Auditing and Professional Ethics Exam Preparation Guide

Course Introduction

Auditing and Professional Ethics explores the principles, procedures, and practices involved in the independent examination of financial statements to ensure their accuracy, reliability, and compliance with regulatory standards. The course covers various auditing techniques, risk assessment, internal control evaluation, and audit evidence collection. Additionally, it emphasizes the ethical responsibilities and professional conduct expected of auditors, addressing issues such as integrity, objectivity, confidentiality, and independence. Students will develop a comprehensive understanding of the framework governing the auditing profession and learn how ethical considerations shape decision-making processes in real-world scenarios.

Recommended Textbook

Ethical Obligations and Decision Making in Accounting Text and Cases 4th Edition by Steven Mintz

Available Study Resources on Quizplus

8 Chapters

624 Verified Questions

624 Flashcards

Source URL: https://quizplus.com/study-set/2603 Page 2

Chapter 1: Ethical Reasoning: Implications for Accounting

Available Study Resources on Quizplus for this Chatper

88 Verified Questions

88 Flashcards

Source URL: https://quizplus.com/quiz/51867

Sample Questions

Q1) The main issue in the Reneging on a Promise case is:

A)Should the student who accepted an offer from one CPA firm back off from that promise in order to accept the offer of another firm deemed more preferable to the student

B)Should Regas back off from the dating relationship she developed with Giles

C)Should the CPA firm renege on its offer of employment to a student after realizing it made one offer too many to student candidates for staff positions

D)Should Tybell quit the firm because of conflicts with his superiors

Answer: A

Q2) Which of the following elements is not an integral part of Rights Theory?

A)Act based on the consequences of one's actions on others

B)Treat people as an end and not merely as a means to an end

C)Act in a way you would want others to act in similar situations

D)Act in a way that is universally accepted

Answer: A

To view all questions and flashcards with answers, click on the resource link above.

Chapter 2: Cognitive Processes and Ethical Decision

Making in Accounting

Available Study Resources on Quizplus for this Chatper

65 Verified Questions

65 Flashcards

Source URL: https://quizplus.com/quiz/51866

Sample Questions

Q1) The ethical dilemma for Ricardo in the Juggyfroot case can best be described as:

A)Whether to go along with Fred and Ethel's accounting for the loss in value on marketable securities.

B)Whether to let his failure to object to inappropriate accounting in the prior year influence whether he goes along with inappropriate accounting in the current year.

C)Whether to quit the firm because of the pressure placed on him by his boss to go along with inappropriate accounting.

D)Whether to blow the whistle on the inappropriate accounting sanctioned by the firm.

Answer: B

Q2) What is an important part in making an ethical choice,according to Kidder?

A)Knowledge

B)Loyalty

C)Courage

D)Trustworthiness

Answer: C

To view all questions and flashcards with answers, click on the resource link above. Page 4

Chapter 3: Organizational Ethics and Corporate Governance

Available Study Resources on Quizplus for this Chatper

86 Verified Questions

86 Flashcards

Source URL: https://quizplus.com/quiz/51865

Sample Questions

Q1) An example of revenue overstatement is:

A)Manipulating reserves

B)Recording gross,rather than net,revenue

C)Reporting cost of sales as a non-operating expense

D)Deferring revenue

Answer: B

Q2) Which of the following is NOT an element of the corporate governance system?

A)Board of directors

B)Internal controls

C)Executive compensation policies

D)Monitoring by top management

Answer: D

Q3) The Ethical Dissonance Model helps to evaluate:

A)Whether the organization sets an ethical tone at the top

B)Whether the organization has ethical leadership

C)Whether the organization has a whistle-blowing process

D)Whether the organization's ethics aligns with individual ethics

Answer: D

To view all questions and flashcards with answers, click on the resource link above. Page 5

Chapter 4: Ethics and Professional Judgment in Accounting

Available Study Resources on Quizplus for this Chatper

100 Verified Questions

100 Flashcards

Source URL: https://quizplus.com/quiz/51864

Sample Questions

Q1) In the PeopleSoft case,the auditors violated what aspect of independence?

A)The auditor borrowed money from the client

B)The auditor was exposed to an intimidation threat by the client

C)The auditor was involved in a business relationship with the client

D)The auditor served in a management decision making position with the client

Q2) Which of the following statements best reflect the ethical obligation of CPAs with respect to working with outside advertising agencies to market professional services for the CPA?

A)Make sure that advertising is done professionally

B)Prohibit advertising on social media

C)Make sure the agency does not do anything that would put you in violation of the ethics rules

D)Prohibit statements about the scope of professional services

Q3) Discuss how professional skepticism relates to conducting a proper audit and meeting ethical obligations under the AICPA Code.

Q4) A young man by the name of Mr.Hicks works at an accounting firm which has a written ethics code of conduct.The code specifically outlines the duties and obligations that every employee must follow without question.One of rules states that every accountant should not lie under any circumstances.

To view all questions and flashcards with answers, click on the resource link above. Page 6

Chapter 5: Fraud in Financial Statements and Auditor

Responsibilities

Available Study Resources on Quizplus for this Chatper

80 Verified Questions

80 Flashcards

Source URL: https://quizplus.com/quiz/51863

Sample Questions

Q1) An example of fraudulent financial statements is:

A)Misrepresentation of events,transactions,and other significant events in the financial statements

B)Failure to provide adequate documentation to support financial statements assertions

C)Aggressive accounting for transactions,events,or other significant matters

D)Misappropriation of assets

Q2) In the ZZZZ best case,Barry Minkow was charged with:

A)A fraudulent insurance restoration scam

B)Insider trading on Lennar stock

C)Stealing from a San Diego church

D)Overcharging a LA housewife for carpet cleaning services

Q3) One difference between the AICPA auditor's report and that of the PCAOB is:

A)The PCAOB report is not signed by the auditor

B)The AICPA report is not signed by the auditor

C)The PCAOB report does not have section headings

D)Both reports are the same

Q4) Explain the link between the opportunity to commit fraud and corporate governance systems.

Page 7

To view all questions and flashcards with answers, click on the resource link above.

Chapter 6: Legal, Regulatory, and Professional Obligations of Auditors

Available Study Resources on Quizplus for this Chatper

81 Verified Questions

81 Flashcards

Source URL: https://quizplus.com/quiz/51862

Sample Questions

Q1) In the case of Equity Funding,the audit client:

A)Fraudulently recorded inventories that did not in fact exist

B)Inflated its earnings by recording fictitious sales of insurance policies

C)Moved liabilities off the balance sheet by using thousands of subsidiaries

D)Recorded inventory below cost,therefore understating costs of goods sold and overstating net income

Q2) In the Advanced Battery Technologies case,the opinion of the court:

A)Held the auditors legally liable because they failed to exercise due care and to demonstrate professional skepticism

B)Held the auditors legally liable because they failed to gather sufficient,competent evidential matter to warrant the expression of an opinion

C)Held the auditors not legally liable because the plaintiff could not plead with particularity that the audit work was so deficient as to amount to no audit at all

D)Held the auditors were not legally liable because they met all professional standards

Q3) Cite specific cases to support your answer to question 1 about the differences between common law and statutory law legal liability of auditors.

To view all questions and flashcards with answers, click on the resource link above.

Page 8

Chapter 7: Earnings Management

Available Study Resources on Quizplus for this Chatper

69 Verified Questions

69 Flashcards

Source URL: https://quizplus.com/quiz/51861

Sample Questions

Q1) The main difference between a discretionary and nondiscretionary accrual is:

A)Discretionary accruals are items that management has full control over

B)Discretionary accruals are based on changes in the fundamental performance of the firm

C)Discretionary accruals arise from transactions considered normal for the firm

D)Discretionary accruals always lead to an increase in earnings

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) Analyze and discuss when earnings management may be an ethical practice and when it is an unethical practice.

Q4) Accruals are potentially troublesome because:

A)They can lead to giving an unmodified audit opinion when it should have been modified

B)They provide an opportunity to manage earnings through aggressive or more conservative estimations

C)They always lead to fraud in financial statements

D)They provide an opportunity to shift debt off the books by setting up an SPE

To view all questions and flashcards with answers, click on the resource link above. Page 9

Chapter 8: Ethical Leadership and Decision-Making in Accounting

Available Study Resources on Quizplus for this Chatper

55 Verified Questions

55 Flashcards

Source URL: https://quizplus.com/quiz/51860

Sample Questions

Q1) The more intense the ethical issues,the more likely:

A)Decision makers will act in accordance with their own ethical values

B)Decision makers are aware of the ethical implications of their intended actions

C)Organizations will foster ethical behavior

D)Organizations will establish an ethical tone at the top

Q2) Organizational dissidence in audit firms is created when:

A)Client interests are placed ahead of the public interest

B)Firm interests are placed ahead of the public interest

C)Individual values do not fit into expectations of the firm

D)Individual values lead to firms changing their values to achieve greater socialization

Q3) It can be said that ethical leaders exhibit each of the following traits except for:

A)Ethical leaders understand the need for respect,openness and trust

B)Ethical leaders aim to empower others to achieve success based on right action

C)Ethical leaders take responsibility for their actions and are accountable

D)Ethical leaders encourage behaviors whereby employees do what the leaders say

Q4) Discuss how moral intensity,organizational culture,and ethical leadership influence behavior in accounting.

To view all questions and flashcards with answers, click on the resource link above. Page 10