Deck 1: Ethical Issues in Advanced Accounting

Question 1

Cooking the books describes stretching the form of accounting standards to the limit, regardless of the substance of the underlying business transactions or events.

Answer 1

False

Question 2

There is general agreement that the first line of defense against improper financial reporting is provided by independent CPAs who audit financial statements of business enterprises.

Answer 2

False

Question 3

All four participating organizations in the Seaview Symposium of 1970 had codes of ethics for their members.

Answer 3

False

Question 4

Several of the executives who perpetrated the Equity Funding Corporation of America fraud were CPAs with public accounting experience.

Question 5

The IMA's Standards of Ethical Conduct for Members provide guidance for resolution of ethical conflict.

Question 6

The Report of the National Commission on Fraudulent Financial Reporting provided to both private and public companies recommendations for curbing fraudulent financial reporting.

Question 7

All Rules of Professional Conduct of the AICPA's Code of Professional Conduct apply to AICPA members in private industry as well as in public accounting practice.

Question 8

The SEC's Accounting and Auditing Enforcement Releases report SEC enforcement actions against accountants in private industry as well as in public accounting practice.

Question 9

The ethics codes of the IMA, FEI, and AICPA do not define discreditable acts.

Question 10

The SEC accepts the "good soldier" defense of unethical conduct by corporate controllers.

Question 11

Management accountants are obligated solely for their own compliance with the IMA's Standards of Ethical Conduct for Members.

Question 12

The current FEI Code of Ethics addresses both business and personal affairs of FEI members.

Question 13

The bylaws of the AICPA require AICPA members to comply with both the Principles and the Rules of the Code of Professional Conduct.

Question 14

According to the AICPA's Principles of Professional Conduct, integrity requires an AICPA member to observe both the form and the spirit of technical and ethical standards.

Question 15

Although members of the AICPA not in public practice cannot maintain the appearance of independence, they must maintain objectivity in rendering professional services.

Question 16

The AICPA's Rules of Professional Conduct prohibit advertising by an AICPA member in public practice.

Question 17

Are AICPA members in private industry obligated to comply with Code of Professional Conduct:

A)
B)
C)
D)

Question 18

According to the Treadway Commission, direct responsibility for the financial statements of a publicly owned business enterprise is attributed to the enterprise's:

A) Chief executive officer
B) Chief financial officer
C) Chief accounting officer
D) Chairperson of the audit committee of the board of directors

Question 19

Honesty and integrity in personal affairs were once required by the ethics code or codes of the:

A) IMA only
B) FEI only
C) AICPA only
D) IMA, FEI, and AICPA

Question 20

At the Seaview Symposium of 1970, the participating organization that did not have a code of ethics for its members was the:

A) American Institute of Certified Public Accountants
B) Financial Executives Institute
C) Financial Analysts Federation
D) Robert Morris Associates

Question 21

The organization whose code of ethics provides guidance for resolution of ethical conflict is:

A) The Institute of Management Accountants
B) The Financial Executives Institute International
C) The American Institute of Certified Public Accountants
D) None of the foregoing

Question 22

According to the National Commission on Fraudulent Financial Reporting, the responsibility for reliable financial reporting resides first and foremost:

A) With the Securities and Exchange Commission
B) With independent auditors
C) With internal auditors
D) At the corporate level

Question 23

A requirement that is not common to the codes of ethics of the IMA, the FEI, and the AICPA is:

A) Competence
B) Integrity and objectivity
C) Confidentiality
D) Compliance with generally accepted accounting principles

Question 24

With respect to gifts, favors, or hospitality, the IMA's Standards of Ethical Conduct for Members require IMA members to:

A) Refuse all such benefits
B) Report such benefits to their supervisors
C) Refuse such benefits that would, or would appear to, influence their actions
D) Accept such benefits but in turn donate them to a nonprofit enterprise

Question 25

According to the AICPA's Principles of Professional Conduct, clients' and employers' best interests are served when AICPA members:

A) Fulfill their responsibility to clients and employers
B) Comply with requirements of the Securities and Exchange Commission
C) Fulfill their responsibility to the public
D) Comply with generally accepted accounting principles

Question 26

According to the AICPA's Principles of Professional Conduct, does integrity require AICPA members to observe the principles of:

A)
B)
C)
D)

Question 27

Independence in fact and appearance is required of AICPA members:

A) In all areas of employment
B) Who provide auditing and other attestation services
C) In order to maintain objectivity in all areas of employment
D) To comply with requirements of the Securities and Exchange Commission

Question 28

Rule 201, "General Standards," of the AICPA's Rules of Professional Conduct deals with all except:

A) Objectivity
B) Due professional care
C) Sufficient relevant data
D) Planning and supervision

Question 29

Does the AICPA Council resolution designating bodies to promulgate technical standards include the:

A)
B)
C)
D)

Question 30

The Public Company Accounting Oversight Board was established by the:

A) Sarbanes-Oxley Act of 2002
B) Securities and Exchange Commission
C) American Institute of Certified Public Accountants
D) Financial Accounting Standards Board

Question 31

Specific recommendations for resolution of ethical conduct are provided by the ethics code or codes of the:

A) IMA
B) FEI
C) AICPA
D) IMA, FEI, and AICPA

Question 32

Avoidance of discreditable acts is required by the ethics code or codes of the:

A) IMA
B) FEI
C) AICPA
D) IMA, FEI, and AICPA

Question 33

Lawrence Knight, CPA, controller of Marvello Company, a publicly owned business enterprise, is a member of the Institute of Management Accountants. On June 30, 2006, the end of Marvello's fiscal year, Knight is instructed by his supervisor, Chief Financial Officer Ernest Coburn, to recognize as revenue a $100,000 shipment of merchandise to a customer, terms "on approval," on that date. Knight does not consider that the earnings process required for the recognition of revenue has been met for the shipment. As a member of the IMA, what should Lawrence Knight do? Explain.