential clients.

       disclose clients' confidential information, only after the client engagement is completed.

       avoid engagements where independence will be impaired.

Question 6.6. (TCO 4) The Code of Professional Conduct of the AICPA provides general standards and specifically enforceable standards. Which of the following are considered “enforceable”? (Points : 6)

       Principles

       Rules of Conduct

       Interpretation of the rules

       Ethical rulings

Question 7.7. (TCO 5) The independence standards of the professional accountant (Points : 6)

       are so important because a conflict of interest can threaten to undermine the reason for having an accounting profession.

       are not so important, since we know that no one can really be “independent” of their own self interest.

       are unlike the independence requirements of any other profession.

       can be considered not applicable when the accountant is a fiduciary.

Question 8.8. (TCO 5) When an “independent” auditor’s fee is paid by the client company (i.e. Enron paid Arthur Andersen’s audit fee) one can conclude the following: (Points : 6)

       This is a normal practice.

       This could give management an opportunity to influence the judgment of the auditor.

       Corporate boards should negotiate and approve the audit fee.

       All of the above are true.

Question 9.9. (TCO 6) Researchers have found that students in business evaluating ethical decisions are largely in cognitive stages 2 or 3 of moral reasoning. Based on that research, one might reasonably infer that (Points : 6)

       most students are already prepared for the ethical decisions they will face.

       there is significant growth in moral reasoning that is possible and desirable.

       educational materials need to be focused strictly on GAAP concepts and principles.

       use of realistic cases are likely to be of little use in providing students with a better understanding of oral reasoning.

Question 10.10. (TCO 9) Why are ethical decisions made by accountants often complex rather than straightforward? (Points : 6)

       Because if more than one stakeholder is involved, the interests of various stakeholders must be considered.

       Outcomes of such decisions are difficult to predict, so consequences may be uncertain.

       The outcome of the decision is subject to scrutiny by others, after the fact.

       All of the above are true.

       All are false. In fact, accountant’s ethics decisions are almost always straightforward, and the problem is merely that most accountants lack the will to “do the right thing."

Question 11.11. (TCO 8) In utilizing the sniff test in making ethical decisions, all of the following are used in making a decision, except: (Points : 6)

       Would I be comfortable if this action or decision were to appear on the front page of a national newspaper tomorrow morning?

       Does my father’s ethics matter in this decision?

       Will my mother be proud of this decision?

       Does this feel right to me?

Question 12.12. (TCO 7) CSR (Corporate Social Responsibility) has in recent times changed. Some of the trends in this area include (Points : 6)

       there is a paradigm shift towards accountability to stockholders versus stakeholders.

       corporations should consider their strategic goals in their operations and reporting with concern for who they wish to appear as a corporate citizen.

       it is really not possible at this time to report on a company’s social responsibility.

       social responsibility is best limited primarily to political donations and intervention in government processes through lobbyists.

Question 13.13. (TCO 1) Several important trends developed as a result of economic and competitive pressures that had and continue to have an effect on the ethics for business, and therefore on the professional accountant. These trends include: (Points : 6)

       expanding legal liability for corporate directors.

       a lack of advertising ability for accountants.

       management assertions to shareholders on the adequacy of internal controls.

       a stated intention to manage risk and protect reputation.

Question 14.14. (TCO2) The Senate Permanent Subcommittee on Investigations released its report. Based upon the evidence presented to it, the subcommittee made the following findings with regard to Enron’s Board of Directors. Which finding was not a part of the report? (Points : 6)

       Fiduciary failure

       Inappropriate Conflicts of Interest

       Lack of Independence

       Allowed the SPEs to be separate from Enron

Question 15.15. (TCO 3) Moral and ethical codes contain various characteristics. Which of the following is not a characteristic? (Points : 6)

       Beliefs about ideals, about what is good or desirable or worthy of pursuit for its own sake.

       Inquiry about ways of life and rules of conduct

       Rules laying down what ought to be done and what ought not to be done

       Motives that incline us to choose the right or the wrong course

1. (TCO 3 and 4) What are the general and specific rules that apply to the professional codes of conduct? Please explain the significance of the rules and why they are important to maintain ethical standards. (Points : 30)

Question 2.2. (TCO 6) Moral and ethical codes can be defined as containing four characteristics. These characteristics are defined in the Encyclopedia of Philosophy. Please list the characteristics and give an example of how they influence ethical decision making. (Points : 30)

Question 3.3. (TCO 7) The notion of independence is central to all aspects of the professional accountant. What is meant by the term independent? Be specific and give an example. (Points : 30)

Question 4.4. (TCO 2) With regard to Arthur Andersen’s role in the Enron scandal, much has been written. During the time that Enron was Arthur Andersen’s client, what roles did AA fulfill? Be specific. (Points : 30)

Question 5.5. (TCO 4) Discuss the EDM framework and the assessing of the ethicality of a decision or action. (Points : 20)

Question 6.6. (TCO 5) What is a stakeholder-accountability oriented governance process? (Points : 20)