ACCOUNTING ETHICS MIDTERM 1 BOOK HALF (CHAPTER 1)
QUESTIONS AND ANSWERS
A CPA would violate the Due Care Principle if he/she:
a. Undertook a professional engagement without having the requisite background, knowledge and
experience.
b. Specializes in the industry of the client, even offering training classes for other accounting firms on
the industry.
c. The accounting firm uses two external partner reviews on high risk audits or clients.
d. Performs tax services for an audit client with audit committee approval. - CORRECT ANSWER✅✅a.
Undertook a professional engagement without having the requisite background, knowledge and
experience.
Sally is the only student from a foreign country in an Auditing class. On the day of the midterm exam,
Sally asks the teacher whether she could use a dictionary to translate English words to her native tongue
so she can better understand the questions. What do you think the instructor should do if she follows
the ethical principle of justice?
a. Allow Sally to use the dictionary since she is at a disadvantage
b. Not allow Sally to use the dictionary because she should know enough English to get by
c. Allow the other students to bring in some tool to give them an advantage
d. None of the above - CORRECT ANSWER✅✅a. Allow Sally to use the dictionary since she is at a
disadvantage
When making a donation at the local Goodwill, Martha tells the clerk that her old computer is in perfect
working order when she knows it is not, just so she can deduct more on her taxes. Which theory best
describes Martha's behavior?
a. Utilitarianism
b. Deontology
c. Egoism
d. Justice - CORRECT ANSWER✅✅c. Egoism
In the Lone Star School District case, the auditors were mostly concerned about:
a. The behavior of a staff member toward client personnel
,b. The falsification of the financial statements
c. The lack of independence of the audit team
d. The lack of documentation for travel and entertainment expenses - CORRECT ANSWER✅✅d. The lack
of documentation for travel and entertainment expenses
The method of ethical reasoning that evaluates actions in terms of harms and benefits is:
a. Act Utilitarianism
b. Rights Theory
c. Justice
d. Virtue - CORRECT ANSWER✅✅a. Act Utilitarianism
Decisions that are made based on the underlying cultural factors can be best characterized by:
a. Ethical Collectivism
b. Situational ethics
c. Ethical relativism
d. Judgmental Individualism - CORRECT ANSWER✅✅c. Ethical relativism
The method of ethical reasoning that deals with making decisions after considering the interests of
others is:
a. Egoism
b. Enlightened Egoism
c. Utilitarianism
d. Rights Theory - CORRECT ANSWER✅✅b. Enlightened Egoism
The country with the highest Power Distance score is:
a. United States
b. United Kingdom
c. Japan
d. Russia - CORRECT ANSWER✅✅d. Russia
, In the Shifty Industries case, the primary ethical issue can be stated as:
a.Whether an accountant should claim a higher section 179 deduction ($100,000) than allowed by law.
b. Whether an accountant should claim any section 179 deduction or not.
c .Whether an accountant should claim inflated expenses on the company tax return.
d. Whether an accountant should claim a section 179 deduction ($25,000) as allowed by law. - CORRECT
ANSWER✅✅a.Whether an accountant should claim a higher section 179 deduction ($100,000) than
allowed by law.
Which of the following is NOT an element of trustworthiness according to the Six Pillars of Character?
a. Reliability
b. Loyalty
c. Fairness
d. Honesty - CORRECT ANSWER✅✅c. Fairness
Jane finds a material misstatement while auditing a client's accounts receivables. Her senior tells her to
ignore the misstatement so that the client does not get upset. Jane wants to be viewed as a team player
in order to advance in the firm so Jane follows her senior's instructions and ignores the misstatement.
Which ethical theory did Jane use to make her decision?
a. Egoism
b. Justice
c. Virtue ethics
d. Utilitarianism - CORRECT ANSWER✅✅a. Egoism
Which of the following situations would be considered ethical?
a. The cashier at Wal-Mart gives you $5 more than you were supposed to receive and you don't do
anything about it
b. You accidentally back into a car at Wal-Mart and leave your information for them to call
c. Receiving fake $20 bills and using them in a store while knowing they are fake
d. Finding a phone in a restaurant and keeping it - CORRECT ANSWER✅✅b. You accidentally back into a
car at Wal-Mart and leave your information for them to call
QUESTIONS AND ANSWERS
A CPA would violate the Due Care Principle if he/she:
a. Undertook a professional engagement without having the requisite background, knowledge and
experience.
b. Specializes in the industry of the client, even offering training classes for other accounting firms on
the industry.
c. The accounting firm uses two external partner reviews on high risk audits or clients.
d. Performs tax services for an audit client with audit committee approval. - CORRECT ANSWER✅✅a.
Undertook a professional engagement without having the requisite background, knowledge and
experience.
Sally is the only student from a foreign country in an Auditing class. On the day of the midterm exam,
Sally asks the teacher whether she could use a dictionary to translate English words to her native tongue
so she can better understand the questions. What do you think the instructor should do if she follows
the ethical principle of justice?
a. Allow Sally to use the dictionary since she is at a disadvantage
b. Not allow Sally to use the dictionary because she should know enough English to get by
c. Allow the other students to bring in some tool to give them an advantage
d. None of the above - CORRECT ANSWER✅✅a. Allow Sally to use the dictionary since she is at a
disadvantage
When making a donation at the local Goodwill, Martha tells the clerk that her old computer is in perfect
working order when she knows it is not, just so she can deduct more on her taxes. Which theory best
describes Martha's behavior?
a. Utilitarianism
b. Deontology
c. Egoism
d. Justice - CORRECT ANSWER✅✅c. Egoism
In the Lone Star School District case, the auditors were mostly concerned about:
a. The behavior of a staff member toward client personnel
,b. The falsification of the financial statements
c. The lack of independence of the audit team
d. The lack of documentation for travel and entertainment expenses - CORRECT ANSWER✅✅d. The lack
of documentation for travel and entertainment expenses
The method of ethical reasoning that evaluates actions in terms of harms and benefits is:
a. Act Utilitarianism
b. Rights Theory
c. Justice
d. Virtue - CORRECT ANSWER✅✅a. Act Utilitarianism
Decisions that are made based on the underlying cultural factors can be best characterized by:
a. Ethical Collectivism
b. Situational ethics
c. Ethical relativism
d. Judgmental Individualism - CORRECT ANSWER✅✅c. Ethical relativism
The method of ethical reasoning that deals with making decisions after considering the interests of
others is:
a. Egoism
b. Enlightened Egoism
c. Utilitarianism
d. Rights Theory - CORRECT ANSWER✅✅b. Enlightened Egoism
The country with the highest Power Distance score is:
a. United States
b. United Kingdom
c. Japan
d. Russia - CORRECT ANSWER✅✅d. Russia
, In the Shifty Industries case, the primary ethical issue can be stated as:
a.Whether an accountant should claim a higher section 179 deduction ($100,000) than allowed by law.
b. Whether an accountant should claim any section 179 deduction or not.
c .Whether an accountant should claim inflated expenses on the company tax return.
d. Whether an accountant should claim a section 179 deduction ($25,000) as allowed by law. - CORRECT
ANSWER✅✅a.Whether an accountant should claim a higher section 179 deduction ($100,000) than
allowed by law.
Which of the following is NOT an element of trustworthiness according to the Six Pillars of Character?
a. Reliability
b. Loyalty
c. Fairness
d. Honesty - CORRECT ANSWER✅✅c. Fairness
Jane finds a material misstatement while auditing a client's accounts receivables. Her senior tells her to
ignore the misstatement so that the client does not get upset. Jane wants to be viewed as a team player
in order to advance in the firm so Jane follows her senior's instructions and ignores the misstatement.
Which ethical theory did Jane use to make her decision?
a. Egoism
b. Justice
c. Virtue ethics
d. Utilitarianism - CORRECT ANSWER✅✅a. Egoism
Which of the following situations would be considered ethical?
a. The cashier at Wal-Mart gives you $5 more than you were supposed to receive and you don't do
anything about it
b. You accidentally back into a car at Wal-Mart and leave your information for them to call
c. Receiving fake $20 bills and using them in a store while knowing they are fake
d. Finding a phone in a restaurant and keeping it - CORRECT ANSWER✅✅b. You accidentally back into a
car at Wal-Mart and leave your information for them to call
