Ethics Final Exam

1. Name the 2 categories of independence defined in the AICPA Plain English Guide to Independence:1. fact/appearance2. mind3. The ___SEC____ is the federal government agency that has the ultimate authority over accounting standards for publically traded corporations. 4. The _NASBA__ is the national organization that serves state boards of accountancy. 5. The first CPA examination was given in New York (state) during ________ (year).

7. The highest level of accreditation awarded to university accounting programs is awarded by the AACSB. 8. SSARS stands for statements on standards for accounting and review services 9. Experience was the most significant barrier to minorities becoming CPA’s. 10. Arthur Levitt, stated that the quality of audits was declining because auditors became more concerned with pleasing clients (honesty/integrity?) 11. A famous pollster, told the AICPA in 1986 that the reputation of CPAs was so good that the only way to ensure against a sharp decline was to increase enforcement.

12. The accounting profession in the USA is based on the profession in what country? Scottland 13. The SEC relied on AICPA (organization) to set accounting and auditing standards from about 1940 through the 1960s. 14. A typical undergraduate business or accounting degree requires what percentage of hours in general education courses? 50% 15. The membership organizations for CPAs within each state are called state societies of CPAs (not NASBA)

16. The AICPA was forced to significantly change its Code of Conduct during the 1970s by the Justice Department because some of the Code constituted an illegal offense against Federal Trade Commission Anti Trust law 17. A CPA firms mix of audit, tax and consulting is called a firm’s scope of practice. 18. Under SOX the PCAOB has the sole authority to set auditing standards for publically traded companies. 19. During the early twentieth century publically traded companies were required to report little to no information to shareholders or the public.

20. The shortest known audit report from the early twentieth century said examined 21. The real value of good quality audits is they reduce risk 22. The one consulting service performed by Andersen for Enron that came under the most criticism in the wake of Enron’s failure was outsource internal audit 23. Under AICPA independence rules if your firm is auditing a client neither you or your firm can be paid commission or contingent fees.

Back of the exam one fill in the blank:25. The Sarbanes-Oxley Act is the most sweeping legislation relating o the accounting profession since the: Securities acts of 1933 and 1934 26.

Under the 1950 AICPA Rules of Professional Conduct a member could be held guilty of an act discreditable_ to the profession if he failed to disclose a material fact known to him, which is not disclosed in the financial statements 27. The McKesson and Robbins scandal in the late 1930s had what impact on the accounting/auditing profession? Auditors had to confirm inventory and receivables 28. The FASB’s Online codification_ Research System is topically organized to improve the usability of authoritative U.S. GAAP 29.

According to SEC guidance, if a firm derives more that 15 percent of its total revenue from one client independence may be impaired 30. What percentage of owners/partners of CPA firms were required to be certified public accountants in early AICPA rules? 100 %

31. Just prior to the Sarbanes Oxley Act the AICPA was heavily promoting the idea of a new credential reflecting the consulting abilities of holders of the credential were to be called cognitive 32. Arthur Levitt, former chairman of the SEC believes that integrity and ethics (mine) independence (chandler’s) is the core of the profession. 33. Guidance for independence issues in governmental audit can be found in the GAO yellow _ Book.

34. Cash basis accounting in is one example of non-GAAP systems that fall into the category of OCBOA – other comprehensive basis of accounting 35. The word invented to describe an approach the USA might use to “sort of” accept IFAC standards is Condorsement 36. Applications to become a licensed CPA in Mississippi are submitted to Mississippi state board of public accountants (MSBPA)

37. According to Arthur Levitt Enron’s most noteworthy innovations were not done in their business but in their bookkeeping 38. Name one of the four basic SEC principles regarding what an auditor cannot do for a client. Be involved in management 39. About 600,000 CPAs are licensed in the USA.

40. About 50000 new individuals become licensed COPAs each year 41. Enron used Special Purpose Entity accounting to keep liabilities (chandler) debt (mine) off Enron’s balance sheets 42. AICPA independence rules refer to an individual on the client’s attest engagement team as a codification member 43. Compensating audit partners for bringing in new clients and consulting work contributed to the downfall for Arthur Andersen. 44. The FASB Accounting Standards covered is the single source of authoritative GAAP overriding all existing literature except SEC rules.

45. According to Steve Zeff during the 1970s the largest CPA firms became advocates for accounting standards that were most favorable to their best clients rather than stand up for the best accounting for the actual economic situation. 46. Steve Zeff believes that the accounting profession has gone form a profession to a business 47. FEI stands for the Financial Executives Institute

In the spaces below list the three barriers to becoming a CPA 48 experience49. education50. examExam Two Fill In the Blank:Four Sociological attributes of a profession1.Self Motivation2.Altrusitic in nature3.Gain information from science4. Educationally lookThree traditional professions1. Theology/education2. Medicince3. LawFour “cardinal” virtues1. Wisdom2. Justice3. Courage4 Reasons “rules are not enough”1. Unmanagible (idealisms)2. Need interpretations3. Do not provide motivation4. Require people to acknowledge they are following the rules “The auditor is in an awkward position. He makes his living by pleasing management, but his societal justification requires serving public/investors. “The task of accounting: to declare the truth about the financial condition of an enterprise, thus providing the conditions of trust necessary for a market economy.” To have a virtue is to do your distinctive task well.

“Generally accepted accounting principles instruct an accountant what do in the usual case where he has no reason to doubt the affairs of the corporation are being honestly conducted. Once reason he has reason to believe that this basic assumption is false is you can’t just rely on GAAP