In a lawsuit between a National Bank and Cellular One, a question has arisen whether Cellular One's bookkeeping staff routinely recorded a journal entry in the ordinary course of business at approximately the same time that the accounting event reflected in the journal entry occurred. The bank claims that the company manipulated its books and records several months after year-end to gain a tactical advantage in this litigation.

By coincidence, you happen to be the lead partner on the audit engagements for both National Bank and Cellular One. You have been subpoenaed into court to testify about whether you saw this journal entry on the client's book prior to year-end. Your testimony is going to be yes, which will help Cellular One's defense, but it will harm the bank's claim.

Will your testimony affect your independence as an auditor and your continuing ability to serve as Cellular One's auditor and National's bank's auditor?

a. Yes you will be testifying as an advocate for your client Cellular One and have an interest in the outcome of the litigation so your independence is impaired.

b. No, you are not an advocate and are simply telling the truth under oath about what you did or did not observe so an advocacy threat does not arise and your independence is not impaired so you can continue to represent both clients.

c. An adverse interest threat arises because you are testifying in litigation which impairs your independence as to both clients.

d. Yes, your independence is impaired because you are the lead audit partner of two clients involved in litigation with each other thereby impairing your independence.

e. Yes, your independence is impaired but only as to National Bank who will be harmed by your testimony.

The trustees of the estates of Seymour Knox and Princess Beatrice Bishop violated which of the following duties as a Fiduciary:

a. The duty of loyalty

b. The duty of due care

c. The duty of impartiality

d. The duty to satisfy Decedents outstanding debts.

e. None of the above

Which of the following people or companies do not match up with the fraud?

a. Lehman Brothers .........................Disguised debt with Repos 105

AIG......................................... Credit default swaps

b. Princess Bernice Bishop Estate.........Whistleblower insider trading

Martha Stewart . . . . . . . . . . . . . . . . . . Obstruction of Justice

c. Descendants of Seymour Knox... . . . Breach of fiduciary duty by Trustee HSBC Bank

Enron . . . . . . . . . . . . . . . . . . . . . . . . . Special Purpose Entities

d. World Com................................. Overstated profits

Xerox Corporation ........................ Manipulated earnings

e. None of the above correctly match up with the fraud

"Fly by Night" is a publicly traded company in transition. The Audit Committee of "Flyby Night" is comprised of five members none of whom are part of Management and four of whom are members of the Board of Directors. Two members of the Audit Committee are brothers who were gifted shares of stock in the corporation from their father, were recently appointed to the Board of Directors and have no experience in corporate management or accounting. These two members of the Audit Committee each own 5% of the corporation's stock.

Prior to retiring, as CEO and Chairman of the Board of Directors their father added the Company's full time consultant to the Audit Committee.He is a retired Chief Financial Officer of a global bank headquartered in New York but has no experience in managerial finance. However, he is a CPA and has worked in accounting as an auditor and as a result of his consulting with the company is intimately familiar with the company's finances.

The remaining two members of the audit committee have been long time members of the company's board of Directors but lack demonstrated expertise in accounting or financial management. Which of the following statements is correct?

a. The Audit Committee is in compliance with SOX because no individual owns more than 10% of the company's stock.

b. Is not in compliance with SOX because two members of the Audit Committee under the "family attribution rules" of the PCAOB own in the aggregate 10% of the Company's outstanding shares.

c. The Audit Committee is in compliance with SOX because one of the members of the Audit Committee has demonstrated expertise in accounting or financial management.

d. Is not in compliance with SOX because one of the members of the Audit Committee is not a member of the Board of Directors

e. None of the above is correct.

James spent the last three months working as part of an engagement team that was auditing Vintage by Jessica, a fast-growing, publicly traded, electric car company headquartered in the heart of Detroit. One day after the client's financial statements were issued, Frank, the partner in charge of the audit team contacted James to tell him that he will be accepting a position at this client as its new CFO. The partner also invited James to join "his new team" and relocate to this client's Atlanta office as a junior Financial Forecasting Associate for Asian Operations. James contacted the client to accept this offer on December 10 and plans to resign his current position on December 17. James also called his attorney at the firm of Dewy Cheatum & Howe for advice.His attorney should advise him to:

a. James should hold off on resigning his position because there is a one year "cooling" off period before he can start work after completing an audit.

b. James should plan a one year sabbatical because there is a one year "cooling off" period before he can start work after completing an audit.

c. James should go ahead and resign and pack his bags because he does not need to wait. The one-year "cooling off" period only applies to auditors who are joining a client as its CEO, CFO, or as another high-ranking financial official.

d. Since Frank is taking a CFO position both Frank and James must wait one year before commencing work with the client.

e. None of the above is correct.

Which of the following does notprovide a "Whistleblower" with the possibility of a financial reward?

a. False Claim Act

b. IRS whistleblower program

c. Dodd-Frank whistleblower program

d. A "qui tam" lawsuit

e. All of the above provide a method for financial reward for money recovered from wrong doers.

Which of the following statements regarding bribery of a public official and bribery of a corporate employee isfalse:

a. Bribery of a public official is unlawful under anti-bribery criminal laws

b. Only bribery of a foreign public official is lawful under the Foreign Corrupt Practices Act

c. In most states Only bribery of a public official can ever result in a prison sentence in the United States

d. In most states bribery of a corporate employee may exclusively be enforced through a civil action for damages by the corporation and never by government prosecution

e. Gifts to public officials without proving Quid Pro Quo are not necessarily bribes