Questions and Answers of Ethical Obligations Decision

Do you believe the end-user cares whether the lead audit engagement partner signs his or her name to the report or the firm simply files Form AP with the PCAOB? Explain.
Answer the following questions about financial statement restatements.a. What are financial statement restatements?b. When should financial statements be restated?c. Assume the auditor has
What is the purpose of an audit firm developing a system of quality controls?
Explain how PCAOB inspections can lead to improvements in audit engagement quality.
In 1995, Congress added Section 10A to the Securities Exchange Act of 1934 as part of the Private Securities Litigation Reform Act. Is it accurate to say that Congress enacted Section 10A with the
Discuss the link between skeptical judgment and skeptical action and Rest’s four-component Model of Ethical Decision Making.
Data analysis, often in the form of continuous monitoring of transactions and controls, is increasingly used as a key component of risk management and audit processes overall. How might data
The PCAOB believes there have been improvements in audit quality during the past few years. Discuss the indicators of audit quality and why they are important to protect the public interest.
1. Explain how pressures and incentives drove the actions taken by Hudgins and Kitay to commit financial statement fraud.2. Describe the problems in the audit of Weatherford International by Ernst
Gary James works for Hill & Beans, a professional services firm. James was a onetime business partner of former Florida state Senator Howard Clark and a donor to his campaign. Clark was recently
In the aftermath of frauds like ZZZZ Best and Enron, SOX beefed up the requirements to belong on the audit committee, as well as its responsibilities. These include which of the following?a. The
1. Given the facts of the case, what communications do you believe Forrester & Loomis should have made with the audit committee with regard to the transactions with the vendor to comply with
Ernst was expected to adhere to audit standards in preparation of their report. What is true about audit standards?a. The SEC requires the 10 standards created by the PCAOB and IFRS.b. The PCAOB
1. Use the Fraud Triangle to analyze the business and audit risks that existed at Diamond Foods during the period of its accounting fraud.2. How would you characterize Diamond's accounting? Did they
A review differs from an audit in that ________________.a. The external auditor reviews company-prepared documentsb. The external auditor reviews internal control to prepare a SOX Section 404
1. Who are the stakeholders in this case and what are Barry's obligations to them?2. What are related-party transactions? Why are related-party transactions a particularly sensitive area? What do you
Describe the types of audit deficiencies that might arise because of problems with ICFR.
How might the existence of the dark triad personalities underlie undesirable behaviors by management and how might it influence the audit?
The audit failure on the part of Ernst can be traced to the failure to _____________.a. Gather sufficient evidential materialb. Realize the inherent risk in auditing a cleaning businessc. See the
The external auditors at Ernst and Whinney succumbed to which part of the fraud triangle?a. Opportunityb. Incentive pressurec. Rationalizationd. A and C
Vick and Lester are engaging in fraud. The definition of fraud can include which of the following?a. Fraudulent financial reportingb. A violation of the Foreign Corrupt Practices Actc.
Vick Jensen is now caught in what dynamic of the Fraud Triangle?a. Incentiveb. Pressurec. Opportunityd. All of these choices are correct
What are the objectives of audit risk assessment, and why is it important in assessing the likelihood that fraud may occur? How might the assessment influence the auditors’ evaluation of ICFR?
Vick and Ethan have both defrauded Fostermann. Each now knows the other is a fraudster. They are caught up in the Fraud Triangle. The components of the triangle are which of the following?a.
1. Assume you are asked as part of an audit of GE’s insurance business to assess fraud risks, what would you include in your report and why?2. At GE’s annual meeting in November 2017, CFO Jamie
1. What issues should be of concern to Margaret in deciding whether Dairy and Cheese should accept the reaudit engagement?2. What are Mark’s ethical obligations in this matter? Should he discuss
1. Analyze the facts of the case using the Fraud Triangle. Would you characterize what Ethan Lester did as a failure of internal controls? Explain.2. Assume Ethan sets a meeting with Vick in two days
On August 31, 2017, the SEC charged Evan R. Kita, a CPA and former accountant at Celator Pharmaceuticals, Inc., and three others with insider trading on market-moving news about the New Jersey-based
Do you think the lead engagement partner in an audit should sign his or her name on the audit report itself or, instead, the informational Form AP with the PCAOB? Use ethical reasoning to weigh the
You are the CFO of a privately-owned business and prepare financial statements and tax returns (which are distributed to lenders, bonding/insurance providers, shareholders, and the IRS). What are
What are client hosting services? Would a CPA/CPA firm violate the Independence Rule if it provides hosting services for a client? Explain when it would or would not impair independence. Would
Assume you disclosed information about a client. How would you determine if you violated the Confidential Client Information rule in the AICPA Code?
What are the specific threats to independence when a CPA accepts gifts or entertainment from an attest client? Does it matter whether the amount of the gift or entertainment was significant?
1. Do you believe covenants not to compete, such as the one in BDO Seidman, are ethical? Do they violate any rules of conduct in the AICPA Code?2. Who are the stakeholders in the BDO case and what
When do ethical conflicts arise in the performance of professional accounting services? How should a CPA go about resolving ethical conflicts?
The applicable section to Helen’s situation in the conceptual framework rules for CPAs in business would be which of the following?a. 110.010b. 1.130.020c. 1.000.020d. 2.000.010
1. Evaluate Mark’s conduct with respect to the Six Pillars of Character.2. Did Mark violate any ethics rules either of the state board or AICPA? Explain.Mark started his own practice ten years ago.
In the event that Carl and the CEO won’t change their position, Helen should probably take her concerns to which of the following?a. The SECb. The external auditorsc. The PCAOBd. The audit committee
1. What role does ‘Auditor Independence’ play in a CPA’s responsibility to protect the public interest?2. Explain the type of threat(s) to independence this case represents and explain why it
Helen Strom is in an ethical dilemma due to a(n) ____________.a. Adverse interest threatb. Familiarity threatc. Undue influence threatd. Financial self-interest threat
1. Evaluate the ethics of the tax shelter transactions, including your concerns about the practices.2. Who are the stakeholders in this case, and what are your professional responsibilities to
Do you believe the threats and safeguards approach establishes a situational or relativistic ethic? How might utilitarianism be used to evaluate the ethicality of permitting certain relationships
Carl Land’s observation that "we push the envelope around here" is typical of the rationalization employed in _____________.a. Groupthink tendencyb. Availability tendencyc. Overconfidence
Grace was lacking in several professional areas in relying on the client rather than external evidence. Arnold Schilder, Chair of the International Auditing and Assurance Standards Board (IAASB),
1. Identify any potential threats to judgment you think could exist based on the facts of the case?2. Thinking back to the biases discussed in Chapter 2, what biases might the identified threat(s)
At the very center of the KPMG framework is __________.a. Attitudeb. Professional skepticismc. Mindsetd. Confidence tendency
We all know people who say, “Don’t bother me with the facts. I’ve already made up my mind.” How might such an attitude influence judgment tendencies of auditors?
It appears Grace has fallen victim to which of the following?a. Judgment triggersb. Availability tendencyc. Mindset tendencyd. Groupthink tendency
1. Apply the steps in Exhibit 4.3, Ethical Conflicts and Compliance with the Rules of Conduct, and analyze whether the relationships described in this case create a conflict of interests and, if so,
Grace Sloan explained that the audit team pressured her to let certain matters go. By doing so, Grace succumbed to groupthink. Groupthink has a home in which of the following?a. Stage 3 of the Rest
Do you believe the U.S. Supreme Court decision in Digital Realty Trust, Inc. v. Somers and the decision in Erhart v. BOFI Holdings were the "right" decisions? Explain the basis for your answer.
Is it a positive result that 39.1 percent of occupational fraud is initially detected by a "tip"? Explain why or why not.
When financial results aren’t what they seemed to be – and a company is forced to issue material financial restatements –should it be required to develop policies to claw back incentive pay and
Review the facts related to the reporting of financial statement fraud by Tony Menendez at Halliburton in the context of the factors identified in the Anti-Fraud Collaboration study. Discuss the
While on a lunch break following a dispute with a supervisor, an employee updated her Facebook status to an expletive and the name of the employer’s company. Several coworkers “liked” her
At the time, revenue recognition required a firm to include ___________.a. Persuasive evidence of an arrangementb. Receipt of a purchase order from the buyer’s budget and the Purchasing Officec.
How can a board of directors know whether the culture of the organization supports the right kind of risk taking?
Halliburton provided a flow chart on revenue recognition known as the ______________.a. Channel Stuffing Treeb. Bill-and-Hold Decision Treec. Mark-to-Market Treed. Revenue Allocation Tree
What are the roles and responsibilities of independent members of the board of directors with respect to risk management and corporate governance?
Menendez was excluded from a meeting on accounting for a potential joint venture arrangement. This is a violation of which of the following?a. Dodd-Frankb. Sarbanes-Oxleyc. The RICO Racketeer
Explain how internal auditors’ sensitivity to ethical dilemmas might be influenced by corporate governance mechanisms.
Halliburton was violating revenue recognition rules by recognizing revenue _____________.a. Before assembling the productb. Before delivering the productc. Before the risks of ownership had passed to
A tobashi scheme involves which of the following?a. Selling investments and buying them back disguised as advisory feesb. Using special purpose entities (SPEs), a la Enron, to offload losses to
Olympus attempted to cover up the losses by writing investments off as ___________.a. Market-to-market trading securitiesb. Goodwill impairmentsc. Discontinued operationsd. Deferred taxes due to
Perhaps the most unusual thing about this case is that _______________.a. The fraud went undetected for so longb. Three sets of different external auditors were involved during the fraudc. The CEO
Organizational culture can influence moral behavior through the “stacked deck” phenomenon. Explain how this might work and lead to a defense of subordinates’ behavior we might call “They made
Natalie’s next step should probably be to _____________.a. Continue employment as though nothing has happenedb. Report to the external auditorsc. Report to the SECd. Seek legal advice
1. What are the main arguments that Jerry and Sharon will need to counter? That is, what are the reasons and rationalizations they will need to address?2. What is at stake should they not convince
In deciding what to do next, Natalie as a CPA should consider the ____________.a.Ethical Responsibilities of a CPA Professional Code of Conduct 102-4b. Ethical Responsibilities of a CPA under AICPA
Explain what you think each of the following statements means in the context of moral development.a. How far are you willing to go to do the right thing?b. How much are you willing to give up to do
According to the 2013 National Business Ethics Survey, 60 percent of workplace misconduct involved someone with managerial authority. Roughly 25 percent of observed misconduct involved senior
If Natalie Garson assumes someone else will report the apparent authorized transfer to Vic Construction, she would be subject to _____________.a. The whistleblower effectb. The tone at the top
1. What role did cultural relativism and situational ethics play in the Olympus fraud? Explain.2. Describe the shortcomings in corporate culture at Olympus?3. Did Michael Woodford violate his ethical
Explain the role of integrity in workplace ethics.
Whistleblowers who meet the criteria are eligible to receive an award based on what was collected as a result of the monetary sanctions. This can vary from ___________.a. 1 to 10 percentb. 10 to 30
1. To whom do John and Laskey owe their ultimate responsibility? Explain.2. If John were to agree not to report this embezzlement to the police or disclose it in the annual report and prospectus,
In an interview on Philosophy Talk, a national syndicated radio program, Edward Snowden, the National Security Agency whistleblower, was asked whether he sees himself as a hero or a traitor,
To encourage various groups to come forward and report fraud, Dodd–Frank extended whistle-blowing privileges and rewards to which of the following?a. Internal auditorsb. External auditorsc. The
1. Put on "Your Thinking Cap" and explain how the provisions of the Sarbanes-Oxley Act might have helped to detect the fraud.2. What anti-fraud controls might have helped detect the fraud. Why?3.
Explain the following statements: (1) It has been argued that an organization that does not support those that whistle blow because of violation of professional standards is indicative of a failure
A whistleblower is defined as a person who provides information to the _________ about a violation of the securities law.a. PCAOBb. Audit committee of the firm involvedc. SECd. External audit firm
Burchard’s Ethical Dissonance Cycle Model suggests this was a failure of which of the following?a. Low Organization Ethics, Low Individual Ethics Low Lowb. High Organizational Ethics, Low
1. Explain the following concepts in the context of the case and how it relates to individual and organizational factors that contribute to fraud:Rationalizations for unethical actions.Stakeholder
What are the ethical lessons to be learned from the scandal at Wells Fargo?
One might say that each group was operating at which ethical level?a. Rest’s notion of Law and Order Stage 4b. Kohlberg’s Moral Sensitivityc. Thorne’s Moral Development Leading to Ethical
The Sadhu was handed off from one group to another due to what?a. The lack of an organizational ethical cultureb. The lack of Koh and Boo’s ethical climatec. The lack of a common corporate
Explain how an overconfidence bias might influence an auditor’s judgment about the proper balance sheet value of inventory.
Select one of the rationalizations for Enron’s actions identified by Andy Fastow in the chapter-opening and explain how you would counteract that statement by emphasizing its ethical deficiencies.
One expression in particular seems to sum up why the accounting frauds at companies such as Enron, WorldCom, and HealthSouth were allowed to persist for so long: “If I Do It, I Must Do It Again.”
Wald, Plotkin, and Sugofsky would do well to follow which model of ethical reasoning?a. Kohlbergb. Restc. Kidderd. Thorne
By suggesting this is operating cash flow, Wald is operating under:a. Instrumental virtue.b. Rest’s idea of the character.c. Kohlberg’s idea of Law and Order.d. The GVV idea of Locus of Loyalty.
The purchase of the motors is a(n):a. Operating cash outflow.b. Investing cash outflow.c. Financing cash outflow.d. Non-cash transaction.
1. Explain the role of cognitive shortcomings in the WorldCom fraud and how social and organizational pressures influenced Betty Vinson's actions.2. The SEC action against Vinson was deemed
If Jackson Daniels decides to do something, what is the one element missing in the chain of communication thus far?a. The failure to report to Internal Auditb. The failure to report to the
1. Identify which biases and or stereotypes might exacerbate the type of behavior described in this case.2. What responsibility does a college or university have in insuring all students feel safe
What is the likely result of Pete’s “zero tolerance of employees making mistakes”?a. Fewer mistakes by employees.b. Implementation of the Ethical Decision Making Model.c. No need for
Jonathan Walker is probably failing which of the Rest Stages?a. Sensitivityb. Judgmentc. Motivationd. Character
1. Explain how incrementalism might influence Ricardo's position with respect to the not so subtle statement by Norman Baitz.“I’m sorry, Lucy. That’s the client's position,” Ricardo
Do you believe all sexual relationships should be forbidden in the workplace? Use ethical reasoning to support your view.
This is a Giving Voice to Values case because:a. Alex is demonstrating instrumental virtue.b. Gregory is demonstrating moral intensity.c. Michael is demonstrating sensitivity.d. Michael is

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