Course Introduction
Accounting Ethics
Chapter Exam Questions
Accounting Ethics explores the moral and ethical responsibilities of accounting professionals in various business settings. This course examines the fundamental principles of ethical behavior, standards set by regulatory bodies, and the consequences of unethical practices in accounting. Topics include integrity, objectivity, confidentiality, professional skepticism, and adherence to codes of conduct, as well as real-world case studies involving ethical dilemmas. Students learn how ethical decision-making impacts financial reporting, auditing, corporate governance, and the public trust in the accounting profession.
Recommended Textbook
Ethical Obligations and Decision Making in Accounting Text and Cases 2nd Edition by Mintz
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Page 2
Chapter 1: Ethical Reasoning Implications for Accounting
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Sample Questions
Q1) The ethical principle "Act only as you would want everyone to act in the same situation" is stated by:
A)Kohlberg's justice orientation
B)Kant's categorical imperative
C)Gilligan's care and response orientation
D)Plato's virtue manifest
Answer: B
Q2) The philosophical belief that you should judge the result, not the action (end justifies the means) is?
A)Utilitarianism
B)Deontology
C)Justice
D)Virtue ethics
Answer: A
Q3) The motive of "duty" is most associated with ___________.
A)Rights
B)Deontology
C)Utilitarianism
D)Justice Answer: B
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Chapter 2: Accountants Ethical Decision Process and Professional Judgment
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Sample Questions
Q1) Keesha is the CEO of a publicly-owned company.She was informed by the CFO that the company's earnings were down 30 percent from the prior year due to the recession.The company's stock price has declined by 20 percent.The CFO comes up with a scheme to hide debt and inflate revenues by selling underperforming assets to a special purpose entity affiliated with the company.Keesha is concerned about possible affects on the creditors but ultimately she agrees to the accounting.Keesha is reasoning at:
A)Stage 1
B)Stage 2
C)Stage 3
D)Stage 4
Answer: B
Q2) The ethical dilemma for Brenda in "The Tax Return" case can best be described as a:
A)Conflict between loyalty to one's supervisor and doing the right thing
B)Conflict between reporting an item of taxable income and ignoring it
C)Lack of independence due to ties to the client entity
D)All of the above
Answer: A
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Chapter 3: Corporate Governance and Ethical Management
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Sample Questions
Q1) Each of the following is part of the New York Stock Exchange listing requirements except for:
A)All directors must be independent of management
B)Audit committees must consist of at least three members all of whom are independent of management and the entity
C)The audit committee should report regularly to the board of directors
D)Each listed company must have an internal audit function
Answer: A
Q2) The stakeholder view emphasizes the obligations of management to:
A)The shareholders
B)The shareholders and creditors
C)All parties impacted by corporate decisions in a significant way
D)The board of directors
Answer: C
Q3) In an ethical decision making model, the first step is
A)Know how to protect yourself
B)Look at the stakeholders involved
C)Frame the ethical issue
D)Determine all alternative actions
Answer: C
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Chapter 4: Aicpa Code of Professional Conduct
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Sample Questions
Q1) Each of the following is an outright restriction on providing nonattest services for an attest client except for:
A)Tax services
B)Financial information systems design and implementation
C)Appraisal or valuation services
D)Internal audit outsourcing services
Q2) Sarah is an audit senior with Childs, Maxwell and Weaver, LLP.Sarah specializes in auditing loan loss reserve for financial institution clients.This current year she has noticed that two of her financial institutions in town have written loans off to a loan customer, Mr.T (fictional name to protect the guilty).Mr.T is well known in town as a highly successful real estate developer and businessman with many different business dealings.As Sarah is auditing on her third financial institution in town, she notices that the bank has loans of $3.5 million outstanding to Mr.T.The current loan loss reserve could not cover the losses on Mr.T's loans.Sarah has recommended a significant increase to the loan loss reserve account.The client will not discuss increasing the loan loss reserve.Ms.Childs, senior partner on the audit, wants to know how the audit firm can justify the increase loan loss reserve account.What can and should Sarah disclose about Mr.T?
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Chapter 5: Audit Responsibilities and Accounting Fraud
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Sample Questions
Q1) Management's attitude toward aggressive financial statement reporting and its emphasis on meeting projected profit numbers would significantly influence an entity's control environment when
A)Internal auditors report to the audit committee
B)The audit committee is active in overseeing the entity's financial reporting
C)Management is dominated by one shareholder with little other governance
D)Management does not have a stock option plan
Q2) All of the following are in a position to commit fraud except for:
A)Employees who have access to assets
B)Top management who can override internal controls
C)External auditors who manipulate the amounts recorded in the financial statements
D)All of the above are in a position to commit fraud
Q3) In the Imperial Valley Thrift & Loan case, each of the following were reasons for the going concern issue except for:
A)The magnitude of loan losses
B)Insufficient equity capital
C)Operating losses over an extended period of time
D)Questions about the collectability of outstanding loans
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Chapter 6: Legal and Regulatory Obligations in an Ethical Framework
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Sample Questions
Q1) The term "manipulative" connotes
A)Gross negligence
B)Constructive fraud
C)Nonfeasance which results in investor losses
D)Intentional or will conduct designed to deceive
Q2) Under the Private Securities Litigation Reform Act, if an auditor concludes that an illegal act with a material effect on the financial statements has been reported to, but not dealt with by senior management, the auditor should then report his/her conclusions to
A)The Securities and Exchange Commission
B)The company's board of directors
C)The office of the controller/comptroller for the appropriate state
D)The Federal Bureau of Investigation
Q3) When courts find accountants liable for constructive fraud, the implication is that
A)Auditors should always be liable when investors lose money due to deceit
B)Accountants may be liable for fraud even when they had no knowledge of deceit
C)Auditors should be able to detect all deceit by management
D)Accountants may be held liable even to third parties to whom they did not have a duty
Page 8
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Chapter 7: Earnings Management and the Quality of Financial Reporting
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Sample Questions
Q1) Use the fraud triangle to evaluate the actions by those in top management at Enron as the accounting fraud unfolded.
Q2) The main accounting issues in the Nortel Networks case were:
A)Premature revenue recognition and hidden cash reserves
B)Capitalization of operating expenses and hidden cash reserves
C)Premature revenue recognition and off-balance-sheet entities
D)Capitalization of operating expenses and off-balance-sheet entities
Q3) Which of the following author(s) emphasize(s) a "purposeful act by management in pursuit of its own self-interests as might be the case when earnings are manipulated to get the stock price up in advance of the exercise of stock options."?
A)Dechow and Skinner
B)Healy and Wahlen
C)Schipper
D)Thomas
E)McKee
Q4) The quality of financial reporting is an important issue in the chapter.Explain how and why the quality of financial reporting is an underlying issue in the frauds discussed in the chapter.
Q5) Explain when earnings management may be an ethical practice.
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Chapter 8: International Financial Reporting: Ethics and Corporate Governance Considerations
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Sample Questions
Q1) In the SEC v.Siemens Aktiengesellschaft case, each of the following charges were made against the company's Managing Board except for:
A)The Board failed to ensure that Siemens met the U.S.regulatory and anti-bribery provisions of the Foreign Corrupt Practices Act
B)The Board failed to meet its obligations with respect to compliance procedures at Siemens
C)The Board failed to adequately supervise the auditors of Siemens
D)The Board created a corporate culture that contributed toward tolerating and even rewarding bribery
Q2) One way to characterize the term "true and fair view" is that:
A)It is used to determine which international auditing standards should be used.
B)It is used to assess whether the entity has met the comply or explain provisions in corporate governance codes.
C)It is a governing criterion by which financial statements are to be judged.
D)All of the above.
Q3) Compare and contrast corporate governance provisions in the U.S.with those in Germany? Where differences exist, evaluate whether you think the U.S.system is preferable or the German system.
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