Question 1

What can a CPA do to maintain technical and ethical standards through due care?

Accepted Answer

Continuing education and improving service quality are essential for CPAs to maintain competence and uphold technical and ethical standards.

Question 2

Why is it important to have ethical codes in the field of accounting?

Accepted Answer

The answer of Why is it important to have ethical...

Question 3

Which organization provides guidelines for ethical conduct for public accountants?

Accepted Answer

The American Institute of Certified Public Accountants (AICPA) provides guidelines for ethical conduct for public accountants. The AICPA's Code of Professional Conduct includes principles such as integrity, objectivity, confidentiality, and professional competence.

Question 4

Discuss earnings per share and how they are used.

Accepted Answer

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Question 5

Unethical accounting methods have affected public confidence only in the company found to have committed accounting violations.

Accepted Answer

Unethical accounting methods not only affect the company found to have committed violations but also have a negative impact on public confidence in the entire industry or sector. This is because the public begins to question the integrity and reliability of financial statements presented by other companies within that industry or sector. The Enron scandal is a classic example of how unethical accounting practices by one company impacted the entire energy sector.

Question 6

Why should there be universal accounting procedures?

Accepted Answer

Universal accounting procedures ensure that financial statements of different companies can be interpreted and compared accurately by stakeholders. This is important for making informed investment decisions and analyzing the financial health of companies across different countries and regions.

Question 7

Under the Code of Ethics for CPAs,what should a CPA do in regards to their responsibilities as a professional?

Accepted Answer

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Question 8

Ethical behavior requires that a CPA give precedence to public trust in the profession over the directions of her or his employer.

Accepted Answer

This is a fundamental principle in the Code of Professional Conduct for CPAs, which requires them to prioritize respect for public interest, integrity, and objectivity in the performance of their duties, even if it conflicts with the instructions or interests of their employer or client. This helps to ensure that the public can have confidence in the competence and ethical behavior of CPAs and the reliability of financial reporting.

Question 9

Demonstrating a commitment to the profession by respecting and maintaining the public trust and serving the public honorably is an example of what type of obligation under the code of Ethics for CPAs?

Accepted Answer

Serving the public interest is an obligation under the code of Ethics for CPAs. This includes respecting and maintaining the public trust and serving the public honorably, which demonstrates a commitment to the profession. The other options are also important obligations under the code of Ethics for CPAs, but they do not directly address the commitment to the public interest.

Question 10

One of the purposes of ethics in accounting is to maintain public confidence in business institutions,financial markets,and the products and services of the accounting profession.

Accepted Answer

Ethics play a crucial role in maintaining public confidence in business institutions, financial markets, and the products and services of the accounting profession. When businesses and accounting professionals demonstrate ethical behavior and adhere to ethical standards, it enhances trust and confidence in their practices among the public. This, in turn, supports the reputation of businesses and the accounting profession, which is essential for their continued success.

Question 11

Why is ethics in accounting practices important?

Accepted Answer

Ethics in accounting practices is important because accounting methods depend on the veracity of their application. Without ethical standards in place, there is a risk of misrepresenting financial information which can have serious consequences for businesses and their stakeholders, including investors, employees, and customers. Ethical accounting practices help to maintain the accuracy and integrity of financial reporting, which is critical for decision-making within the business and for external stakeholders who rely on this information.

Question 12

Activity ratios allow investors to compare the relative efficiencies of similar companies.

Accepted Answer

Activity ratios measure how efficiently a business uses its resources to generate revenue. By comparing the activity ratios of similar companies, investors can gain insight into which companies are achieving higher levels of efficiency in areas such as asset utilization, inventory management, and revenue generation. Therefore, activity ratios are a useful tool for analyzing and comparing the performance of similar companies in the same industry.

Question 13

The most commonly used liquidity ratio is found by calculating current assets to current liabilities.

Accepted Answer

The statement is true. The most commonly used liquidity ratio is the current ratio, which is calculated by dividing current assets by current liabilities.

Question 14

Which of the following statements BEST describes the need for global accounting standards?

Accepted Answer

The complexity of the global market increases the risk of unethical accounting behavior as national accounting standards can vary significantly, allowing accountants to choose the standards that best suit their clients. This can result in a lack of transparency and consistency, which can create confusion, increase risk, and undermine investor confidence in financial reporting. Global accounting standards, such as International Financial Reporting Standards (IFRS), promote transparency and consistency by providing a common set of rules that companies can follow in their reporting, making it easier for investors to compare financial information across borders.

Question 15

What are the six ethics-related areas enforced by the American Institute of Certified Public Accountants?

Accepted Answer

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Question 16

What does the success of the AICPA code depend on?

Accepted Answer

The success of the AICPA code depends on the acceptance and use by the professionals governed by the code. If professionals do not follow the code or do not accept it, then the code will not achieve its desired outcomes.

Answer: A and B
 While C is the most important factor in the success of the AICPA code, understanding of the code by its users and the exercising of moral judgement in all things are also crucial. If individuals do not understand the code, then they are more likely to violate it unintentionally. Additionally, the code relies on individuals to exercise moral judgement in situations that may not be specifically addressed in the code.

Question 17

Which of the following is an indication of how efficiently a firm is using its resources?

Accepted Answer

Activity ratios, such as inventory turnover or accounts receivable turnover, measure how efficiently a firm is using its resources to generate revenue. These ratios show how quickly a company is turning over its assets and can indicate if there are inefficiencies in the production or sales process. Earnings per share, debt, leverage, and profitability are important measurements but do not directly indicate resource efficiency.

Question 18

A long-term ratio of 2:3 indicates that the company has more equity than debt by a half.

Accepted Answer

A long-term ratio of 2:3 indicates that for every 2 units of equity, there are 3 units of debt, meaning the company has more debt than equity, not the other way around.

Question 19

Major projects,such as corporate mergers or buyouts,can adversely affect the long-term solvency ratio of a company.

Accepted Answer

Major projects like corporate mergers or buyouts can result in increased debt and reduced equity, which can negatively impact the long-term solvency ratio of a company.

Question 20

What is a leveraged buyout?

Accepted Answer

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Quiz 15: The Role of Accountants and Accounting Information