Question 1

One of the contributions of the Treadway Commission Report and the work of the Committee of Sponsoring Organizations (COSO)  was:

Accepted Answer

A)   To establish a voluntary process for peer review
B)   To identify red flags that might lead to fraud
C)   To identify the tone at the top for management to create an ethical culture
D)   To establish peer review requirements for CPAsE) C) and D)
F) B) and D)

Question 2

Personal values link to:

Accepted Answer

A)   Ethical judgment and motivation
B)   Ethical motivation and action
C)   Ethical sensitivity and action
D)   Ethical sensitivity and judgmentE) B) and C)
F) All of the above

Question 3

Professional judgment is influenced by:

Accepted Answer

A)   Organizational values
B)   Personal code of ethics
C)   Cognitive biases
D)   Organizational dissonanceE) A) and B)
F) B) and C)

Question 4

Tax avoidance transactions are often called:

Accepted Answer

A)   Earnings management
B)   Tax shelters
C)   Employee fraud
D)   Attest servicesE) A) and B)
F) None of the above

Question 5

Describe the characteristics of the KPMG Professional Judgment Framework.

Accepted Answer

KPMG developed a framework of the elemen...

Question 6

An example of a self-review threat is:

Accepted Answer

A)   Establishing and maintaining the internal controls for the client
B)   Preparing source documents used to generate the client's financial statements
C)   Promoting the client's securities through investment banking activities
D)   Borrowing money from the clientE) A) and B)
F) A) and C)

Question 7

The growth in consulting services raises questions about which professional obligation?

Accepted Answer

A)   Objectivity
B)   Confidentiality
C)   Competence
D)   Conflicts of interestE) All of the above
F) A) and C)

Question 8

One of the differences between the ethical obligations of CPAs and lawyers is:

Accepted Answer

A)   Lawyers are obligated first and foremost to the public interest while CPAs are obligated to their clients' interests
B)   Lawyers are obligated first and foremost to the client's interest while CPAs are obligated to the public interest
C)   Lawyers and CPAs both must be independent of their clients
D)   Lawyers and CPAs must exercise objective judgmentE) All of the above
F) A) and B)

Question 9

Which of the following is NOT a component of the KPMG Professional Judgment Framework?

Accepted Answer

A)   Clarify issues and conclusions
B)   Clarify issues and objectives
C)   Gather and evaluate information
D)   Articulate and document rationaleE) None of the above
F) A) and B)

Question 10

Safeguards implemented by the attest client include each of the following except:

Accepted Answer

A)   Proper oversight by client management
B)   Management participation in the client by the attest firm
C)   Policies and procedures to address ethical conduct
D)   The tone at the top set by executive managementE) C) and D)
F) B) and D)

Question 11

Why is professional judgment important in accounting?

Accepted Answer

Professional judgment is the basis for d...

Question 12

Impairments of independence can occur when:

Accepted Answer

A)   A CPA owns a direct financial interest in a client
B)   A CPA owns a material indirect financial interest in a client
C)   Immediate family members of the CPA are in violation of the independence rules
D)   All of the aboveE) A) and B)
F) All of the above

Question 13

Why don't auditors prepare financial statements, as well as audit them?

Accepted Answer

A)   It would take away a job from the controller of the company
B)   It would not eliminate errors in the financial statements
C)   It would be a conflict of interest and violate ethical standards
D)   It would not streamline the process and be effectiveE) None of the above
F) A) and D)

Question 14

The ethical issue in the Beauda Medical case is:

Accepted Answer

A)   Whether an audit firm should inform one audit client about malfunctioning equipment at another client that the former plans to buy
B)   Whether an audit firm should inform one audit client about fraudulent financial statements of another client
C)   Whether certain expenditures should be capitalized rather than expensed
D)   Whether revenue should be accelerated into an earlier periodE) C) and D)
F) B) and D)

Question 15

Describe the basic features of the Revised AICPA Code of Professional Conduct.

Accepted Answer

Emphasizes the public interest as the co...

Question 16

Ethics rules in the AICPA Code apply to:

Accepted Answer

A)   Individual CPAs who are licensed by state boards of accountancy only
B)   Individual CPAs who are licensed by state boards of accountancy and accounting firms
C)   Licensed accounting firms and certain members of alternative practice structures
D)   Individual CPAs who are licensed by state boards of accountancy, licensed accounting firms, and certain members of alternative practice structuresE) B) and C)
F) C) and D)

Question 17

Diane is a CFO at We Do What We Want, Inc. She was just instructed by her boss, the CEO, to accelerate the recording of revenue into an earlier year to meet financial analysts' earnings projections. In order to meet the ethical standards of the accounting profession, Diane must be certain that she:

Accepted Answer

A)   Blows the whistle on the financial wrongdoing
B)   Reports the matter to the SEC
C)   Informs the external auditors
D)   Works through the chain of command within the company to avoid subordinating judgmentE) B) and C)
F) A) and B)

Question 18

The confidentiality standard in the AICPA code provides a blanket exception to the rule in each of the following situations except:

Accepted Answer

A)   In response to a validly issued court summons
B)   To provide information to the PCAOB in its inspection process
C)   To defend oneself in an ethics investigation
D)   In response to a successor auditor's requestE) None of the above
F) All of the above

Question 19

EY partner Pamela Hartford violated Independence Rules when:

Accepted Answer

A)   She prepared financial statements and provided attest services for her audit client
B)   She identified the firm's protective covenants are reasonable in scope.
C)   She refused to maintain adequate records and documents.
D)   She maintained a personal relationship with a member of company management.E) A) and C)
F) B) and C)

Question 20

To prevent subordination of judgment, a CPA should evaluate threats to:

Accepted Answer

A)   Independence and Due Care
B)   Objectivity and Integrity
C)   Integrity and Due care
D)   Independence and Scope of ServicesE) A) and B)
F) A) and C)

Exam 4: Ethics and Professional Judgment in Accounting

The growth in consulting services raises questions about which professional obligation?

Correct AnswerverifiedShow Answer

Describe the basic features of the Revised AICPA Code of Professional Conduct.

Correct AnswerverifiedEmphasizes the public interest as the co...View AnswerShow Answer

One of the differences between the ethical obligations of CPAs and lawyers is:

Correct AnswerverifiedShow Answer

Diane is a CFO at We Do What We Want, Inc. She was just instructed by her boss, the CEO, to accelerate the recording of revenue into an earlier year to meet financial analysts' earnings projections. In order to meet the ethical standards of the accounting profession, Diane must be certain that she:

Correct AnswerverifiedShow Answer

EY partner Pamela Hartford violated Independence Rules when:

Correct AnswerverifiedShow Answer

One of the contributions of the Treadway Commission Report and the work of the Committee of Sponsoring Organizations (COSO) was:

Correct AnswerverifiedShow Answer

Why don't auditors prepare financial statements, as well as audit them?

Correct AnswerverifiedShow Answer

The ethical issue in the Beauda Medical case is:

Correct AnswerverifiedShow Answer

To prevent subordination of judgment, a CPA should evaluate threats to:

Correct AnswerverifiedShow Answer

Personal values link to:

Correct AnswerverifiedShow Answer

Which of the following is NOT a component of the KPMG Professional Judgment Framework?

Correct AnswerverifiedShow Answer

Safeguards implemented by the attest client include each of the following except:

Correct AnswerverifiedShow Answer

Why is professional judgment important in accounting?

Correct AnswerverifiedProfessional judgment is the basis for d...View AnswerShow Answer

Impairments of independence can occur when:

Correct AnswerverifiedShow Answer

Tax avoidance transactions are often called:

Correct AnswerverifiedShow Answer

The confidentiality standard in the AICPA code provides a blanket exception to the rule in each of the following situations except:

Correct AnswerverifiedShow Answer

Professional judgment is influenced by:

Correct AnswerverifiedShow Answer

An example of a self-review threat is:

Correct AnswerverifiedShow Answer

Ethics rules in the AICPA Code apply to:

Correct AnswerverifiedShow Answer

Describe the characteristics of the KPMG Professional Judgment Framework.

Correct AnswerverifiedKPMG developed a framework of the elemen...View AnswerShow Answer

Correct Answer
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Correct Answer
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Emphasizes the public interest as the co...
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Correct Answer
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Correct Answer
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Professional judgment is the basis for d...
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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KPMG developed a framework of the elemen...
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