Possible Question Exam 1

1) Which of the following (according to Charles Fombrum) is not one of the four determinants that influence a company's reputation? a. b. c. d. Credibility. Reliability. Profitability. Responsibility.

2)

The 5 E's of the accounting profession in Texas are Ethics, Enthusiasm, Education, Examination and Experience. a. True b. False

3)

The P in CPA stands for Public? a. True b. False

4)

The difference between what the public thinks it is getting in audited financial statements and what the public is actually getting is known as: a. b. c. d. e. Credibility gap Expectations gap Audit gap Stewardship gap None of the above

5)

Which of the following is not a trend described in Chapter 1 as having an impact on the ethics of business? a. b. c. d. e. Directors’ legal liability Management’s stated intention to protect reputation Auditors’ legal liability Management’s assertions to shareholders on the adequacy of internal controls Management’s stated intention to manage risk

1

Possible Question Exam 1
6) Which corporate report discusses subjects that include environmental, health and safety, philanthropic and other social impacts? a. b. c. d. e. Corporate annual report Corporate social responsibility report Corporate quarterly report Corporate stakeholder report Corporate ethics committee report

7)

The goal of the State Board of Public Accounting is to protect the public? a. True b. False

8)

Professional Accountants, in their fiduciary role, owe their primary loyalty to: a. b. c. d. e. The accounting profession The client The general public Government regulations All of the above

9)

A CPA license issued by the State of Texas is a form of a social contract between the CPA license holder and the public and the State of Texas. a. True b. False

10)

Ethical corporate behaviour is expected to lead to: a. b. c. d. e. Higher profitability in the short-term Higher profitability both in the short-term and long-term Lower profitability in the long-term Higher profitability in the long-term Lower profitability both in the short-term and long-term

11)

A value that is almost universally respected by stakeholder groups is: a. b. c. d. e. Super norm Alfa norm Value norm Hypernorm General norm 2

Possible Question Exam 1
12) Incomplete disclosure of the company’s revenue recognition policy is an example of: a. b. c. d. e. Lack of transparency Lack of integrity Lack of accuracy All of the above None of the above

13)

This philosophical approach requires that an ethical decision depends upon the duty, rights, and justice involved: a. b. c. d. e. Consequentialism Virtue ethics Duty ethics Righteousness Deontology

14)

Who does the AICPA Code of Professional Conduct apply to: a. Members in Public practice b. Members in Industry c. Members in Government d. Members in Education e. All of the above

15)

The Moral Standards Approach focuses on the following dimensions of the impact of a proposed action: a. b. c. d. e. Net benefit to society, fair to all stakeholders, whether it is right Net benefit to society and whether it is legal Net benefit to society, fair to all stakeholders, whether it is legal Fair to most stakeholders and whether it is right Net benefit to society, fair to most stakeholders, whether it is right

16)

The following is a fundamental factor in having an effective ethical corporate culture: a. Tone at the top b. Inefficient oversight by the company’s Board of Directors c. Unenforced code of conduct d. None of the above e. All of the above 3

An opportunity to avoid costs An opportunity to change employee’s perspectives on risk An opportunity to enhance the company’s reputation All of the above None of the above 19) To sign a tax return as a tax return preparer you need which of the following? a. b. All the above may sign a tax return as a return preparer 20) Tax return preparers who are members of a firm are specified tax return preparers and must electronically file the income tax returns they prepare and file if the firm’s preparers. 50 c. 1. Enrolled Agent d. 1 million 4 . 2 b. (Fill in the blank. c. d.) a. c. in the aggregate. expect to file "_______" or more of these income tax returns in 2011. d.Possible Question Exam 1 17) Which entity has final approval of financial accounting and reporting rules and regulation for publically traded companies in the United States of America? a. Attorney e. CPA License b. PTIN holder c. b.000 e. 100 d. e. 18) IRS DOJ PCAOB AICPA all of the above Effective crisis management could represent: a. e.

lowering earnings and decreasing option expense Increasing cash flow. certified public accountants (CPAs) and enrolled agents who are active and in good standing with their respective licensing agencies. b. To determine management’s compensation To safeguard the interest of the company’s stakeholders To safeguard the company’s assets To formulate the company’s strategy To safeguard the interest of the company’s shareholders 23) In order to ensure an investment-grade credit rating.which currently only apply to attorneys. 22) The Board of Directors’ paramount duty is: a. b. Enron began to emphasize the following three actions: a. Requiring all paid tax return preparers who must sign a federal tax return to register with the IRS and obtain a preparer tax identification number (PTIN). Reducing accruals. d. Extending the ethical rules found in Treasury Department Circular 230 -. d. CPAs and enrolled agents who practice before the IRS -. and smoothing earnings Increasing cash flow. and lowering debt Smoothing accruals. increasing cash flow. c. d. increasing cash flow. lowering debt. e. Requiring ongoing continuing professional education for all paid tax return preparers except attorneys. including: a. This expansion would allow the IRS to suspend or otherwise discipline tax return preparers who engage in unethical or disreputable conduct. lowering debt. e. enrolled agents and others who are already subject to continuing education requirements. employment and business tax returns and that the tax due on those returns has been paid. and decreasing option expense 5 . CPAs. All of the above. c.to all paid preparers. b. e. and lowering debt Increasing cash flow. Requiring competency tests for all paid tax return preparers except attorneys. These preparers will be subject to a limited tax compliance check to ensure they have filed federal personal. c.Possible Question Exam 1 21) The IRS recommended in 2011 a number of steps that it plans to implement for future filing seasons.

c. Audit staff leaving the firm to work for Enron 28) Which of the following was not among Arthur Andersen’s shortcomings in conducting Enron’s audit? a. at exercise price Record all stock options at market price Record stock options only when exercised at market price Record not exercised options at market price 27) Which of the following was not a conflict of interest that Arthur Andersen’s personnel encountered? a. c. Auditing their own work as SPE consultants Losing a very large client A partner reviewed another partner’s work Internal debates about Enron’s questionable accounting treatments were not discussed with the audit committee e.Possible Question Exam 1 24) Which of the following was not a committee in Enron’s Board? a. d. b. Buy more assets using syndicated loans Sell assets to third parties and record cash income as earnings Hedge the company’s assets Lend money to third parties to buy assets Recording profits on energy derivatives trading 26) At the time of Enron’s collapse. b. c. d. e. Lack of competence Failure of quality control standards Misunderstanding of auditor’s fiduciary role Inconclusive testing of control Insufficient information provided by Enron’s staff 6 . e. d. b. b. c. Risk Management Committee Executive Committee Finance Committee Audit and Compliance Committee Nominating Committee 25) Enron referred to this transactions as “monetizing” or “syndicating” its assets: a. e. e. the prevailing treatment for employee stock option expense was: a. d. c. Record stock options only when and if exercised. d. b. at exercise price Record all stock options when issued.

Increase the number of directors in the board Reduce the number of directors in the audit committee Increase audit fees Reduce the number of boards that each director sits on All of the above a. The audit committee must approve non audit services to be provided by the auditors e. c. Religious concerns Emotional attachment to other people Enlightened self-interest All of the above None of the above 7 . b. d. c. c.Possible Question Exam 1 29) Which of the following is not a requirement imposed by the SOX Corporate Governance Framework? The audit committee must be comprised solely by independent directors The audit committee is responsible for appointing the company’s external auditor The audit committee must establish procedures to allow employees to submit anonymous complaints d. 31) These companies are more likely to voluntarily adopt improved governance measures: a. e. d. d. b. e. Norms and values are in conflict There is only one alternative course of action available Norms and values are not in conflict There are several theories of ethical decision making All of the above 33) Individuals may be ethical because of: a. b. c. e. Larger companies Less profitable companies Foreign companies Smaller companies Private companies 32) Ethical dilemmas arise when: a. e. b. c. b. The audit committee must be comprised solely by financial experts 30) SOX increased the time requirement and legal risk for company directors. d. These requirements will likely: a.

d. b. c.Possible Question Exam 1 34) This theory argues that the best ethical alternative is the one that will produce the greatest amount of happiness to the largest number of stakeholders: a. b. Deontology Distributive Justice Utilitarianism Moral Imagination Virtue Ethics 38) This theory is concerned with the motivation of the decision maker rather than the consequences of the decision: a. Deontology Distributive Justice Utilitarianism Moral Imagination Virtue Ethics 35) This theory focuses on the moral character of the decision maker: a. e. Deontology Distributive Justice Utilitarianism Moral Imagination Virtue Ethics 8 . c. b. b. e. e. d. d. b. d. c. c. c. d. Deontology Distributive Justice Utilitarianism Moral Imagination Virtue Ethics 37) This theory argues that equals should be treated equally in relationship to their relevant equalities and differences: a. e. Deontology Distributive Justice Utilitarianism Moral Imagination Virtue Ethics 36) This approach focuses on coming up with an innovative solution to an ethical dilemma: a. e.

pain and anguish can be quantified: a. b. d. a variant of utilitarianism. c. d. Deontology Distributive Justice Utilitarianism Moral Imagination Virtue Ethics 40) A problem with this theory is that the categorical imperative does not provide clear guidelines for deciding what is right and wrong when two or more moral laws conflict and only one can be chosen: a. pleasure. e. b. c. c. and (2) it is difficult to choose between compassion and not betraying somebody’s trust: a.Possible Question Exam 1 39) Two weaknesses of the following approach are (1) it is difficult to determine who demonstrates integrity in the workplace. considers an action to be ethically good if it will probably produce a greater balance of good over evil: a. b. d. Act Utilitarianism Active Utilitarianism Sub-Utilitarianism Consequentialism Virtue Ethics 9 . b. d. c. b. Deontology Distributive Justice Utilitarianism Moral Imagination Virtue Ethics 43) This approach. d. e. Deontology Distributive Justice Utilitarianism Moral Imagination Virtue Ethics 41) Minority rights may be violated under this approach: a. Deontology Distributive Justice Utilitarianism Moral Imagination Virtue Ethics 42) This approach presupposes that happiness. utility. e. e. e. c.

e. Adam Smith John Locke Thomas Hobbes Jeremy Bentham John Rawls 46) There are two aspect of justice. Adam Smith John Locke Thomas Hobbes Jeremy Bentham John Rawls 10 . e. d. b. The individual The firm Society (a) and (b) only All of the above 48) This philosopher argued that social and economic inequalities are just if these inequalities are to everyone’s benefit: a. b. e. e. the decisions need to be good a. b.Possible Question Exam 1 44) Under this approach what is important is that the decision was made for the right reasons: a. Distributive justice Procedural justice Balance of justice Deontology Teleology 47) for: If managers use moral imagination to determine ethical alternatives. c. 45) Deontology Distributive Justice Utilitarianism Moral Imagination Virtue Ethics This philosopher argued that self-interest leads to economic cooperation: a. d. c. but under this aspect there should be a consistent application of law: a. d. b. b. d. d. c. e. c. c.

Fairness. The three basic philosophical approaches for corporate decision makers are consequentialism. and Responsibility. None of the above 11 . and virtue ethics. Demonstrate commitment to professionalism d. b. All of the above e. None of the above. Compassion. Integrity. deontology. An audit partner cannot serve as the engagement partner or the concurring partner for over five concurrent years. Serve the public interest b. According to Article 2 in the Code of Professional Conduct. Hypernorms involve the demonstration of the following basic values: Honesty. c. b. c. d. d. Public Company Accounting Oversight Board consists of five CPAs Auditors may offer actuarial services if permitted by the client’s Audit Subcommittee. members should act in a way that will: a. A hypernorm is a value that is almost universally respected by stakeholder groups. 52. Predictability. CPA is not independent of his audit client.Possible Question Exam 1 49) Norman Jones. None of the above 51. Nora Jones when a) b) c) he charges a contingent fee for audit services he charges a commission for audit services all of the above 50) Which of the following is false? a. Which of the following is true for a publicly traded company? a. Honor the public trust c.

b. or omission. document. d.S.Possible Question Exam 1 53. error. or omission. or has made an error in or omission from any return. the difference between how the public believes a company will perform and how the company actually performs after one year. False 56. 54. or omission now makes the practitioner liable. MUST a. c.. Borrowers e. stay silent because informing the client of such noncompliance. d. 55. Suppliers d. error. All above could be stakeholders 12 . a.S. A public accounting firm must be independent of the firm's audit client throughout the audit. or other paper which the client submitted or executed under the revenue laws of the U. advise the client promptly of the fact of such noncompliance. Customers c. b. knows that the client has not complied with the revenue laws of the U. error. A practitioner who. The expectations gap has been coined to describe: a. the difference between what the public thinks it is getting in audited financial statements and what it is actually getting. True b. Employees b. c. Which of the following are not examples of stakeholders? a. Both B and C. advise the client of the consequences as provided under the Code and regulations of such noncompliance. the gap between what the public expects of a certain stock and what value the stock actually closes on that day. affidavit. Both A and C. having been retained by a client with respect to a matter administered by the IRS.

Risk includes the systematic application of management policies and procedures. c. A Practitioner has no obligation to allow a client to view their tax file. Responsibility.Possible Question Exam 1 57. Generally a practitioner must.The firm may charge a flat fee for all work. What is risk? a. Moral Standard Approach. b. d. Profitability. A practitioner may not keep copies of client records. Which of the following (according to Charles Fombrum) is not one of the four determinants that influence a company's reputation? a. 3. d. Generally client records do not have to be returned if there is a dispute over fees. 59. All of the following are approaches of comprehensive ethical decision making known as stakeholder impact analysis except for? a. Five Questions Approach. b. 60.The firm can receive commissions from third parties for work performed on a client. Regarding the fees of registered independent accounting firms on a audit engagement the following is true: a. and structures that are directed towards the effective management of potential opportunities. processes. Stakeholder Impact Analysis Approach. 2. c. return any and all records of the client. Reliability. d. b. 4.The firm may charge a fee based on the number of errors it find in the clients financials. Risk is the chance of something happening that will have an impact on objectives. c. at the request of the client. The firm may charge a client a commission based on recovery received due to finding an issue on the financials. Pastin Approach. d. b. c. Risk is the culture. 13 . 58. Credibility. 61. Risk is when the stock market goes down. The following is true about return of client tax related records: 1.

but the audit report must be modified to disclose the lack of independence. c. According to Chapter 1. Rule 101-Independence. Stakeholder impact analysis as a form of ethical decision making commences with which of the following: a. According to Circular 230. Investigation of stakeholder interests. b. All of the above. e. None of the above. applicability to law.Possible Question Exam 1 62. Both. b. reasonableness of assumptions. D. According to the AICPA Code of Professional Conduct. Reliability. which of these is the best practice for tax advisors? a. Establish the facts (relevance. e.33. 14 . There must be reasonable assurance that this is being done during the engagement. Trustworthiness. Identification of significant stakeholders. a. Communicate clearly with the client the terms of the engagement. b. Act with fairness and integrity. Advise client import of conclusions. c. B. b. A CPA may conduct a financial statement audit when he or she is not independent. d. Responsibility. Ranking of stakeholder interests. 64. What must an accountant do to be in compliance with the generally accepted auditing standards? a. an audit requires that an individual perform his or her services with integrity and objectivity. derived conclusions). Credibility. Part 10. Be independent in fact. c. d. E. 67. All of the above. Neither. d. which of these determinant factors define a corporation's reputation? A. All of the above. True False 66. Be independent in appearance. 65. C.

a. c. Matter to stop contacting him. This is a lawful practice because Weasel & Mink. if he could sign this client. Texas State Board of Public Accountancy. None of the above. CPAs will refund Ms. CPAs because CPAs cannot refund for work already performed. C. b. Matter charged her $135/hour. Mr.000 for the preparation of the return. the client in question has asked Mr. would not be in violation of Circular 230 in which of the following scenarios: a. Weasel & Mink. Jim Matter. c. d. None of the above. The brochure is an advertisement of all of the services 15 b. CPAs because CPAs cannot charge a contingent fee for preparing an original tax return. Under the assumption that his going rate is $125/hour. Matter had been persistently soliciting and contacting a potential client. Jim has taken it upon himself to mail out a brochure to a list of people he has obtained through a friend. b. Fleece and charged her $5. He has been so persistent because he feels that. c. In the event the Internal Revenue Service does not sustain her tax deductions on her chinchilla farm. Which of the following organizations licences CPAs: a. CPAs made a mistake on the tax return. CPAs prepared an original tax return for Ms. This is not lawful practice because Weasel and Mink. Matter that she would like him to prepare her 1040. This is not lawful practice because Weasel and Mink. This is a lawful practice because Weasel & Mink. Weasel & Mink. Texas Society of CPAs. 69.A. Mr. it would generate huge profits for his firm. However. CPAs can reimburse a client for all or a portion of a fee in the event that the position taken on the tax returned is challenged by the Internal Revenue Service. Fleece $500.P. A potential client calls Jim up 6 weeks later after the brochure has been published and tells Mr. AICPA. e. Jim Matter has published a fee schedule that specifically states his hourly rate for preparing 1040's is $125/hour.Possible Question Exam 1 68. rather than the published rate of $125/hour. Even after he has clearly told Jim to stop contacting him because he did not want Jim's services. the client in question is shocked when she receives her bill for preparation of her 1040. e. 70. Matter still keeps pursuing the client. In regards to solicitation of clients. Mr. All of the above. d. .

c. Under PCAOB’s ethics rule 3524 governing an “Audit Committee Pre-Approval of Certain Tax Services”. Provide the audit committee a written. The list of names that Jim is going to mail brochures to are not current clients. e. Discuss the proposal and the potential impact on independence and ethics with the audit committee c. b. Johnson CPAs may require that its client endorse the check and then negotiate the check by depositing the check into its operating account if the client has not paid its bill for the preparation of the tax return. which step is not required of auditors in seeking preapproval of tax services? a. Submit a sworn statement that the tax services are to be performed only by senior staff in financial reporting oversight roles with the audit client (or its affiliates) 16 . Matter only kept copies of the brochures mailed out to these people for 24 months after they were mailed. Johnson CPAs may hold a refund check until its client picks up the check. 72. Johnson CPAs practice before the IRS and have implemented a policy requiring all tax refund checks of its clients be sent to the firm.Possible Question Exam 1 offered by Jim and his firm. All of the above. d. detailed description of the scope of the proposal. Johnson CPAs may endorse its client's refund checks and deposit the checks into Johnson CPAs' operating accountant if the client has not paid its bill for the preparation of the tax return. d. 71. and are not seeking the type of services offered by a CPA. have not invited Jim to contact them through direct mail. Matter's brochures explicitly state that he is Acertified by the Internal Revenue Service to perform tax services. None of the above. Mr. Mr. related fee and other b. a. Document the substance of the discussion in a uniform format d.

Understand the company’s process very well. A CPA certification holder. e. All of the above. Sarbanes-Oxley Act of 2002 Securities Act of 1933 Securities Act of 1934 Jones Act 74. e.Possible Question Exam 1 73. a registered public accounting firm and its associated persons must be a. Consideration should give to individuals who have authority in the organization. B. d. Independent of the firm’s audit client throughout the audit and professional engagement period. The person is in a financial reporting oversight role. D. Arthur Anderson. C. All statements are correct. The board of directors appoints the audit committee and has the authority to remove members at anytime. At least one member of the audit committee should be able to understand and analyze the financial statements of the organization and the financial expert. c. 76. The credibility gap. c. Under PCAOB's audit professional standards. d. c. This is commonly referred to as: a. 75. The recent corporate accounting scandals have brought to light the void between what investors think they are getting in audited financial statements and what they are actually getting in audited financial statements. Which of the following statements are not correct regarding a publicly traded company: a. and WorldCom? A. b. b. The expectations gap. b. Which of the following laws was enacted as a result of the corporate scandals of Enron. The financial statement gap. 17 . d. The accountability gap. The committee should consist of at least three member of the board of directors and one audit financial expert.

d. After discussing an ethical issue or a financial report that deviates from GAAP with your manager and other executives. Advise the IRS promptly d. Paul Brown provides audit services to a client. Both of the above d. Secure all documentation related to that issue. d. b. e. Consider advising the Board of Directors. Advise the client promptly of the fact of such non-compliance b. b. Bookkeeping services related to the client's financial records. Which of the following services can Paul Brown provide to some of this same client's employees? a. Appraisal or valuation services. Under PCAOB rules the “Audit and professional engagement period” include(s): a. c. Corporate Governance b. 81. d.then consider resigning. A practitioner who knows that the client has not complied with the revenue Laws of the United States must: a. Advise the client of the consequences of such non-compliance c. take into consideration the fact that the problem continues to persist after reporting it and your inability to do anything to resolve the problem. 18 . Tax services in limited circumstances. your next step is going to be: a. an SEC registrant. c. Advise the client promptly of the fact and the consequences of such non-compliance 79. c. Accounting Profession c. The Sarbanes Oxley Act of 2002 provides for the reform of: a. you found out that they were involved in the issue. None of the above. Internal audit outsourcing services. Resign right away. the period covered by any financial statements being audited the period of the engagement to audit or review the audit client’s financial statement all of the above none of the above 80. None of the above 78. Financial information system design and implementation. b.Possible Question Exam 1 77.

e. The Moral Standards Approach focuses on all of the below except: a. All of the above. Establish procedures for anonymous employee complaints. Inspect. A practitioner may be censured. 85. d. c. Whether it is fair to all stakeholders. Conviction of any felony under federal or state law for which the conduct involved renders the practitioner unfit to practice before the IRS. e. b. discipline. None of the above. b. Receive audit reports from the auditors without management present. Consist of five members with five year staggered terms. 86. suspended or disbarred from practice before IRS due to incompetence and disreputable conduct. Approve any non-audit services provided by auditors. d. c. including: a. Whether it is right 19 . d. Appoint and oversee outside auditors. Establish auditing and attestation standards. All of the above. b. Maintain and register foreign firms that audit SEC registrants. d. e. 83. Whether it helps the officers of the corporation. and write rules governing accounting firms that audit public companies. b. All of the above. c. Conviction of any criminal offense involving dishonesty or breach of trust. Under Sarbanes-Oxley.Possible Question Exam 1 82. the audit committee of a public company shall do the following: a. SOX established a Public Accounting Oversight Board (PCAOB) that will: a. and who will be subject to PCAOB regulations and discipline. c. Conviction of any criminal offense under the revenue laws of United States. Whether it provides a net benefit to society.

and for the financial statements to be in conformity with Generally Accepted Accounting Principles would mean a major modification to the financial statements of Garbage Management. e.000 for the preparation of the return. a. it was discovered that some of the financial data was not presented in conformity with Generally Accepted Accounting Principles. Actually. c. Integrity and Objectivity (Rule 102). Inc. b. a new executive of the company. b. D 88. which was hired to audit the financial statements of Garbage Management. Inc. John Jacob. CPA for another man. a. CPAs prepared an original tax return for Ms. None of the above. c. Choose the best answer.000. and left him with $10. Independence (Rule 101). they used to date. who went to college with John Jacob. This is a lawful practice because Weasel & Mink. and Independence (Rule 101). Accounting Principals (Rule 203) and General Standards (Rule 201). General Standards (Rule 201) and Compliance with Standards (Rule 202). During the course of the audit. and Compliance with Standards (Rule 202). Accounting Principals (Rule 203). 20 . Weasel & Mink. Shelly Rogers asks John Jacob. What are the potential violations of the AICPA Code of Professional Conduct that this situation presents. In the event the Internal Revenue Service does not sustain her tax deductions on her chinchilla farm. CPAs because CPAs cannot refund for work already performed. John Jacob. CPA. CPA if XYZ Firm could overlook the non-conformity. Fleece $500.Possible Question Exam 1 87. Weasel & Mink. This is a lawful practice because Weasel & Mink. On the 3rd day of his audit work at XYZ Firm. This is not lawful practice because Weasel and Mink. Accounting Principals (Rule 203). CPA works for XYZ Firm. CPAs will refund Ms. CPA runs into Shelly Rogers. but Shelly Rogers left John Jacob. CPAs can reimburse a client for all or a portion of a fee in the event that the position taken on the tax returned is challenged by the Internal Revenue Service. d.00 in debt for a diamond ring which she did not return. CPAs because CPAs cannot charge a contingent fee for preparing an original tax return. but haven't had contact with one another in over 15 years. This is not lawful practice because Weasel and Mink. CPAs made a mistake on the tax return. They used to be very good friends. d. Fleece and charged her $5.

All of the above. Sarbanes Oxley Act of 2002 d. Public accounting rule. A member of the AICPA must: a. such as the officer’s brother-in-law. All of the above. Who may practice before the internal Revenue Services? a. Enrolled agents d. b. The “audit engagement period” B. Based upon the PCAOB’s Rules on Ethics. All of the above. Attorney b. Training and Communication c. c. The “audit period” C. 90. a) True b) False 93. The “professional engagement period” 94. All of the above 21 . The period of the engagement to audit or review the audit client’s financial statements or to prepare a report filed with the Commission is called: A. allegations of corporate improprieties and financial restatements. A company’s comprehensive culture-building and risk reduction services include: a. Measurement and Reporting d. The “professional audit period” D. Strategy and Assessment b. Certified public accountants c. b. Security act of 1933 c. Undertake only those professional services that the member of member=s firm can reasonably expect to be completed with professional competence. Enrolled actuaries e.Possible Question Exam 1 89. Congress enacted the in response to a spate of highly publicized business failures. Adequately plan and supervise the performance of professional services. a. a registered public accounting firm would not be independent of its client if during the audit the firm provided tax services to an immediate family member of the client. 93. Exercise due professional care in the performance of professional services. d. 91.

Scott Hungary is a member of Board of Directors of Beast Inc. Gary Daman’s CPA firm has been engaged in Beast Hungary Inc. b. c. Any records that Mike is not using at the time. Gary Daman is NOT allowed to represent Lisa Billup before the IRS when: a. C. Mike the CPA will not return the records until fee dispute is solved. The representation is not prohibited by law. Gary Daman also files personal tax return for Scott Beast. unless there is a fee dispute. Lisa Billup. 97. confirmed in writing. b. c. Scott Hungary is the CFO of Beast Inc. even if there is a fee dispute. The representation of Lisa Billup will be directly adverse to Gary’s another client. Any and all records necessary to fulfill the tax obligation. Joe the Client requests that Mike the CPA return to him all of his records so that Joe the Client can comply with his Federal Tax obligations.’s financial audit for the past 3 years. 96. even if there is a fee dispute. B. Scott Hungary is the Controller of one of the Beast Inc. 22 . Gary Daman.Possible Question Exam 1 95. CPA. D. Lisa Billup gives informed consent. Gary reasonably believes that he will be able to provide competent and diligent representation to Lisa Billup. In such case. Mike the CPA must return: A. determined to have a conflict of interest with a client. d. Carol O’Neil.’s subsidiaries. Mike the CPA is not allowed to make copies of these records. Any and all records necessary to fulfill the tax obligation. Mike the CPA is allowed to make copies of these records. Scott Hungary is the CEO of Beast Inc. a member of the Beast Inc.? a. d. Any and all records necessary to fulfill the tax obligation. Under what circumstance Gary Daman is still considered independent of Beast Hungary Inc.

D. a. None of the above 100.Government c. The PCAOB which is charged with overseeing. sales. false 101 What of the following is not considered as stakeholders? a.. inspecting. 99. Fairness. reliability. Describe. cash flow. in writing.Employees b. D. and equity. C.Suppliers d. John Fry. All of the above. Productivity. B. growing. plummeted. Discuss with the audit committee of the client any potential effects of the services on the independence of the firm. a registered public accounting firm shall: A. The reason being is because John Fry’s actions affected the corporate reputation of his company. Credibility. and honesty. in writing. and disciplining accounting firms in their roles as auditors of public companies. and responsibility. C. the stock price of XYZ Corp. to the audit committee of the client the scope of the services performed. integrity. Describe. trustworthiness.Possible Question Exam 1 98. and document the substance of the discussion with the audit committee of the issuer. was arrested for using. regulating. B. As a result.None of the above 23 . to the audit committee of the client any compensation agreement or other agreement. such as a referral agreement. and selling marijuana out of his home in Austin. TX. True b. as well as any other side letter on the engagement letter. compassion. In connection with seeking Audit Committee pre-approval to perform an audit client any permissible tax service. The four determinates of corporate reputation are: A. the Chairman and CEO of XYZ Corp. the fee structure of the engagement.

Which of the following does not belong to the checklist for maintaining good client relations? A. All of the above e. B. All of the above. if needed. (relevance. Act with fairness and integrity.Possible Question Exam 1 102. What is a positive way to maintain a quality relationship with a client? A. Honor the public trust c. E. with clearly defined terms (i. Serve the public interest b. Complete work at agreed upon deadlines. members should act in a way that will a. reasonableness of assumptions. B. Have written fee agreements. including drafts as well as client status reports. Monitor quality of all work. derived conclusions). C. C. D.e. billing) and. Advise client import of conclusions. Return all phone calls promptly. 103. applicability of law. Maintain professional office appearance. Communicate clearly with the client the terms of the engagement. B. D. Use appropriate phone protocol to maintain confidentiality with clients. According to Article 2 in the Code of Professional Conduct. All of the above. None of the above 24 . They all belong to the checklist. E. Which of these is the best practice for tax advisors? A. 104. Have written fee agreements. Establish the facts. provide cost estimates. Demonstrate commitment to professionalism d. C. D. 105.

has notified Mr. b. b. Jones that his federal income tax return and extension for 2006 is complete and ready to be mailed to the IRS. The expectations gap has been coined to describe: a. Both B and C. What must Taxes R Us do? a. Jones to copy the remaining records needed to abide by his Federal tax responsibility. error. Who may practice before the IRS? a. d. He then complains that Taxes R Us accounting fees are too high priced and demands his records so he can go elsewhere.. 107. c. or omission. Jones to only review and copy all the records he had provided. b. error. 25 . Jones requests an estimate of his payment. advise the client of the consequences as provided under the Code and regulations of such noncompliance. error. None of the above. Taxes R Us must return the entire file of records provided by Mr. or other paper which the client submitted or executed under the revenue laws of the U. 108 . MUST a. d. Taxes R Us. Jones at once because those are his personal belongings. c.S. Both A and C.Possible Question Exam 1 106. affidavit. or omission. stay silent because informing the client of such noncompliance. d. the gap between what the public expects of a certain stock and what value the stock actually closes on that day. the difference between what the public thinks it is getting in audited financial statements and what it is actually getting. Any licensed attorney(s) in good standing 109. or has made an error in or omission from any return. a CPA firm. knows that the client has not complied with the revenue laws of the U. Taxes R Us must return the documents that the IRS requires attached to a return and allow Mr. Mr. Taxes R Us must allow Mr. Anybody b. A practitioner who. A CPA candidate d. Any person with a college degree c. document. the difference between how the public believes a company will perform and how the company actually performs after one year. c. advise the client promptly of the fact of such noncompliance.S. having been retained by a client with respect to a matter administered by the IRS. or omission now makes the practitioner liable.

Eileen’s company has reviewed the executive board. 4. a seasonal employee for H&R Block. 3. an employee at the 5th Circuit Federal Court of Appeals. Business Ethics Trends d. 111. Due to business travel he won’t be able to attend & represent himself. who advised him on the tax deductions he claimed on his 2005 return C) Jason’s mother who is employed as a bookkeeper at a local bank D) Jason’s brother-in-law. The firm can receive commissions from third parties for work performed on a client. Governance. and revised the penalties of misconduct. who prepared and signed his 2005 return as the preparer B) Jason’s aunt. This reveals how SOX has had an impact on a.Possible Question Exam 1 110. who is a former CPA who practiced in the State of Texas 26 . Accountability and Reporting. and Management Practice b. Accounting Profession and Auditing Practice c. Since the new SOX governance framework was established. Regarding the fees of registered independent accounting firms on a audit engagement the following is true: 1. None of the above. The firm may charge a flat fee for all work. Jason has a hearing scheduled before a panel of IRS appeals officers relating to his 2005 Individual Federal Income Tax Return. discussed the roles they play in the company. 2. 112. The firm may charge a fee based on the number of errors it find in the clients financials. Which of the following individuals can represent Jason at his hearing? A) Jason’s best friend. The firm may charge a client a commission based on recovery received due to finding an issue on the financials.

several trends developed that impacted the ethics of business & the professional accountant. Persons who have been censured. All of the above. B.Possible Question Exam 1 113. including management’s responsibility for establishing. Persons that have been placed in inactive status for failure to meet the requirements for renewal of enrollment. suspended. The Director of Practice will maintain roasters of all the following individuals: A. Which of the following is not one of those trends? a) b) c) d) e) decreasing legal liability for corporate directors mgmt. maintaining & assessing their effectiveness is governed by which title of the Sarbanes-Oxley Act? A) B) C) D) Title III – Corporate Responsibility Title IV – Enhanced Financial Disclosures Title VIII – Studies & Reports Title XI – Corporate Fraud & Accountability 116. As a result. C. which step is not required of auditors in seeking preapproval of tax services? A) Provide the audit committee a written. Under PCAOB’s ethics rules governing an “Audit Committee Pre-Approval of Certain Tax Services”. employee empowerment & the use of EDI increased reliance by management on non-financial performance indicators used on a real-time basis 115. D. or disbarred from practice before the IRS. assertion to shareholders on the adequacy of internal controls a stated intention to manage risk & protect reputation delayering. In the 1980’s business evolved from a profit-only mandate to one recognizing the interdependence of business & society. detailed description of the scope of the proposal. 27 . Persons that have been granted active enrollment to practice before the IRS. related fee and other B) Discuss the proposal and the potential impact on independence and ethics with the audit committee C) Document the substance of the discussion in a uniform format D) Submit a sworn statement that the tax services are to be performed only by senior staff in financial reporting oversight roles with the audit client (or its affiliates) 114. Managements report upon the corporation’s internal controls.

Jones Act 118. A company’s comprehensive culture-building and risk reduction services include: a. means any person who is a member in good standing of the bar of the highest court of any State. and structures that are directed towards the effective management of potential opportunities and adverse effects. __________ includes the culture.Possible Question Exam 1 117. True b. 119. All of the above. processes. Commissioner d. 120. a) Risk Management b) Hypernorms c) Ethics d) Synergy 28 . CPA b. possession of the United States. Strategy and Assessment b. including a Commonwealth. Sarbanes-Oxley Act of 2002 b. Based upon the PCAOB’s Rules on Ethics. Training and Communication c. or the District of Columbia. In Circular 230. a registered public accounting firm would not be independent of its client if during the audit the firm provided tax services to an immediate family member of the client. such as the officer’s brother-in-law. False 121. Securities Act of 1933 c. Arthur Anderson. Securities Act of 1934 d. a. Enrolled agents. Which of the following laws was enacted as a result of the corporate scandals of Enron. a. territory. and WorldCom? a. Measurement and Reporting d. Attorney c.

b.” (Brooks. 2) Which of the following entities is not considered a “stakeholder” of a company? a. Debtor. Employee. c. Gary Daman’s CPA firm has been engaged in Beast Hungary Inc. d. confirmed in writing. determined to have a conflict of interest with a client. Gary Daman is NOT allowed to represent Lisa Billup before the IRS when: a. Lisa Billup.? a. c.’s subsidiaries. The representation of Lisa Billup will be directly adverse to Gary’s another client. P. Under what circumstance Gary Daman is still considered independent of Beast Hungary Inc. “Stakeholders increasingly expect that a company’s activities will respect their values and interests. CPA. Carol O’Neil. b. Gary Daman also files personal tax return for Scott Beast. c. Lisa Billup gives informed consent.’s financial audit for the past 3 years. b. this respect for stakeholder values and interests determines the ethical standing and success of a corporation. a member of the Beast Inc. Scott Hungary is the CEO of Beast Inc. Scott Hungary is the CFO of Beast Inc. d. Gary Daman.Possible Question Exam 1 122. Gary reasonably believes that he will be able to provide competent and diligent representation to Lisa Billup. To a large extent. Scott Hungary is a member of Board of Directors of Beast Inc. 29 . Stockholder. Creditor. Scott Hungary is the Controller of one of the Beast Inc. 123. 124. The representation is not prohibited by law. d.

Ensure committing acts beyond the scope of the powers of ABC Corp. Decrease of the demand of qualified audit personnel. 127. D. responsibilities. B. Avoid committing acts beyond the scope of the powers of ABC Corp. The Board of Director’s of ABC Corporation have three broad duties that stem from the fiduciary status of corporate directors. Clarification of roles. 126. PCAOB C. as defined by its charter or laws of the state of corporation. The duty of obedience requires the director to: A. b. The attestation standards. Strengthening of the role of the audit committee. as defined by its charter or laws of the state of corporation. SEC B. loyalty. Avoid committing acts within the scope of the powers of ABC Corp.Possible Question Exam 1 125. d. 30 . as defined by its charter or laws of the state of corporation. including quality control and independence standards of the auditing firm performing contract internal work for the company. all of these 128. C. “The new SOX governance framework will focus the attention of directors and management on issues that are of critical importance to the proper governance and reporting process. and competencies of directors and board subcommittees. must assess. AICPA D. Those three duties are the duties of obedience. and care. SOX of 2002 is primarily regulated and overseen by A. c. and certify by signature which of the following: a. management is responsible for. None of the above. Under the Sarbanes-Oxley Act (SOX). Increased penalties for wrongdoing.” Which one of the following developments is not the result of SOX framework? a.

c. Advise the client promptly of the fact of such non-compliance b. Exercise due professional care in the performance of professional services. Adequately plan and supervise the performance of professional services. The five members (only two of which can be CPAs) of the Public Company Accounting Oversight Board (PCAOB) are certified in the Company=s headquarters. 130. d. Undertake only those professional services that the member of member=s firm can reasonably expect to be completed with professional competence. 129. None of the above 131. All of the above. The Sarbanes Oxley Act of 2002 provides for the reform of: a.Possible Question Exam 1 b. SEC forms. Advise the client of the consequences of such non-compliance c. Quarterly and annual financial reports. Both of the above d. Corporate Governance b. and period reports on systems of internal control. A member of the AICPA must: a. A practitioner who knows that the client has not complied with the revenue Laws of the United States must: a. Accounting Profession c. d. Advise the IRS promptly d. b. The non-audit services of the auditing company were performed according to the appropriate SARS. Advise the client promptly of the fact and the consequences of such noncompliance 31 . c.

c. b. Due Diligence. The expectations gap. Morals. and arithmetic equality Need. d. and merit Opportunity. This is commonly referred to as: a. Ethical framework. c. and merit a. Hypernorm. for the most part.Possible Question Exam 1 132. and merit Opportunity. 133. and equivalence 32 . c. The financial statement gap. 134. arithmetic equality. is universally respected by various stakeholders group is: a. d. fairness. All of the above. The recent corporate accounting scandals have brought to light the void between what investors think they are getting in audited financial statements and what they are actually getting in audited financial statements. d. All of the above. e. b.The accountability gap. The term that refers to a set of values that. fairness. Need. there are three main criteria for determining the just distribution: Need. e. b. arithmetic equality. The credibility gap. fairness. According to distributive justice theory.