Professional Ethics for Accountants
Final Exam Questions
Course Introduction
Professional Ethics for Accountants explores the fundamental ethical principles and standards that are essential to the accounting profession. This course examines the ethical responsibilities of accountants in various roles, including public practice, industry, and government, through case studies and real-world scenarios. Topics covered include integrity, objectivity, confidentiality, professional competence, and compliance with relevant laws and regulations. Emphasis is placed on ethical decision-making frameworks, the impact of unethical behavior, and strategies to resolve ethical dilemmas, preparing students to uphold the highest standards of ethical conduct in their professional careers.
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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Sample Questions
Q1) The SEC had:
A) A primary role in the development of the AICPA Code of Professional Conduct
B) A secondary role in the development of the AICPA Code of Professional Conduct
C) No role in the development of the AICPA Code of Professional Conduct, but it retains the authority to override this code of conduct concerning the behavior of both internal and external auditors performing services relating to the financial activities of regional and local financial institutions
D) No role in the development of the AICPA Code of Professional Conduct
Answer: D
Q2) IFAC is often referred to as:
A) The "Global Watchdog"
B) The "Global Accounting Police"
C) An "Organization of Organizations"
D) The "AICPA's Little Brother"
Answer: C
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Chapter 2: Ethical Principles and Reasoning
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Sample Questions
Q1) Acting on principle,knowing that the party you hurt would have done the same thing if the roles had been reversed,corresponds to which of the following stages of moral development?
A) The pre-conventional stage
B) The conventional stage
C) The post-conventional stage
D) All of the above
Answer: C
Q2) Acting based on a desire to comply with a legal statute,even though you disagree with that statute,corresponds to which of the following stages of moral development?
A) The pre-conventional stage
B) The conventional stage
C) The post-conventional stage
D) All of the above
Answer: B
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4
Chapter 3: The Core Philosophies
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Sample Questions
Q1) Which of the following rights customarily is not given absolute protection by deontology?
A) Property rights
B) The right to never be imprisoned
C) The right of free association
D) The right to be left alone
Answer: B
Q2) When a person is asked to evaluate an ethical dilemma in a secondary language rather than in the primary language learned at birth,researchers have discovered that the person's decision-making tends to be:
A) Less rational
B) Skewed in favor of a choice that reflects the viewpoint of consequentialism
C) More likely to favor the deontology viewpoint
D) Emotionally-driven, especially among men
Answer: B
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5
Chapter 4: Virtue,justice,and Social Responsibility
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Sample Questions
Q1) Should corporations be required to disclose in SEC filings their expenditures on improving and maintaining the environment?
Q2) Virtue ethics requires people to ask the following question of themselves:
A) "How should I act?"
B) "Who should I be?"
C) "Did I make an error in judgment?"
D) "Did my decision optimally protect the rights of others?"
Q3) Rawls believed that:
A) There should be perfect equality of resource allocation in society
B) Imperfect resource allocation benefits society because it encourages innovation and hard work
C) Resource allocation should resemble a normal statistical distribution, with most people concentrated around the median
D) Disproportionately greater resource allocations to some in society is acceptable as long as it results in a higher standard of living for those with lower incomes
Q4) What broad categories of acts do you consider to be acts of Corporate Social Responsibility?
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Chapter 5: Why We Cheat
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Sample Questions
Q1) The Becker Rational Model would likely be most helpful in:
A) Assisting law enforcement authorities in setting the level of punishment imposed on a particular cheater after unlawful behavior has occurred
B) Assisting potential cheaters in assessing the expected likelihood of getting caught
C) Assisting potential cheaters in assessing the expected punishment they will endure, if and when they are caught
D) Assisting potential cheaters in assessing the net economic gains they will garner from cheating
Q2) The "Dead President's" Effect refers to people's propensity,when cheating,to:
A) Favor monetary rewards over nonmonetary rewards
B) Prefer liquidity over illiquidity
C) Favor rewards that are vivid and simple to understand over rewards that are abstract and complex
D) Refrain from stealing cash
Q3) Does our college have a student ethics code? What impact,if any,does it have on your behavior? Could a student ethics code be made more effective?
Q4) What criticisms do you have of the Becker Rational Model?
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Chapter 6: Greed,corruption,and Collusion
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Sample Questions
Q1) Mary,a CPA,accepted a fee from Rajiv,a CPA,for referring one of Mary's clients to him.Mary's client was not informed of this referral fee.Was Mary's acceptance of this fee permitted by applicable professional rules?
A) Yes, if Rajiv possesses specialized skills that Mary lacked
B) Yes, if Rajiv possesses specialized skills that Mary lacks and Rajiv agreed to a non-contingent referral fee arrangement with Mary prior to provide services to the referred client
C) Yes, as long Mary's fee arrangement is a lump-sum amount rather than a percentage of the amount that Rajiv bills this client for his services
d) No
Q2) What rule in the IFAC Code of Conduct governs an accountant's responsibilities when the accountant is offered a bribe?
Q3) Under the Foreign Corrupt Practices Act,a company can be held criminally liable:
A) If it is more probable than not that it committed bribery
B) In a lawsuit filed by a government other than the United States
C) If it engaged in "willful blindness" to acts of bribery that furthered its economic interests
D) Only if documentary evidence confirms the existence of bribery
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8
Chapter 7: Fraud and Earnings Management
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Sample Questions
Q1) To curb potential abuse,publicly traded companies:
A) May not do business with related parties
B) May not have related parties serve on their Boards of Directors
C) May do business with related parties, as long as such relationships and transactions are clearly disclosed
D) May do business with related parties as long as such transactions occur at fair market value, as determined by the company's independent auditors
Q2) "Round trip" transactions primarily are utilized by companies:
A) To commit tax fraud
B) To substantially change the overall composition of their assets
C) To recognize accounting gains without meaningfully changing the nature of their operations
D) To return capital that previously was contributed by shareholders, often through the use of treasury stock repurchases
Q3) What is big bath accounting? How is it abused?
Q4) What lessons have been learned from the demise of Enron?
Q5) What is cookie jar accounting? How is it abused?
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Page 9
Chapter 8: Discreditable Acts: Discrimination,deceit,and Disclosure
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Sample Questions
Q1) Financial statements prepared on the cash basis:
A) Comply with GAAP but are complex to prepare
B) Comply with GAAP and are relatively easy to prepare
C) Do not comply with GAAP and are relatively easy to prepare
D) Do not comply with GAAP and, therefore, are not subject to being audited
Q2) 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
Q3) The Accounting Principles Rule states that financial statements:
A) Always must comply with GAAP
B) Never should contain a departure from GAAP
C) May contain a departure from GAAP for administrative reasons, as long as the departure is clearly disclosed
D) May contain a departure from GAAP if adherence to GAAP would result in the statements being misleading
Q4) Outside the United States,what constitutes GAAP?
Page 10
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Chapter 9: Confidentiality
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Sample Questions
Q1) A CPA may utilize information obtained during the course of a professional accountant-client relationship for personal gain:
A) Only if the CPA does not disclose this information to others
B) Only if the source of this information cannot reasonably be discovered by others
C) Only if the use of this information does not preclude the client from pursuing any opportunities that it otherwise would have desired to pursue
D) Never
Q2) A CPA' duty of confidentiality ends when:
A) A professional relationship with a client ends
B) A client dies
C) A client's is acquired by another company in a merger or purchase
D) Never
Q3) If a CPA violates the duty of confidentiality,who may hold it accountable?
Q4) Is there a federal accountant-client privilege? What does it cover?
Q5) In accordance with the duty of confidentiality,when is client information considered to be confidential?
Q6) When does a CPA's duty of confidentiality begin? When does it terminate?
Q7) 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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Sample Questions
Q1) For many years,a partner in a CPA firm worked on the audit of Grossnomics,Inc.This partner now has retired from the CPA firm and serves as a consultant to Grossnomic's Audit Committee.This partner's former CPA firm:
A) No longer maintains the independence to audit Grossnomics, unless the CPA firm demonstrates to the AICPA that it remains independent in fact and in attitude
B) No longer maintains the independence to audit Grossnomics under any circumstance
C) Maintains the independence to audit Grossnomics as long as this former partner no longer has any actual or apparent financial ties to his former CPA firm
D) Maintains the independence to audit Grossnomics as long as the former partner does not participate in the preparation of Grossnomics' financial statements
Q2) What are the seven threats to independence identified in the AICPA's Code of Professional Conduct? Give examples of each.
Q3) A CPA was raised by his grandmother.Can his grandmother's stock ownership in one of the CPA's audit clients impair his independence?
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Page 12
Chapter 11: Conflicts of Interest
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Sample Questions
Q1) For a CPA who performs auditing services,the most significant conflict of interest that is likely to arise is between:
A) Two clients who both sell the same product in different geographic markets
B) Two clients who both are aggressively pursuing sales to the same prospective customer
C) The client's interest and the public interest
D) The CPA's interest and another CPA's interests
Q2) Due to the conflict of interest rules,a CPA may:
A) Not provide professional services to two companies in the same industry
B) Not provide professional services to two companies who do business with one another
C) Not provide professional services to two companies who do business with one another if the sales or services are material in amount to one of the parties
D) Generally provide professional services to two companies who do business with one another, even if the sales or services are material in amount to one or both parties
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?
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Page 13
Chapter 12: Duties As a Whistleblower
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Sample Questions
Q1) A company maintains a whistleblower hotline to encourage reports of abusive accounting practices within the company.The hotline allows callers to identify themselves or to remain anonymous.Under the Sarbanes-Oxley Act,if a caller provides his or her identity,this identity may:
A) Not be disclosed by the company if the caller is a company supplier
B) Not be disclosed by the company if the caller is a company customer
C) Not be disclosed by the company if the caller is a company employee
D) Not be disclosed, even if the caller is an individual who is acting on behalf of a supplier, customer, or employee
Q2) Under the Dodd-Frank Act,a whistleblower who reports original information that materially assists the SEC in recovering ill-gotten gains relating to securities violations is entitled to:
A) A minimum submission fee, plus a percentage of the SEC's recovery
B) A percentage of the SEC's recovery
C) A percentage of the SEC's recovery only if the amount recovered involved fraud
D) A percentage of the SEC's recovery only if the amount recovered exceeds a specified threshold
Q3) Do you believe the people are innately altruistic?
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Chapter 13: Duties of Public-Company Auditors: the Sarbanesoxley Act
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Sample Questions
Q1) If a publicly traded corporation misstated its accounting filings to the SEC,the "clawback" provision in the Sarbanes-Oxley Act gives the corporation the right to recover:
A) Dividends earned by the company's CEO and CFO
B) Interest earned by the company's CEO and CFO
C) Capital gains earned by the company's CEO and CFO on stock bought within 12 months after the date of the misstated financial statements
D) Capital gains earned by the company's CEO and CFO on stock realized by sale within 12 months after the date of the misstated financial statements
Q2) The PCAOB:
A) Is entirely independent of the AICPA
B) Appoints the members of the AICPA's governing board, but otherwise is independent of the AICPA
C) Frequently is criticized for developing financial accounting standards that are more complex than those established by the FASB
D) Legally has the power to override the AICPA when their areas of jurisdiction conflict or overlap
Q3) Who may serve on an Audit Committee?
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Page 15
Chapter 14: Duties of Tax Professionals
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Sample Questions
Q1) Preparing a client's tax return solely based on what the client has represented to you about his income and expenses generally is:
A) Permissible
B) Prohibited only by the AICPA's Statements of Standards onTax Practice
C) Prohibited only by U.S. Treasury Circular 230
D) Prohibited by both AICPA and IRS professional mandates
Q2) A taxpayer ordinarily should not assert a tax position unless it is supported by "substantial authority." This standard commonly is referred to as requiring a certain probability of acceptance or approval if the position is detected and challenged by the taxing authority.What is the associated probability of success?
A) 20%
B) 33.3%
C) 40%
D) Over 50%
Q3) What are some of the ethical duties that apply to tax return preparers?
Q4) What are some of the practical problems associated with applying the tax reporting standards,such as the "reasonable basis" standard?
Q5) 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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Sample Questions
Q1) An accountant who is not a CPA:
A) Will never be considered a fiduciary
B) Always is considered a fiduciary during the course of providing professional services
C) Will likely be considered to be a fiduciary during the course of preparing monthly adjusting entries for small, unsophisticated business owners
D) Will likely be considered to be a fiduciary if the accountant provides financial planning services to clients and sells them sophisticated tax-sheltered insurance policies
Q2) Why would a person want to create a living trust?
Q3) 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
Q4) Why types of ethical dilemmas concerning independence do CPAs who specialize in auditing face when serving as a trustee of a trust?
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Chapter 16: Duties in the Accounting Workplace Online Only
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Sample Questions
Q1) What are the core traits that an employer usually may not inquire about prior to hiring an employee?
Q2) An accounting firm insists that all of its professional staff members and partners provide copies of their most recent federal and state income tax returns to the partner in charge of regulatory compliance.These submissions must occur no later than the April 15 due date for filing these tax returns.This policy:
A) Is mandated by the AICPA's Code of Professional Conduct
B) Is reasonable to ensure compliance with professional standards, but is not required
C) Is a discreditable act by the accounting firm
D) Is an illegal violation of employee privacy under the federal tax law
Q3) 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.)
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