Chapter 1 - Ethics And Ethical Reasoning
|
1.
|
Plato maintained that all “wrong-doing” is involuntary and arises from ignorance. 4
|
|
  T is correct. (p.4) Plato endeavored to extend his ideas of code making from the civil to the criminal field and to devise a penal code based on rational principles.
|
|
|
F is incorrect. Plato's resolution made the distinction between acts which are remediable in damages and acts which require punishment between injury and wrongdoing.
|
|
|
|
|
2.
|
Which of the following statements best explains why the accounting profession has found it essential to promulgate ethical standards and to establish means for ensuring their observance? 9
|
|
|
Vigorous enforcement of an established code of ethics is the best way to prevent unscrupulous acts.
|
|
|
Ethical standards that emphasize excellence in performance over material rewards establish a reputation for competence and character.
|
|
|
A distinguishing mark of a profession is its acceptance of responsibility to the public.
|
|
|
A requirement for a profession is to establish ethical standards that stress primarily a responsibility to clients and colleagues.
|
|
|
|
|
Chapter 2 - Ethical Reasoning and Accountants
|
3.
|
The concept of materiality is least important to an auditor when considering the 10
|
|
|
Adequacy of disclosure of a client's illegal act.
|
|
|
Discovery of weaknesses in a client's internal control.
|
|
|
Effects of a direct financial interest in the client on the CPA's independence.
|
|
|
Decision whether to use positive or negative confirmations of accounts receivable.
|
|
|
|
|
4.
|
According to the profession's ethical standards, an auditor would be considered independent in which of the following instances? 10
|
|
|
The auditor's checking account, which is fully insured by a federal agency, is held at a client financial institution.
|
|
|
The auditor is also an attorney who advises the client as its general counsel.
|
|
|
A member donates service as treasurer of a charitable organization that is a client during the period covered by the financial statements.
|
|
|
The client owes the auditor fees for two consecutive annual audits.
|
|
|
|
|
5.
|
In which of the following circumstances would a CPA who audits XM Corporation lack independence? 10
|
|
|
The CPA is a director of, but does not control, YN Corporation, which has a loan from XM.
|
|
|
The CPA and XM's president each owns 25% of FOB Corporation, a closely held company.
|
|
|
The CPA has an automobile loan from XM, a financial institution. The loan is collateralized by the automobile.
|
|
|
The CPA reduced XM's usual audit fee by 40% prior to the audit because XM's financial condition was unfavorable
|
|
|
|
|
6.
|
On June 1, 2004, a CPA obtained a $100,000 personal loan from a financial institution client for whom the CPA provided compilation services. The loan was fully secured and considered material to the CPA's net worth. The CPA paid the loan in full on December 31, 2004. On April 3, 2005, the client asked the CPA to audit the client's financial statements for the year ended December 31, 2005. Is the CPA considered independent with respect to the audit of the client's December 31, 2005, financial statements? 11
|
|
|
Yes, because the loan was fully secured.
|
|
|
Yes, because the CPA was not required to be independent at the time the loan was granted.
|
|
|
No, because the CPA had a loan with the client during the period of a professional engagement.
|
|
|
No, because the CPA had a loan with the client during the period covered by the financial statements.
|
|
|
|
|
7.
|
According to the profession's ethical standards, which of the following events may justify a departure from a Statement of Financial Accounting Standards? New Evolution of a New Form Legislation of Business Transaction 12
|
|
|
No Yes
|
|
|
Yes No
|
|
|
Yes Yes
|
|
|
No No
|
|
|
|
|
8.
|
Which of the following actions by a CPA most likely violates the profession's ethical standards? 13
|
|
|
Arranging with a financial institution to collect notes issued by a client in payment of fees due.
|
|
|
Compiling the financial statements of a client that employed the CPA's spouse as a bookkeeper.
|
|
|
Retaining client records after the client has demanded their return.
|
|
|
Purchasing a segment of an insurance company's business that performs actuarial services for a client's employee benefit plans.
|
|
|
|
|
9.
|
According to the profession's ethical standards, an auditor would be considered independent in which of the following instances? 17
|
|
|
The auditor is the officially appointed stock transfer agent of a client.
|
|
|
The auditor's checking account, which is fully insured by a federal agency, is held at a client financial institution.
|
|
|
The client sponsors an employee benefit plan in which the auditor participates.
|
|
|
The client is the only tenant in a commercial building owned by the auditor.
|
|
|
|
|
10.
|
Adams is the executive partner of Adams & Co., CPAs. One of its smaller clients is a large nonprofit charitable organization. The organization has asked Adams to be on its board of directors, which consists of a large number of the community's leaders. Membership on the board is honorary. Adams & Co. would be considered to be independent 19
|
|
|
Under no circumstances.
|
|
|
As long as Adams's directorship was disclosed in the organization's financial statements.
|
|
|
As long as Adams was not directly in charge of the audit.
|
|
|
As long as Adams does not perform or give advice on management functions of the organization.
|
|
|
|
|
Chapter 3 - Conclusions and Implications
|
Chapter 4 - Definitions
|
Chapter 5 - Culture, Motivation, Power, and Business Ethics
|
Chapter 6 - AICPA’s Code of Professional Conduct
|
Chapter 7 - Interpretations and Rulings
|
Chapter 8 - Corporate Responsibility law (Sarbanes-Oxley act)
|
Chapter 9 - Standards of Ethical Conduct for Practitioners
|
Chapter 10 - Montana Ethics
|
|
|
|
|
|
|
|
|
