Auditing and Professional Ethics Study Guide Questions
Course Introduction
Auditing and Professional Ethics is a comprehensive course that explores the principles and practices of auditing within the framework of ethical standards expected from professional auditors. The course examines the fundamental concepts of audit planning, execution, reporting, and the application of professional skepticism and judgment. Students learn about various types of audits, internal controls, risk assessment, and evidence gathering techniques while understanding the legal and ethical responsibilities that auditors have towards stakeholders and society at large. Emphasis is placed on the codes of professional conduct, regulatory requirements, and the implications of ethical lapses in the audit profession, equipping students with the skills and integrity to navigate the complex environment of modern auditing.
Recommended Textbook
Ethical Obligations and Decision Making in Accounting Text and Cases 2nd Edition by Mintz
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8 Chapters
609 Verified Questions
609 Flashcards
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Page 2
Chapter 1: Ethical Reasoning Implications for Accounting
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97 Verified Questions
97 Flashcards
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Sample Questions
Q1) The motive of "duty" is most associated with ___________.
A)Rights
B)Deontology
C)Utilitarianism
D)Justice
Answer: B
Q2) Thomas Jefferson's writings in the preamble of the Declarations of Independence is a perfect example of what theory?
A)Rights Theory
B)Virtue Theories
C)Consequentialist Theories
D)Applied Ethics
Answer: A
Q3) Teleology deals with
A)Consequences of actions
B)Fairness to others
C)Respecting the rights of others
D)Following prescribed virtue characteristics
Answer: A
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Page 3
Chapter 2: Accountants Ethical Decision Process and Professional Judgment
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Sample Questions
Q1) Role expectation or approval from others is a motive for doing right is which state of Kohlberg's moral reasoning?
A)Fairness to others
B)Obedience
C)Self-chosen principles
D)Law and order
Answer: A
Q2) The main accounting issue in the Juggyfroot case is:
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
Answer: D
Q3) In stage 5 of Kohlberg's model, ethical reasoning is motivated by:
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
Answer: C
4
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Chapter 3: Corporate Governance and Ethical Management
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80 Verified Questions
80 Flashcards
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Sample Questions
Q1) Under the Sarbanes-Oxley Act, which of the following bodies must contain members that are 100% independent of management?
A)Board of directors
B)Audit committee
C)Internal auditors
D)All of the above
Answer: B
Q2) To ensure audit committee independence, the committee should meet separately with each of the following groups except for:
A)Senior executives
B)Internal auditors
C)External auditors
D)The audit committee should meet separately with all of the above
Answer: D
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Page 5
Chapter 4: Aicpa Code of Professional Conduct
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Sample Questions
Q1) The House Subcommittee on Oversight and Investigations made its recommendations after looking into failures at:
A)ESM Government Securities
B)Continental Illinois National Bank and Trust
C)Penn Square Bank
D)All of the above
Q2) Which would not have to follow the independence of a CPA, according to Interpretation 101-1?
A)CPA's spouse
B)CPA's spousal equivalent
C)CPA's distant cousin
D)CPA's dependents
Q3) In which case was the main accounting issue how to account for contractual allowance?
A)AOL
B)Family Games
C)ZZZZ Best
D)HealthSouth
Q4) Describe each of the investigations of the accounting profession during the 1970s and 1980s.
Page 6
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Chapter 5: Audit Responsibilities and Accounting Fraud
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80 Flashcards
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Sample Questions
Q1) What is the auditor's responsibility with regard to illegal acts?
A)To detect and report illegal acts that have an indirect and material effect on financial statement amounts.
B)To detect and report illegal acts that have a direct and material effect on financial statement amounts.
C)To detect and report illegal acts that have a direct and immaterial effect on financial statement amounts.
D)To detect and report illegal acts that have an indirect and immaterial effect on financial statement amounts.
Q2) Which of the following is the most likely reason for an auditor to issue a qualified opinion?
A)Inability to gather sufficient relevant information to form the basis for the opinion
B)Differences with management that lead to trust issues on the part of the auditor
C)Going concern issue
D)Difference of opinion with management on the application of generally accepted accounting principles
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Chapter 6: Legal and Regulatory Obligations in an Ethical Framework
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Sample Questions
Q1) The Restatement (Second) of Torts Approach
A)Expands an accountant's legal liability to third parties identified by the client as intended recipients of work
B)Limits an accountant's legal liability to only those parties with which it has a privity relationship
C)Limits an accountant's legal liability to only those parties that have been named by the client
D)Expands an accountant's legal liability to all possible users of the audited financial statements
Q2) Michael Trent Reznor, the lead singer in the band Nine Inch Nails, filed a lawsuit against Richard Szekelyi and the Navigent Group in the Reznor v JAM, Inc case alleging: A)Negligence
B)Breach of fiduciary duty
C)Aiding and abetting fraud
D)All of the above
Q3) Distinguish between an auditor's legal liability under common law and statutory law.Cite specific cases to support your Answer.
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Page 8
Chapter 7: Earnings Management and the Quality of Financial Reporting
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Sample Questions
Q1) The amount and size of earnings restatements were relatively high in the early and mid-2000s.Explain the reasons that these instances were frequent and amounts high during that period of time.
Q2) Vorhies identifies four perspectives to help CPAs identify key internal control exceptions under the Sarbanes Oxley Act including:
A)An internal control deficiency caused by accounting manipulations
B)A large variance in an accounting estimate compared with the actual determined amount
C)A misstatement that changes a loss into income or vice versa
D)All were identified
Q3) Which technique was used by both WorldCom and Waste Management to manage earnings?
A)Manipulating asset net valuation amounts to minimize operating expenses for a period
B)Accelerating the recording of revenue into an earlier period
C)Delaying needed repairs to a later period
D)All of the above were used
Q4) Use the fraud triangle to evaluate the actions by those in top management at Enron as the accounting fraud unfolded.
Page 9
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Chapter 8: International Financial Reporting: Ethics and Corporate Governance Considerations
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Sample Questions
Q1) The Tata Group's code of ethics contains each of the following provisions except for:
A)Relatively minor gifts can be made if normal and customary
B)Conflicts of interest should be avoided and, if they exist, they should be reported to the CEO
C)The code prohibits the use of confidential information without the explicit approval of management
D)Insider information can be used as long as it is approved by management
Q2) Each of the following can be a motivation to record a secret reserve except for:
A)Understate net assets and equity
B)Overstate net assets and equity
C)Record amounts in the name of prudence
D)Record amounts to get tax deductions
Q3) The case that deals with conflicts between management and the board of directors and the role of family members in various business entities is:
A)Parmalat
B)Satyam
C)Bat-A-Bing Construction
D)Enron
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