Accounting Final Exam Guide Test Bank

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Chapter 1Multiple Choice Questions

 

___________________________________________________

 

 

 

 

 

  1. Examining the interests of stakeholders is probably required for:

 

 

 

 

 

  1. A value that is almost universally respected by stakeholder groups is:

 

 

 

 

 

  1. Companies attempt to manage the risk of something happening that will have a negative or positive impact on the company’s objectives, such as:

 

 

 

    1. Credit risks

    2. Litigation risk

    3. Reputation risk

    4. Ethics risks

    5. All of the above

 

 

 

 

 

 

 

  1. Most large corporations do not consider these risks in a broad and comprehensive way:

 

 

 

    1. Operational risks

    2. Reputational risks

    3. Credit risks

    4. Market risks

    5. Ethics risks

 

 

 

 

 

 

 

  1. The following are examples of ethics risks faced by employees:

 

 

 

    1. Honesty and integrity

    2. Fairness and compassion

    3. Integrity and responsibility

    4. Fairness and integrity

    5. Responsibility and honesty

 

 

 

 

 

 

 

  1. Not reporting environmental issues is an example of:

 

 

 

    1. Lack of transparency

    2. Lack of integrity

    3. Lack of accuracy

    4. All of the above

    5. None of the above

 

 

 

 

 

 

 

  1. Incomplete disclosure of the company’s revenue recognition policy is an example of:

 

 

 

    1. Lack of transparency

    2. Lack of integrity

    3. Lack of accuracy

    4. All of the above

    5. None of the above

 

 

 

 

 

 

 

  1. This philosophical approach requires that an ethical decision depends upon the duty, rights, and justice involved:

 

 

 

    1. Consequentialism

    2. Virtue ethics

    3. Duty ethics

    4. Righteousness

    5. Deontology

 

 

 

 

 

 

 

  1. The Moral Standards Approach focuses on the following dimensions of the impact of a proposed action:

 

 

 

    1. Net benefit to society, fair to all stakeholders, whether it is right

    2. Net benefit to society and  whether it is legal

    3. Net benefit to society, fair to all stakeholders, whether it is legal

    4. Fair to most stakeholders and whether it is right

    5. Net benefit to society, fair to most stakeholders, whether it is right

 

 

 

 

 

 

 

 

 

  1. Effective crisis management could represent:

 

 

 

    1. An opportunity to avoid costs

    2. An opportunity to change employee’s perspectives on risk

    3. An opportunity to enhance the company’s reputation

    4. All of the above

    5. None of the above

 

 

 

 

 

 

 

 

 

Chapter 2 Multiple Choice Questions

 

_______________________

 

 

 

 

 

 

 

  1. In order to ensure an investment-grade credit rating, Enron began to emphasize the following three actions:

     

    1. Reducing accruals, increasing cash flow, and lowering debt

    2. Smoothing accruals, increasing cash flow, and lowering debt

    3. Increasing cash flow, lowering debt, and smoothing earnings

    4. Increasing cash flow, lowering earnings and decreasing option expense

    5. Increasing cash flow, lowering debt, and decreasing option expense

 

 

 

 

 

 

 

 

 

 

 

  1. At the time of Enron’s collapse, the prevailing treatment for employee stock option expense was:

 

 

 

    1. Record stock options only when and if exercised, at exercise price

    2. Record all stock options when issued, at exercise price

    3. Record all stock options at market price

    4. Record stock options only when exercised at market price

    5. Record not exercised options at market price

 

 

 

 

 

 

 

  1. Which of the following was not a conflict of interest that Arthur Andersen’s personnel encountered?

     

    1. Auditing their own work as SPE consultants

    2. Losing a very large client

    3. A partner reviewed another partner’s work

    4. Internal debates about Enron’s questionable accounting treatments were not discussed with the audit committee

    5. Audit staff leaving the firm to work for Enron

 

 

 

 

 

 

 

  1. Which of the following was not among Arthur Andersen’s shortcomings in conducting Enron’s audit?

     

    1. Lack of competence

    2. Failure of quality control standards

    3. Misunderstanding of auditor’s fiduciary role

    4. Inconclusive testing of control

    5. Insufficient information provided by Enron’s staff

 

 

 

 

 

 

 

 

 

  1. In general terms, WorldCom overstated its reported net income by:

 

 

 

    1. Generating false expenses

    2. Booking false revenue

    3. Capitalizing line costs

    4. Amortizing line costs quicker than allowed under GAAP

    5. Recognizing future period’s revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chapter 3 Multiple Choice Questions

 

_____________________________

 

 

 

 

 

 

 

  1. This philosopher argued that self-interest motivates people to form peaceful civil societies:

 

 

 

    1. Adam Smith

    2. John Locke

    3. Thomas Hobbes

    4. Jeremy Bentham

    5. John Rawls

 

 

 

 

 

 

 

 

 

  1. 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:

     

    1. Deontology

    2. Distributive Justice

    3. Utilitarianism

    4. Moral Imagination

    5. Virtue Ethics

 

 

 

 

 

 

 

 

 

  1. This approach presupposes that happiness, utility, pleasure, pain and anguish can be quantified:

     

    1. Deontology

    2. Distributive Justice

    3. Utilitarianism

    4. Moral Imagination

    5. Virtue Ethics

 

 

 

 

 

 

 

  1. This philosopher argued that social and economic inequalities are just if these inequalities are to everyone’s benefit:

 

 

 

    1. Adam Smith

    2. John Locke

    3. Thomas Hobbes

    4. Jeremy Bentham

    5. John Rawls

 

 

 

 

 

 

 

  1. According to distributive justice theory, there are three main criteria for determining the just distribution:

 

 

 

    1. Need, fairness, and merit

    2. Need, arithmetic equality, and merit

    3. Opportunity, fairness, and merit

    4. Opportunity, fairness, and arithmetic equality

    5. Need, arithmetic equality, and equivalence

 

 

 

 

 

 

 

Chapter 4 Multiple Choice Questions

 

______________________________

 

 

 

 

 

  1. These costs can be measured indirectly by using costs incurred in similar circumstances or mirror image alternatives:

     

    1. Surrogates

    2. Externalities

    3. Future impacts

    4. Collateral damages

    5. Ethical costs

 

 

 

 

 

 

 

 

 

  1. This approach incorporates the expected future impacts of a decision into the analysis:

 

 

 

    1. Virtue ethics

    2. Consequentialism

    3. Cost-benefit analysis

    4. Risk-benefit analysis

    5. All of the above

 

 

 

 (I do not understand the difference between Q8 and Q9; when are future impacts not expected in an analysis? I think that Q8 should be deleted; I’ve added a replacement question at the end.)

 

 

 

  1. These values are the combinations of a value and the probability of its occurrence:

 

 

 

    1. Probable values

    2. Common values

    3. Present values

    4. Expected values

    5. Risk-adjusted values

 

 

 

 

 

 

 

  1. Which of the following is not one of the 5 questions in Graham Tucker’s original approach to ethical decision making?

 

 

 

    1. Is it profitable

    2. Is it right?

    3. Is it fair?

    4. Is it legal?

    5. Does it demonstrate the virtues expected?

 

 

 

 

 

 

 

  1. The following three standards make up the moral standards approach:

 

 

 

    1. Utilitarian, Individual rights, and Justice

    2. Utilitarian, Individual rights, and Fairness

    3. Legal, Individual rights, and Justice

    4. Utilitarian, Moral rights, and Justice

    5. Legal, Moral rights, and Justice

 

 

 

 

 

 

 

  1. Pastin’s approach adds the following concepts to stakeholder impact analysis:

 

 

 

    1. Rule ethics

    2. Ground rule ethics

    3. End-point ethics

    4. Social contract ethics

    5. All of the above

 

 

 

 

 

 

 

  1. The following approach does not specifically incorporate a thorough review of the motivation for the decisions involved, or the virtues or character traits expected:

 

 

 

    1. 5-question approach

    2. Moral standards approach

    3. Pastin’s approach

    4. All of the above

    5. (a) and (b) only

 

 

 

 

 

 

 

  1. Lack of awareness of the following problem results in executives not attributing enough value to the use of an environmental resource:

 

 

 

    1. Commons problem

    2. Ethics problem

    3. Value problem

    4. Risk-assessment problem

    5. Moral problem

 

 

 

 

 

 

 

  1. If a decision is expected to be unfair to a particular stakeholder group, the decision may be improved by:

 

 

 

    1. Using stakeholder analysis

    2. Using a decision making approach

    3. Increasing the compensation to that stakeholder group

    4. Increasing the compensation to all stakeholder groups

    5. All of the above

       

 

 

 

 

 

  1. Which of the following is not an example of a common ethical decision-making pitfall?

 

 

 

    1. Conforming to an unethical corporate culture

    2. Focusing only on legalities

    3. Conflicts of interests

    4. Failure to identify all stakeholder groups

    5. None of the above

       

 

 

 

 

 

  1. Failure to identify all relevant stakeholder groups for a proper stakeholder impact analysis may be the result of:

     

    1. Bias

    2. Conforming to an unethical corporate culture

    3. Conflicts of interests

    4. Failure to consider the motivation for the decision

    5. All of the above

 

 

 

 

 

 

 

  1. Completing the following steps in this order provides a sound basis for challenging a proposed decision:

 

 

 

    1. Identify facts and stakeholders, rank stakeholders and their interests, and assess the impact of the proposed action

    2. Identify a proper ethical decision framework, rank stakeholders and their interests, and assess the impact of the proposed action

    3. Rank stakeholders and their interests, identify facts and stakeholders, and assess the impact of the proposed action

    4. Identify a proper ethical decision framework, identify facts and stakeholders, and assess the impact of the proposed action

    5. Rank stakeholders and their interests, identify a proper ethical decision framework, and assess the impact of the proposed action

 

 

 

 

 

 

 

  1. Frequently, decision makers have been subject to unreasonable expectations and unrealistic deadlines, this is an example of:

 

 

 

    1. Conforming to an unethical corporate culture

    2. Focusing only on legalities

    3. Conflicts of interests

    4. Failure to identify all stakeholder groups

    5. Failure to rank stakeholder interests

       

 

 

 

Chapter 5 Multiple Choice Questions

 

_________________________________

 

 

 

 

 

  1. Corporations are now increasingly realizing that they are accountable:

 

 

 

    1. Legally to shareholders

    2. Legally to all stakeholders

    3. Strategically to additional stakeholders

    4. (a) and (b)

    5. (a) and (c)

 

 

 

 

 

 

 

  1. The company’s internal auditors and the Ethics Officer should report:

     

    1. Day-to-day to the CEO

    2. Day-to-day to the Audit Committee of the Board of Directors

    3. Regularly to the Audit Committee of the Board of Directors without management being present

    4. (a) and (c)

    5. (a) and (b)

       

       

       

       

  2. Experience has revealed that, to be effective, a code must be reinforced by:

     

    1. Tone at the top

    2. Ethics officer and internal auditors

    3. A comprehensive ethical culture

    4. Principles, rules and examples

    5. All of the above

       

       

       

  3. Which of the following is not an ethics risk management principle?

     

    1. Normal definitions of risk are too narrow for stakeholder accountability

    2. Assign responsibility, develop follow-up processes and board review

    3. Discovery and remediation are essential

    4. The code of ethics must be reviewed by independent parties

    5. An ethics risk exists when expectations of stakeholders may not be met

       

       

       

  4. A conflict of interest exists when a given decision maker (D) and another person (P) are in the following situation:

     

    1. D has to exercise judgement in P’s behalf

    2. P has to exercise judgement in D’s behalf

    3. D has a special interest that interferes with proper judgement

    4. (a) and (b)

    5. (a) and (c)

       

       

       

  5. A potential conflict of interest exists when a given decision maker (D) and another person (P) are in the following situation:

     

    1. P has a special interest that interferes with proper judgement

    2. D may have to exercise judgement in P’s behalf

    3. D has a special interest that interferes with proper judgement

    4. (a) and (b)

    5. (b) and (c)

       

       

       

  6. This is the preferred approach to deal with conflicts of interests

     

    1. Management

    2. Disclosure

    3. Remediation

    4. Avoidance

    5. Awareness

       

       

       

  7. A fundamental problem examined by agency theory is how it is possible to align:

     

    1. Shareholders’ and stakeholders’ goals

    2. Manager’s and stakeholders’ goals

    3. Shareholders’ and managers’ goals

    4. Principal’s and shareholders’ goals

    5. Agent’s and stakeholders’ goals

       

       

       

  8. The 20/60/20 rule states that the total percent of employees who could commit a fraudulent act is:

     

    1. 20%

    2. 60%

    3. 80%

    4. 100%

    5. None of the above

       

       

       

  9. Which of the following is not a characteristic identified by forensic experts in prospective fraud situations?

     

    1. High intelligence

    2. Greed

    3. Need for whatever is taken

    4. Opportunity to take advantage

    5. Low probability of being caught

       

       

       

  10. The primary focus of a compliance-based ethics program is:

     

    1. Preventing, detecting and punishing violations of the law

    2. Define organizational values and encourage employee commitment

    3. Improve image and relationship with stakeholders

    4. Protect management from blame

    5. All of the above

       

       

       

  11. The primary focus of an integrity-based ethics program is:

     

    1. Preventing, detecting and punishing violations of the law

    2. Define organizational values and encourage employee commitment

    3. Improve image and relationship with stakeholders

    4. Protect management from blame

    5. All of the above

       

       

       

  12. The most important factor in encouraging employee observance to an ethics program is that employees perceive that it is:

     

 

  1. Compliance-based
  2. Value-based
  3. Achievement oriented
  4. Stakeholder-based
  5. Externally oriented

 

 

 

 

 

 

 

  1. Building trust within an organization can have favourable impact on employee’s willingness to share information and ideas in a process of:

     

    1. Ethical awareness

    2. Ethical awakening

    3. Ethical renewal

    4. Ethical wave 

    5. None of the above

       

       

       

  2. A Conference Board survey identified the following rationale for developing codes of ethics:

     

    1. Make employees aware that adherence is critical to bottom-line success

    2. Provide a statement of do’s and don’ts

    3. Discuss what is expected in stakeholder relationships

    4. Establish values and mission

    5. All of the above

       

       

       

  3. This code deals with ethics principles plus additional examples:

     

    1. Credo

    2. Code of ethics

    3. Code of conduct

    4. Code of practice

    5. All of the above

       

       

       

  4. Which of the following is not a mechanism for monitoring a code of ethics?

     

    1. Ethics audit or internal audit procedures

    2. Reviews by legal department

    3. Awards and bonuses

    4. Annual sign-off by employees

    5. Employee surveys

       

       

       

  5. Which of the following is not an example of emerging public accountability standards or initiatives?

     

    1. SOX-404

    2. GRI

    3. AA-1000

    4. FTSE4Good

    5. All of the above

       

       

       

  6. SOX imposed the following new penalties for executives:

     

    1. Fines

    2. Suspension

    3. Criminal prosecution for executives

    4. Return of ill-gotten gains

    5. All of the above

       

       

       

       

      Chapter 6 Multiple Choice Questions

      ____________________________

       

  7. The following elements are essential features of a profession:

 

 

 

    1. Extensive training, license or certification, and provision of important services to society

    2. Extensive training, primarily intellectual skills, and representation by professional organizations

    3. Extensive training, provision of important services to society, and primarily intellectual skills

    4. License or certification, representation by professional organizations, and autonomy

    5. License or certification, autonomy, and provision of important services to society

 

 

 

 

 

 

 

  1. The following value is not necessary for an accounting professional:

 

 

 

    1. Honesty

    2. Integrity

    3. Objectivity

    4. A primary commitment to self-interest

    5. All but one of the above

 

 

 

 

 

 

 

  1. The following duties are essential to maintaining a fiduciary relationship in the accounting profession:

     

    1. Development and maintenance of required knowledge and skills

    2. Maintenance of trust

    3. Maintenance of an acceptable personal reputation

    4. All of the above

    5. (a) and (b) only

       

       

       

  2. Professional Accountants, in their fiduciary role, owe primary loyalty to:

     

    1. The accounting profession

    2. The client

    3. The general public

    4. Government regulations

    5. All of the above

 

 

 

 

 

 

 

  1. According to Kohlberg, at this stage of moral reasoning, fear of punishment and authorities are a motive for doing right:

     

    1. Pre-conventional

    2. Conventional

    3. Post-conventional

    4. Autonomous

    5. Principled

       

       

       

  2. 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:

     

    1. Pre-conventional

    2. Conventional

    3. Post-conventional

    4. Autonomous

    5. Principled

       

       

       

  3. Which of the following is not a fundamental principle in codes of conduct for professional accountants?

     

    1. Act in the client’s best interest

    2. Objectivity and independence

    3. Maintain the good reputation of the profession

    4. Maintain confidentiality

    5. Not to be associated with misleading information

       

       

       

  4. If a professional accountant is billing an audit client for more hours than those actually worked, he will be violating the following fundamental principle:

     

    1. Objectivity

    2. Professional due care

    3. Integrity

    4. Confidentiality

    5. All of the above

       

       

       

  5. If a professional accountant is auditing a public company and she receives company shares as payment for her audit services, she will be violating the following fundamental principle:

     

    1. Integrity

    2. Objectivity

    3. Professional due care

    4. Confidentiality

    5. All of the above

       

       

       

  6. 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:

     

    1. Integrity

    2. Objectivity

    3. Professional due care

    4. Confidentiality

    5. All of the above

       

       

       

  7. The adoption of the following measures would reduce the expectation gap and lessen public misunderstanding of the auditor's role

 

 

 

    1. Publish a statement of management responsibility

    2. Auditor to report annually to audit committee

    3. Expand audit report to clarify auditor's role and the level of assurance

    4. (a) and (b)

    5. (a) and (c)

 

 

 

 

 

 

 

  1. The recommendation of appointment and review of the external auditors by the audit committee is an example of:

 

 

 

    1. Safeguards reducing the risk of conflict of interest created by the profession, legislation, or regulation

    2. Safeguards reducing the risk of conflict of interest between an auditor and management

    3. Safeguards reducing the risk of conflict of interest within a professional accounting firm’s own systems and procedures

    4. All of the above

    5. (a) and (c) only

 

 

 

 

 

 

 

  1. 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:

 

 

 

    1. Safeguards reducing the risk of conflict of interest created by the profession, legislation, or regulation

    2. Safeguards reducing the risk of conflict of interest within a client

    3. Safeguards reducing the risk of conflict of interest within a professional accounting firm

    4. All of the above

    5. (a) and (c) only

 

 

 

 

 

 

 

  1. The external review of an audit firm’s quality control system is an example of:

 

 

 

    1. Safeguards reducing the risk of conflict of interest within the audit profession

    2. Safeguards reducing the risk of conflict of interest within a client

    3. Safeguards reducing the risk of conflict of interest within a professional accounting firm

    4. All of the above

    5. (a) and (c) only

 

 

 

 

 

 

 

  1. This organization is developing an international code of conduct for professional accountants:

 

 

 

    1. International Accounting Standards Board

    2. European Federation of Accountants

    3. Financial Accounting Standards Board

    4. Public Accounting Oversight Board

    5. International Federation of Accountants

 

 

 

 

 

 

 

  1. This organization issues auditing standards, carries out inspections of public accounting firms auditing U.S. public clients, and imposes sanctions when applicable:

     

    1. CPAB

    2. PCAOB

    3. SEC

    4. FASB

    5. AICPA

       

       

       

  2. This organization can issue auditing standards in the U.S.:

     

    1. AICPA

    2. FASB

    3. SEC

    4. PCAOB

    5. All of the above

       

       

       

  3. 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:

     

    1. Self-review

    2. Intimidation

    3. Advocacy

    4. Familiarity

    5. Over-dependence

       

       

       

  4. 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:

     

    1. Self-review

    2. Intimidation

    3. Advocacy

    4. Familiarity

    5. None of the above

       

       

       

  5. A new audit client was taken on by a professional accountant’s firm. The fee for this client’s audit engagement is significantly lower than that charged by the prior accountants. This situation could result in the following threat to professional independence:

     

    1. Self-review

    2. Intimidation

    3. Advocacy

    4. Familiarity

    5. None of the above

       

       

      Chapter 7 Multiple Choice Questions

      ____________________________

       

       

  6. The following duties are essential to maintaining a fiduciary relationship in the accounting profession:

     

    1. Development and maintenance of required knowledge and skills

    2. Maintenance of trust

    3. Maintenance of an acceptable personal reputation

    4. All of the above

    5. (a) and (b) only

       

       

       

       

  7. According to Kohlberg, at this stage of moral reasoning, fear of punishment and authorities are a motive for doing right:

     

    1. Pre-conventional

    2. Conventional

    3. Post-conventional

    4. Autonomous

    5. Principled

       

       

       

  8. 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:

     

    1. Pre-conventional

    2. Conventional

    3. Post-conventional

    4. Autonomous

    5. Principled

       

       

       

  9. Which of the following is not a fundamental principle in codes of conduct for professional accountants?

     

    1. Act in the client’s best interest

    2. Objectivity and independence

    3. Maintain the good reputation of the profession

    4. Maintain confidentiality

    5. Not to be associated with misleading information

       

       

       

  10. If a professional accountant is billing an audit client for more hours than those actually worked, he will be violating the following fundamental principle:

     

    1. Objectivity

    2. Professional due care

    3. Integrity

    4. Confidentiality

    5. All of the above

       

       

       

  11. If a professional accountant is auditing a public company and she receives company shares as payment for her audit services, she will be violating the following fundamental principle:

     

    1. Integrity

    2. Objectivity

    3. Professional due care

    4. Confidentiality

    5. All of the above

       

       

       

  12. 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:

     

    1. Integrity

    2. Objectivity

    3. Professional due care

    4. Confidentiality

    5. All of the above

       

       

       

  13. The adoption of the following measures would reduce the expectation gap and lessen public misunderstanding of the auditor's role

 

 

 

    1. Publish a statement of management responsibility

    2. Auditor to report annually to audit committee

    3. Expand audit report to clarify auditor's role and the level of assurance

    4. (a) and (b)

    5. (a) and (c)

 

 

 

 

 

 

 

  1. The recommendation of appointment and review of the external auditors by the audit committee is an example of:

 

 

 

    1. Safeguards reducing the risk of conflict of interest created by the profession, legislation, or regulation

    2. Safeguards reducing the risk of conflict of interest between an auditor and management

    3. Safeguards reducing the risk of conflict of interest within a professional accounting firm’s own systems and procedures

    4. All of the above

    5. (a) and (c) only

 

 

 

 

 

 

 

  1. 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:

 

 

 

    1. Safeguards reducing the risk of conflict of interest created by the profession, legislation, or regulation

    2. Safeguards reducing the risk of conflict of interest within a client

    3. Safeguards reducing the risk of conflict of interest within a professional accounting firm

    4. All of the above

    5. (a) and (c) only

 

 

 

 

 

 

 

  1. The external review of an audit firm’s quality control system is an example of:

 

 

 

    1. Safeguards reducing the risk of conflict of interest within the audit profession

    2. Safeguards reducing the risk of conflict of interest within a client

    3. Safeguards reducing the risk of conflict of interest within a professional accounting firm

    4. All of the above

    5. (a) and (c) only

 

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