Applied Ethics for Accountants Exam Review
Course Introduction
Applied Ethics for Accountants examines the ethical principles and frameworks relevant to the accounting profession, providing students with the tools to recognize, analyze, and resolve ethical dilemmas encountered in real-world accounting practice. The course covers key topics such as professional codes of conduct, corporate social responsibility, integrity in financial reporting, and the ethical implications of emerging technologies. Through case studies and practical scenarios, students will learn to apply ethical reasoning to issues involving conflict of interest, confidentiality, fraud, and stakeholder responsibility, preparing them to make sound decisions that uphold public trust and professional standards.
Recommended Textbook
Ethics In Accounting A Decision Making Approach 1st Edition by Gordon Klein
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16 Chapters
513 Verified Questions
513 Flashcards
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2
Chapter 1: Introduction to Ethics
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26 Verified Questions
26 Flashcards
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Sample Questions
Q1) Membership in the AICPA:
A) Automatically makes a CPA a member of IFAC as well
B) Automatically subjects a CPA to the ethical rules established by the IFAC Code as well
C) Does not entitle a CPA to join IFAC
D) Entitles a CPA to join IFAC upon payment of additional dues
Answer: C
Q2) The rules of the AICPA are required to be:
A) Identical to the rules of the IFAC
B) Developed by the international professional accounting community through IFAC and then applied through the IFAC to professional accountants practicing in the United States
C) More rigorous than IFAC's rules due to the mandates imposed by American stock exchange trading rules
D) Never more lenient that the rules of the IFAC
Answer: D
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3
Chapter 2: Ethical Principles and Reasoning
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41 Flashcards
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Sample Questions
Q1) In Kohlberg's Six Stages of Moral Development,striving to act in accordance with laws occurs at:
A) Stage 2
B) Stage 4
C) Stage 5
D) Stage 6
Answer: B
Q2) Carol Gilligan's key thesis is that:
A) Women are less willing to violate laws and established societal norms than men are B) Women are less willing to engage in risky, unethical behavior than men are
C) Women are more focused on principles of compassion than principles of justice
D) Women have greater compassion for those who deviate from ethical norms than men have
Answer: C
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Chapter 3: The Core Philosophies
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17 Flashcards
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Sample Questions
Q1) Which of the following typically is not a real-world difficulty of applying utilitarianism?
A) It give undeservedly high weight to human emotion
B) It cannot readily measure societal values, such as the value of eradicating discrimination based on religion
C) It can be difficult to determine if an act makes society better off
D) It focuses on the good of the majority and does not place any value on the protection of minorities' rights
Answer: A
Q2) A focus on the importance of categorical imperatives distinguishes:
A) Utilitarianism from consequentialism
B) Deontology from utilitarianism
C) The philosophies espoused by Kant from deontology
D) The philosophies espoused by Mill from utilitarianism
Answer: B
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Chapter 4: Virtue,justice,and Social Responsibility
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Sample Questions
Q1) Which of the following is,or are,commonly accepted definitions of CSR?
A) A corporation fully complies with all applicable laws and regulations
B) A corporation engages in activities that are both socially responsible and profit-enhancing
C) A corporation engages in activities that are socially responsible, even if they are not profit-enhancing
D) All of the above
Q2) Identify a corporate project that exemplifies corporate social responsibility and explain your rationale.
Q3) Rawls was a proponent of:
A) The universality principle
B) The veil of ignorance
C) The reversibility principle
D) Our current system of federal income tax rates
Q4) Should corporations be required to disclose in SEC filings their expenditures on improving and maintaining the environment?
Q5) Do you believe that societal resource allocations based on Rawls' veil of ignorance should be widely adopted?
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Chapter 5: Why We Cheat
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21 Verified Questions
21 Flashcards
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Sample Questions
Q1) A homeowner would never steal money from her neighbors,but she does not hesitate to cheat on paying her dues owed to the local Homeowners' Association.This homeowner's actions can best be explained by the concept of:
A) Moral compartmentalization
B) Moral reminders
C) The proximity effect
D) The magnitude of the consequences effect
Q2) Your expected gain from cheating is $600.The expected financial penalty from cheating is $300 and the expected probability of your cheating being detected is 25%.You also will experience a loss of self-esteem that has an estimated value to you of $500,whether or not your cheating is detected.You are likely to:
A) Cheat, due to the copycat effect
B) Not cheat, due to moral compartmentalization
C) Cheat, applying the principles expressed by the Becker Rational Model
D) Not cheat because cheating would be irrational
Q3) Why is it important to you for our college's basketball team to win a game against our arch-rival?
Q4) What criticisms do you have of the Becker Rational Model?
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Page 7
Chapter 6: Greed,corruption,and Collusion
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32 Flashcards
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Sample Questions
Q1) If a CPA charges a contingent fee in connection with providing professional services to a review client,the CPA's fee arrangement is:
A) Permissible always
B) Permitted only if the fee arrangement is expressed in a clear writing signed by the client
C) Permitted only if the fee is reasonable in amount
D) Never permissible
Q2) A CPA,acting on behalf of a client company,makes a payment to a foreign government official to ensure that goods that are entitled to be exported into that country are processed more rapidly than other competing shipments into that country are processed.By doing so,the CPA has:
A) Committed a direct violation of the Foreign Corrupt Practices Act's provision concerning "financial professionals and other client representatives"
B) Not jeopardized her professional license
C) Jeopardized her professional license if she also performed sales tax reporting services for that client during the same reporting period
D) Definitely jeopardized her professional license
Q3) Discuss the pros and cons of contingency fees from an accountant's standpoint.
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8
Chapter 7: Fraud and Earnings Management
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25 Flashcards
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Sample Questions
Q1) Your employer operates in an industry in which company pre-tax earnings are expected to increase by 5% next year.Your employer,however,has issued earnings guidance in which it declared that it expects its pre-tax earnings to increase by 11% next year.As a result,which of the following elements of the Fraud Triangle are present?
A) Attitudes
B) Pressure to understate expenses
C) Opportunity to overstate revenues
D) All three elements are present
Q2) Enron's use of Special Purpose Entities led to:
A) Widespread, and wholly unexpected, embezzlements of funds
B) Widespread embezzlements of funds that could had, and should have, been readily anticipated
C) The accounting profession developing the concept of consolidated financial statements
D) Rule changes in GAAP
Q3) What is big bath accounting? How is it abused?
Q4) If the accounting profession were to replace the accrual basis of accounting with the cash basis,do you think that financial accounting fraud would increase or decrease? Defend your viewpoint.
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Chapter 8: Discreditable Acts: Discrimination,deceit,and Disclosure
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29 Verified Questions
29 Flashcards
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Sample Questions
Q1) Under what circumstances are business enterprises allowed to present financial statements that do not conform to GAAP?
Q2) An accountant provides bookkeeping services for a small Limited Liability Partnership client.The client provided the accountant with its general ledger on a password-protected site and the accountant changed the password to one of its own selection for security reasons.From information contained in the general ledger,the accountant developed various tax planning strategies that it created in a password-protected Word document.The CPA has not been paid by the client for its services,but the client nonetheless has demanded that the CPA "turn over control" of the password-protected documents.What are the CPA's obligations?
Q3) Under what circumstances are departures from GAAP permitted?
Q4) Under the Advertising and Other Forms of Solicitation Rule of the AICPA's Code of Professional Conduct,a CPA may not engage in advertising that is:
A) Undignified
B) Unprofessional
C) Deceptive
D) All of the above
Q5) Outside the United States,what constitutes GAAP?
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Chapter 9: Confidentiality
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Sample Questions
Q1) The duty of confidentiality applies to:
A) Spoken communications only
B) Written documents only, whether or not they are in digital or physical form
C) Only written documents that are marked with the word "Confidential" or an equivalent phrase
D) All documents, communications, and observed facts
Q2) The FBI is trying to locate a suspected terrorist.Law enforcement authorities believe that this terrorist currently holds a job and,therefore,has had payroll taxes withheld from his paycheck.Also,this suspected terrorist would have received a W-2 payroll statement form from his employer that references his last-known address.The FBI has asked the IRS to cooperate by disclosing the name of the employer and the last known address of this suspected terrorist.Can the IRS disclose this information?
A) No, due to the duty of confidentiality
B) No, due to the federal taxpayer privilege
C) Yes, because the law permits it
D) Yes, because an employer does not have any privacy duties to its employees regarding qualitative tax information
Q3) Is there a federal accountant-client privilege? What does it cover?
Q4) When should a tax advisor encourage a client to seek legal advice?
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Chapter 10: Independence and Moral Seduction
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36 Verified Questions
36 Flashcards
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Sample Questions
Q1) The advocacy threat to independence exists when:
A) A member of an auditing firm publicly speaks out on behalf of his client
B) A member of an auditing firm makes a clear recommendation to the client
C) A member of an auditing firm makes a recommendation to a client that is skewed in favor of a particular position or outcome
D) A member of an auditing firm confronts an audit client and expresses an opinion that results in a significant disagreement with the client
Q2) A CPA firm is comprised of 100 audit partners.Three of these partners own stock in one of the CPA firm's audit clients,with each such partner owning 2% of the outstanding shares in this client.Does this CPA firm retain the independence to audit this client?
A) Yes, as long as none participate in the audit as the primary or concurring partner
B) Yes, as long as none render non-audit services to this client
C) Yes, as long as none is a "covered member' with respect to this client
D) No
Q3) What are the seven threats to independence identified in the AICPA's Code of Professional Conduct? Give examples of each.
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Page 12
Chapter 11: Conflicts of Interest
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Sample Questions
Q1) The concept of "moral licensing," in the context of conflicts of interest,relates to:
A) A person receiving actual consent to proceed in a professional relationship, despite the potential for a conflict of interest to arise
B) A person receiving implied consent to proceed in a professional relationship, despite the potential for a conflict of interest to arise
C) A person who potentially will benefit from a conflict of interest agreeing to make periodic payments to reimburse any party who is adversely affected by the conflict of interest
D) A person making exaggerated claims about goods or services after having disclosed influences that create the appearance of a conflict of interest
Q2) What is "discounting," as that term is used in the context of conflicts of interest?
Q3) When can a CPA provide services to all partners in a client partnership? When can it not provide services to all client partners without obtaining their consent?
Q4) What is an apparent conflict of interest? Provide an example.
Q5) What is "implied consent," in the context of conflicts of interest?
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Page 13
Chapter 12: Duties As a Whistleblower
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Sample Questions
Q1) A "qui tam" court case can proceed to court only if:
A) A private citizen has, or can arrange to have, adequate resources for pursuing the claim
B) The government grants its approval for the lawsuit to proceed
C) The government first refuses to pursue the case on its own initiative
D) The government and the private citizen reach a joint agreement concerning the sharing of winnings and costs of litigation
Q2) What factors should a potential whistleblower consider before actually deciding to divulge information to a workplace authority? Do the factors that a potential whistleblower should consider depend on whether they are divulging information to a workplace authority rather than a governmental authority?
Q3) Why is whistleblowing a relatively recent phenomenon?
Q4) Private citizens benefit financially from a "qui tam" lawsuit only if a lawsuit is initiated under the False Claims Act on behalf of the federal government.If individuals pursuing this type of legal action were entitled to keep 90% of the winnings,how do you believe society would change?
Q5) What factors do you believe contribute to a person developing a sense of altruism toward others?
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Chapter 13: Duties of Public-Company Auditors: the
Sarbanesoxley Act
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45 Verified Questions
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Sample Questions
Q1) Under the Sarbanes-Oxley Act,the decision whether to have a concurring audit partner on an audit engagement,in addition to the lead audit partner,is:
A) A decision that solely is made by the audited company's Audit Committee
B) A decision that is made solely by the lead audit partner
C) A decision that is made jointly by the audited company's Audit Committee, in consultation with the lead audit partner
D) A compulsory provision in the law
Q2) The PCAOB is:
A) A self-regulatory body
B) A regulatory body that solely is in charge of developing standards that govern audits of publicly traded companies
C) A regulatory body that, jointly with the AICPA, develops auditing standards that govern audits of publicly traded companies
D) A regulatory body that sets and, when necessary, enforces ethical standards for all CPAs
Q3) What is the "one-year waiting period" rule established by Sarbanes-Oxley? Do you believe that the scope of this rule is adequate?
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Page 15
Chapter 14: Duties of Tax Professionals
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Sample Questions
Q1) The use of estimates on a tax return should be prominently disclosed on the face of the tax return if:
A) The estimates involved deductions for meals and entertainment
B) The estimates involved business-related automobile usage
C) The taxpayer was unavailable to participate in the tax return preparation process due to illness or death
D) The estimates result in a change in a taxpayer's tax liability by "a sum equal to or greater than $1,000"
Q2) The "reasonable possibility of success" standard commonly is associated with "1 out of 3" odds of success.These odds refer to the likelihood of success:
A) After the IRS has detected and challenged an asserted tax position
B) Taking into account the fact that the IRS may not detect a questionable tax position
C) Taking into account the fact that the IRS may detect a questionable tax position, but not challenge it due to limited government resources
D) Of the taxpayer achieving the beneficial tax savings desired from the asserted position
Q3) When does "substantial authority" exist for a tax return position?
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Chapter 15: Duties of Fiduciaries: Financial
Planners,trustees,and Executors
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30 Verified Questions
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Sample Questions
Q1) Why would a person create a blind trust?
Q2) When an accountant acts as a trustee of a split-interest trust,which of the following fiduciary duties applies to the accountant?
A) Only the duty of impartiality
B) Only the duty of care
C) Only the duty of loyalty
D) All of the above
Q3) An auditor that properly satisfies the Independence Rule will,with regard to an audit client:
A) Never be a fiduciary
B) Always be a fiduciary
C) Be a fiduciary if the audit client is a bank or other so-called public-interest client
D) Be a fiduciary if the audit client poses an undue influence threat
Q4) A CPA is most likely to be held to the standards of a fiduciary when she:
A) Performs tax accounting services
B) Serves as investment fund manager
C) Performs attest services other than audits
D) Performs audits
Q5) Why would a person want to create a living trust?
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Chapter 16: Duties in the Accounting Workplace Online Only
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Sample Questions
Q1) Prior to hiring a new professional staff member,an auditing firm checks public records to see if a prospective employee has ever been convicted of insider trading? Is this ethical?
Q2) An employer spends substantial sums training its employees.This employer has determined that it is not economical to make these training expenditures if a new employee is likely to quit within the first three years of employment.Is it ethical for an employer,prior to hiring a new employee,to inquire of prospective female employees if they plan to give birth to a child during the upcoming three years? (Do not discuss the law.)
Q3) "Employment at will" means that:
A) An audit client may terminate its auditor without giving the auditor advance notice
B) A tax return preparation service may terminate an employee only for engaging in willful misconduct
C) A corporation may terminate a member of its accounting staff without giving the staff member advance notice
D) An employer only may terminate an employee if the employee will receive adequate severance pay or unemployment compensation
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