BUSI 604 Chapter 1
The Public Interest Principle in the AICPA Code of Professional
Conduct recognizes:
The importance of integrity in decision making
The importance of loyalty to one's superior
The importance of whistleblowing when financial wrongdoing exists
The importance of maintaining confidentiality
a. The importance of integrity in decision making
Michael Josephson, founder of the Josephson Institute of Ethics, is
credited for developing:
Book of virtues
Care and response orientation
Six Pillars of Character
Rights theory
c. Six Pillars of Character
Learning Objective: 01-03 Describe how the pillars of character support
ethical decision making.
Objectivity requires that a CPA should:
Maintain a mental attitude of intellectual honesty and independence
Maintain a mental attitude of intellectual honesty and impartiality
Act in accordance with the best interests of one's client
Act in accordance with the best interests of one's employer
b. Maintain a mental attitude of intellectual honesty and impartiality
Which of the following situations would be considered ethical?
The cashier at Wal-Mart gives you $5 more than you were supposed
to receive and you don't do anything about it
You accidentally back into a car at
Wal-Mart and leave your information for them to call
Receiving fake $20 bills and using them in a store while knowing
they are fake
Finding a phone in a restaurant and keeping it
b. You accidentally back into a car at Wal-Mart and leave your information for
them to call
The relationship between legal and ethical can best be expressed
as:
Always follow the law regardless of consequences for others
Ethical behavior requires less than legal behavior
Legal and ethical are the same thing
Ethical behavior requires us to do more than required by the law
and less than the law allows
d. Ethical behavior requires us to do more than required by the law and less
than the law allows
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:
Loyalty
Integrity
Caring
Objectivity
b. Integrity
Which of the following characteristics does NOT describe the
behavior of Cynthia Cooper in the WorldCom fraud?
Persistence
Competence
Integrity
Conformity
d. Conformity
Decisions that are made based on the underlying circumstances of a
particular matter can be best characterized by:
Ethical Collectivism
Situational ethics
Ethical relativism
Judgmental Individualism
b. Situational ethics
A danger of situational ethics is that it can be used to rationalize a
wrong-doing. Such rationalizations may be seen in all of the
following examples except:
Cheating at the University of North Carolina
Penn State scandal
Betty Vinson's actions at World Com
DigitPrint case discussed in the chapter
d. DigitPrint case discussed in the chapter
Ty is a rising star at Texas State Country & Western Stores. He is the
controller of the company. His wife, Rosie, is the lead auditor of the
CPA firm that examines Country & Western's financial statements
and issues an audit opinion. Given the nature of the relationships,
Rosie would violate what ethical standard if she is allowed to
conduct the audit:
Integrity
Due care
Independence
Responsibility
c.Independence
Which of following is false of active social networkers?
They are less likely to blow the whistle than coworkers.
They witness more misconduct among their coworkers.
They experience more retaliation when they report their colleagues.
They act with integrity with effective training on the use of social
networks.
a. They are less likely to blow the whistle than coworkers.
An accountant who blows the whistle on financial wrongdoing by
his/her employer by going outside the entity violates:
The due care principle
Confidentiality
One's reliability obligation
Public interest obligation
b.Confidentiality
In the Cleveland Custom Cabinets case, the owner of the company
thought it was all right to manipulate the financial statement
numbers primarily because:
He wanted to improve earnings to increase the share price of
company stock
The treatment recommended by the owner for estimating overhead
conformed to GAAP
He was the sole owner of the company and controlled the board of
directors
He got approval from the auditors
c. He was the sole owner of the company and controlled the board of
directors
If one's reputation is tainted it may create a:
Conflict of interests
Loss of independence
Lack of trust
Loss of objectivity
c. Lack of trust
The most important duty of public accounting is to the:
Securities Exchange Commission
Current stockholders
Management
Investing public
d. Investing public
The country with the highest Power Distance score is:
United States
United Kingdom
Japan
Russia
d. Russia
Jason is the fastest worker on the audit of a company for the firm
Zits LLP. Other Zits workers take twice as long to complete the
equivalent amount of work as Jason. One day Jason is approached by
the other workers and is asked to slow down "You are exceeding the
time budget for the audit and making the rest of us look bad," said
one staff member. From an organizational, ethical point of view, the
best thing for Jason to do is:
Tell the other staff members that he will use the time he saves on
his budget to help them to meet their budget by picking up their
slack
Approach the supervisor to discuss the pressure of fellow staff to
slow down on doing audit work
Explain to the other staff members that he works diligently and they
should do the same
Tell the other staff members to mind their own business
b. Approach the supervisor to discuss the pressure of fellow staff to slow
down on doing audit work
Ethical relativism can best be described as a:
Point of view that morality is relative to the norms of one's culture.
Concept that holds that integrity should be maintained in the face
of pressure by others.
An ethical reasoning method that holds one should always act out of
self-interest.
An ethical reasoning method that holds one should always consider
the effect of one's actions on others.
a. Point of view that morality is relative to the norms of one's culture.
In the Capitalization versus Expensing case the main ethical issue is
whether Gloria Hernandez should:
Capitalize or expense $1 million of expenditures
Report her superiors' actions to the CEO
Talk to the audit committee about the pressure imposed by her
supervisor
Become a whistle blower
a. Capitalize or expense $1 million of expenditures
The credibility standard in the Statement of Ethical Professional
Practice of the IMA requires that an accounting professional should:
Communicate information fairly and objectively
Disclose all relevant information that might affect the intended
user's understanding of the reports, analyses or recommendations
Disclose delays or deficiencies in information, timeliness, processing
or internal controls in conformance with organization policy and the
law
All of the above
d. All of the above
Learning Objective: 01-07 Apply the IMA Statement of Ethical and
Professional Practice to a case study.
In the Better Boston Beans case, what is the ethical dilemma facing
Cyndie?
Loyalty of co-worker versus trust of co-worker
Trust of co-worker versus the honesty of the workplace
Honesty of the workplace versus the privacy of an individual
Privacy of an individual versus loyalty of co-worker
b. Trust of co-worker versus the honesty of the workplace
Virtue ethics emphasizes development of good habits of character.
What should be the greatest reward of practicing good habits of
character, according to MacIntyre?
External rewards
Loyalty from others
Internal rewards
Authority of rules
Learning Objective: 01-04 Differentiate between moral philosophies
and their effect on ethical reasoning in accounting.
c. Internal rewards
This philosophy is called virtue ethics, and it posits that what is moral in a
given situation is not only what conventional morality or moral rules require
but also what a well-intentioned person with a "good" moral character would
deem appropriate.
MacIntyre relates virtues to the internal rewards of a practice (i.e., the
accounting profession)
Janice is a staff accountant in the accounting firm of Obama and
Biden. She is assigned to the audit of HealthCare Associates. On the
very first day Janice noticed that the accounting manager of the
client took money out of the petty cash fund and put it in his
pocket. The best action for Janice to take is:
Ignore the situation because Janice doesn't know why the manager
pocketed the money
Inform her immediate supervisor of what she observed
Tell another staff accountant who is a friend and ask for her advice
Tell the superior of the accounting manager what she has observed
b.
Inform her immediate supervisor of what she observed
Utilitarian philosophers are divided into two types: act utilitarian
and
rule utilitarian.
egoistic utilitarian.
ethical utilitarian.
beneficial utilitarian.
a. rule utilitarian.
Act
Evaluate whether the intended action provides the greatest net benefits.
Rule
Select the action that conforms to the correct moral rule that produces the
greatest net benefits.
When making a donation at the local Goodwill, Martha tells the clerk
that her old computer is in perfect working order when she knows it
is not, just so she can deduct more on her taxes. Which theory best
describes Martha's behavior?
Utilitarianism
Deontology
Egoism
Justice
c.Egoism
Egoism
Defines "right" behavior by consequences for the decision maker.
Enlightened Egoism
Considers well-being of others within the scope of deciding on a course of
action based on self-interest.
The biggest problem in implementing a utilitarian approach to
decision making is:
The interests of others may be subservient to self-interests
It fails to consider the interests of others
It can be difficult to weigh all the consequences of actions
It relies on moral absolutes
d. It can be difficult to weigh all the consequences of actions
Which of the following is true of the relationship between civility
and ethics?
One can be both ethical and uncivil.
One can be both civil and unethical.
One can use others, be a bully and be ethical.
One can have empathy and caring for others and be uncivil towards
them.
b. One can be both civil and unethical.
Can you be civil and not entirely ethical? Can you be ethical and not terribly
civil? The answer to the first is a qualified "yes." You can be well behaved
and gracious to others but still be motivated by non-ethical values such as
greed. The problem is you may wind up using others to advance your self-
interests.
Social networking is the norm for many workers, and some workers
spend at least 30 percent of their workday linked up to one or more
networks. The Ethics Resource Center conducted a survey in which
social networkers admitted each of the following except:
They think about risks before posting online.
They comment on their personal sites about their company if it was
in the news.
They often comment on their personal sites about managers,
coworkers, and even clients.
They always consider the consequences of their postings on others.
d. They always consider the consequences of their postings on others.
A difficult choice between two moral principles that are in conflict
with one another is known as a/an:
ethical relativism
situational ethics
ethical dilemma
conflict ethics
c. ethical dilemma
Sally is the only student from a foreign country in an Auditing class.
On the day of the midterm exam, Sally asks the teacher whether she
could use a dictionary to translate English words to her native
tongue so she can better understand the questions. What do you
think the instructor should do if she follows the ethical principle of
justice?
Allow Sally to use the dictionary since she is at a disadvantage
Not allow Sally to use the dictionary because she should know
enough English to get by
Allow the other students to bring in some tool to give them an
advantage
None of the above
a. Allow Sally to use the dictionary since she is at a disadvantage
Which of the following is NOT an element of trustworthiness
according to the Six Pillars of Character?
Reliability
Loyalty
Fairness
Honesty
c. Fairness
1. Trustworthiness (The dimensions of trustworthiness include being honest,
acting with integrity, being reliable, and exercising loyalty in dealing with
others.)
Civility requires all but the following:
Restraint
Politeness
Respect
Disregard
d. Disregard
Bob is being pressured by his superior to go along with improper
accounting and told he is expected to be a team player. Which of the
following statements best characterizes those expectations?
Independence
Confidentiality
Loyalty
Utilitarianism
c. Loyalty
In the Harvard Cheating scandal case, using ethical reasoning who
is at fault for the situation?
The professor
Teaching assistants
Students who cheated
All of the above
d. All of the above
The method of ethical reasoning that requires selecting the correct
moral rule that produces the greatest benefits over harms is:
Act Utilitarianism
Rule Utilitarianism
Rights Theory
Justice
b. Rule Utilitarianism
Act
Evaluate whether the intended action provides the greatest net benefits.
Rule
Select the action that conforms to the correct moral rule that produces the
greatest net benefits.
The biggest problem in applying virtue theory to decision making is:
It can be difficult to identify virtues
It relies on moral absolutes in decision making
It can be difficult to determine virtues to distinguish equals from
unequal claims in decision making
Conflicts between virtues may make decision making more difficult
d. Conflicts between virtues may make decision making more difficult
The motive of "duty" is most associated with _________.
Egoism
Deontology
Utilitarianism
Justice
b. Deontology
Rights Theory
Considers "rights" of stakeholders and related duties to them.
Treats people as an end and not merely as a means to an end.
Universality Perspective: Would I want others to act in a similar manner for
similar reasons in this situation?
In the Lone Star School District case, the auditors were mostly
concerned about:
The behavior of a staff member toward client personnel
The falsification of the financial statements
The lack of independence of the audit team
The lack of documentation for travel and entertainment expenses
d. The lack of documentation for travel and entertainment expenses
Jose and Emily work as auditors for the state of Texas. They have been
assigned to the audit of the Lone Star School District. There have been some
problems with audit documentation for the travel and entertainment
reimbursement claims of the manager of the school district.
In the Shifty Industries case, the primary ethical issue can be stated
as:
Whether an accountant should claim a higher section 179 deduction
($100,000) than allowed by law.
Whether an accountant should claim any section 179 deduction or
not.
Whether an accountant should claim inflated expenses on the
company tax return.
Whether an accountant should claim a section 179 deduction
($25,000) as allowed by law.
a. Whether an accountant should claim a higher section 179 deduction
($100,000) than allowed by law.
In the Giles and Regas case, the primary ethical issue can be stated
as:
Whether a subordinate should blow the whistle on a superior who
has violated ethical policy
Whether two staff members of the same rank should be allowed to
date
Whether a superior should become involved in a dating relationship
with a subordinate
Whether a student should renege on the acceptance of an offer from
one firm after receiving an offer from a second firm
c. Whether a superior should become involved in a dating relationship with a
subordinate
Ed Giles and Susan Regas have never been happier than during the past four
months since they have been seeing each other. Giles is a 35-year-old CPA
and a partner in the medium-sized accounting firm of Saduga & Mihca. Regas
is a 25-year-old senior accountant in the same firm.
Internal rewards of accounting practice include:
Wealth and prestige
Success and power
Integrity and Excellence
Achievement and notoriety
c. Integrity and Excellence
Which of the following elements does NOT make up an integral part
of what is meant by "ethics"?
Accepted standards of behavior
Knowing the difference between right and wrong
Always following the law
The moral point of view
c. Always following the law
What is the one virtue that people should want in a boss, to trust a
boss?
Diligence
Commitment
Honesty
Sense of humor
Honesty
Teleology deals with:
Consequences of actions
Fairness to others
Respecting the rights of others
Following prescribed virtue characteristics
a. Consequences of actions
