Multiple Choice Questions
A. Failure to approach the audit with professional skepticism
B. Lack of audit independence
C. Failure to assign a sufficient number of staff to the audit
D. Having a conflict of interests
A. Approaching the audit with an independent attitude
B. Approaching the audit with a questioning mind
C. Being objective in decision making
D. Maintaining one's integrity
A. The thought process followed in one's moral development
B. The method of moral reasoning used in decision making
C. The exercise of professional judgment in decision making
D. All of the above
A. The various phases in one's moral development and related levels of moral reasoning
B. A model of ethical action that is based on one's moral development
C. A predictive tool to determine how a person will reason ethically based on one's moral development
D. A model of age-specific levels of moral reasoning
A. Stage 1
B. Stage 2
C. Stage 3
D. Stage 4
A. He loved his wife
B. He couldn't come up with all the money to pay for it
C. He was afraid his wife would die without the drug
D. All of the above
A. Fear of punishment
B. Satisfaction of one's needs
C. Following the law
D. Acting based on universal ethical principles
A. Satisfaction of one's needs
B. Acting in the best interests of others
C. Upholding the rights, values, and legal contracts of society
D. Acting based on universal principles
A. Acting in the best interests of others
B. Following the law
C. Upholding the rights, values, and legal contracts of society
D. Acting based on universal principles
A. The morality of law and duty to the social order
B. A rational calculation of benefits and harms to society
C. Universal ethical principles
D. All of the above
A. Stage 2
B. Stage 3
C. Stage 4
D. Stage 5
A. The important constituent groups affected by accounting and auditing work
B. The stages of the moral development of accountants and auditors
C. The decision making process followed by accountants and auditors
D. All of the above
A. Stages 1 and 2
B. Stages 2 and 3
C. Stages 3 and 4
D. Stages 4 and 5
A. A description of the values that influence ethical decision making
B. A model of the relationship between ethical action and one's level of moral development
C. A model of moral judgment based on one's possession of certain virtues of behavior
D. All of the above
A. Moral sensitivity
B. One's stage of ethical development
C. Moral motivation
D. One's courage in making decisions
A. Your actions lack moral sensitivity
B. You are reasoning at stage 1
C. You are making judgments based on the utilitarian method
D. You lack the courage of your convictions
A. Moral sensitivity
B. Egoism
C. Enlightened egoism
D. Professional skepticism
A. Establishing an ethical culture within an organization
B. Honesty exercised by top management
C. Consistency in decision making
D. Exercising professional skepticism when approaching an audit
A. Exercising due care in carrying out one's professional responsibilities
B. Maintaining one's objectivity in decision making
C. Maintaining one's integrity in decision making
D. Acting in accordance with the moral point of view
A. A depiction of a model of moral development
B. A depiction of how the Principles in the AICPA Code of Professional Conduct influences decision making
C. A model of the role of virtue in decision making
D. A model of the role of moral development and virtue in decision making
A. Moral sensitivity
B. Ethical reasoning
C. Ethical motivation
D. Ethical character
A. Maintaining an attitude of independence in decision making
B. Considering and responding to the risk of material misstatement in the financial statements due to fraud
C. Considering and responding to pressures that might be imposed on auditors in decision making
D. All of the above
A. CPAs reason at stages 3 and 4 in Kohlberg's model
B. A lack of professional skepticism is a serious problem for auditors
C. The selection of audit procedures is a serious problem for auditors
D. A lack of professional skepticism and the selection of audit procedures are serious problems for auditors
A. A questioning mind, the suspension of judgment, and an independent attitude
B. A questioning mind, the search for knowledge and an independent attitude
C. A questioning mind, the suspension of judgment and the search for knowledge
D. The suspension of judgment, the search for knowledge and an independent attitude
A. Understanding the motivation and integrity of evidence providers
B. Understanding the nature of the corporate culture
C. Understanding the way in which decisions are made
D. All of the above
A. Organize the various elements of ethical reasoning and professional judgment
B. Evaluate stakeholder interests using ethical reasoning
C. Identify and select alternative courses of action
D. All of the above
A. Identify the stakeholders affected by intended actions
B. Evaluating alternative courses of action using moral reasoning methods
C. Identify the accounting issues present in a case
D. Providing a perspective to apply the decision making model to specific facts of the case
A. Culture of the organization
B. Method of moral reasoning
C. Internal controls
D. Corporate governance system
A. Whether the alternatives are consistent with professional standards
B. Whether the alternatives are consistent with firm policies and its own code of ethics
C. The stage of moral development of the decision maker
D. The potential harms and benefits of alternative courses of action
A. Wait to see if his budget numbers are met and, if not, inform top management of the error at that time
B. Cover up the error in the budget forecast
C. Let his friend, Jonathan Walker, explain the mistake to top management
D. Admit his mistake to top management at the earliest possible time
A. Make a decision based on what is in her own best interests
B. Consider the interests of the stakeholders but decide based on what is in her best interests
C. Refuse to record the transaction as desired by the CFO
D. Inform the board of directors of the difference of opinion with the CFO
A. Professional skepticism
B. Objective decision making
C. Due care
D. All of the above
A. Stage 1
B. Stage 2
C. Stage 3
D. Stage 4
A. Stage 1
B. Stage 2
C. Stage 3
D. Stage 4
A. Lacking in of moral sensitivity
B. Lacking in professional skepticism
C. Loyal to the company's best interests
D. All of the above
A. Fairness to others
B. Obedience
C. Self-chosen principles
D. Law and order
A. Social order
B. Fairness to others
C. Law and order
D. Self-chosen principles
A. Stage 1
B. Stage 2
C. Stage 3
D. Stage 4
A. Women think saving a life is more important than keeping the law.
B. Men think keeping the law is more important than saving a life.
C. Men tend to think in terms of justice, and women in terms of caring.
D. Men misunderstand and women understand.
A. Moral sensitivity
B. Moral development
C. Moral judgment
D. Moral character
A. Being able to think of others first
B. Being able to identify the best course of action
C. Being able to identify an ethical situation
D. Being able to react quickly
A. Courage
B. External pressures
C. Loyalty
D. Internal pressures
A. is morally developed early in life and will not change
B. continues to change decision priorities with education and experiences
C. may change up or down one stage upon becoming an adult
D. may only go backwards through the stages upon becoming an adult
A. A CPA unable to apply technical accounting standards is unlikely to be influenced by others.
B. A CPA is unlikely to be influenced by rules or authority.
C. A CPA is unlikely to be influenced or give into pressures.
D. A CPA unable to apply technical accounting standards is likely to be influenced by others.
A. Pre-conventional
B. Post-conventional
C. Conventional
D. Unconventional
A. Choose an ethical theory to follow.
B. Discuss with others your options.
C. Get the facts surrounding the problem.
D. Determine consequences.
A. Protecting interests of the environment
B. Protecting interests of all stakeholders
C. Protecting interest to increase profits
D. Protecting interests of shareholders
A. Persistence, due care, and independence
B. Persistence, due care and courage
C. Independence, courage, and loyalty
D. Persistence, due care, and loyalty
A. Fraud is a common element of audits.
B. Auditors always detect fraud if they follow professional standards.
C. Even an audit in accordance with professional standards can fail to detect a material fraud in the financial statements, particularly where management has gone to great lengths to cover up the fraud.
D. Auditors should not be expected to uncover fraud since management always has the upper hand with respect to financial statement matters.
A. Conflict between loyalty to one's supervisor and doing the right thing
B. Conflict between reporting an item of taxable income and ignoring it
C. Lack of independence due to ties to the client entity
D. All of the above
A. Objectivity
B. Responsibility
C. Due care
D. Empathy
A. Inform his supervisor about a lack of diligence of other staff accountants
B. Date another staff member of the CPA firm
C. Devote time on an audit and not charge it to the job
D. Quit his job because he can't meet the firm's expected quality of work
A. Selfish, in that he only thought of his own interests
B. Disloyal to the company
C. Unethical because he wrote checks to himself for unauthorized checks
D. Undertaken with the intent to help out his supervisor
A. What can go wrong when a company sets a policy that potentially harms one area of its operations
B. How the failure to exercise professional skepticism can cloud objective judgment
C. The pressure that can be placed on accountants by top management
D. All of the above
A. How to account for prepaid capacity
B. How to account for and report special purpose entities
C. How to account for inventory declines
D. How to account for investments in marketable securities
A. Stage 1
B. Stage 2
C. Stage 3
D. Stage 4
A. Were independent of Imperial Valley
B. Exercised the appropriate level of professional skepticism
C. Will give in to the pressure by the CPA firm to go along with the client
D. All of the above
A. Loyalty of co-worker versus trust of co-worker.
B. Trust of co-worker versus honesty of the workplace.
C. Honesty of the workplace versus privacy of an individual.
D. Privacy of an individual versus loyalty of co-worker.
A. Quality of work versus integrity.
B. Integrity versus loyalty to the firm.
C. Quality of work versus loyalty to the firm.
D. Trust of a co-worker versus quality of work.
A. Compensation to executives of a company.
B. Cover up of fraud.
C. Insubordination of an employee.
D. Unapproved loans to executives.
Essay Questions
One day, to Cal's deep dismay, he hears that Harry had been implicated in some financial irregularities at work. The issues while serious lease some room for doubt. There is reason to think Harry got ensnared by regulations, though he may have afterwards tried to cover up that entanglement by being less than forthright. Yet after what Cal observes to be a careful audit and investigation, Harry is let go from his job.
Harry comes to Cal and asks for a letter of recommendation.
What should Cal do? What are the consequences of the options?
Stan's boss revealed to Stan that Stan's team member Jim was slated to lose his job. However, it was made plain that Stan was to keep that information confidential.
Not long after that conversation, Jim approached Stan and asked whether he could confirm the rumor that he would be laid off.
What should Stan do? With what values is Stan dealing? What are the consequences of Stan's choices?
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