02 Jan Question 4. 4. (TCO 2) The Enron

1. (TCO 1) Trends in business generally are related to changes in accounting practices. For example, the globalization of business lead to the plan to harmonize GAAP for providers of capital in world markets. Which of the following best describes the implications and consequences for standard setting for the accounting profession? (Points : 6)

SOX emphasized the need for professional accountants to tend to business to ensure the viability of Private CPA firms as profitable ventures.

Enron and WorldCom debacles lead to the creation of the Securities and Exchange Commission.

The influence of the International Accounting Standards Board (IASB) and the International Federation of Accountants (IFAC) will be as influential (or more so) than SOX on accounting practices.

Unfettered private enterprise seems to be able to manage itself in a way that leads to benefits for all stakeholders.

Question 2.2. (TCO 2) Arthur Andersen was Enron s auditor and performed many duties and functions for Enron. Which of the following was not one of the functions or duties performed by Arthur Andersen? (Points : 6)

Auditor

Consultant on accounting and SPE transactions

Made decisions affecting internal control policies

Advisor or reviewer of financial disclosure matters

Question 3.3. (TCO 3) According to Trevino et al (2000), executives must first be moral or ethical people or else their followers will come to regard them as hypocrites when their true nature shows. The character traits associated with ethical leadership include all but which of the following: (Points : 6)

Humility

Honesty

Integrity

Sincerity

Question 4.4. (TCO 4) In the case of Sunbeam, the appliance company had a new CEO named Al. Al was under pressure to improve revenues and earnings. He used fraudulent techniques such as channel stuffing and failure to write entries necessary for sales allowances. The principle(s) being violated were (Points : 6)

the cost principle.

the going-concern assumption.

the revenue recognition principle.

None of the above

Question 5.5. (TCO 4) Professional codes of conduct are designed to provide guidance about conduct expected of members so that (Points : 6)

the reputation of the profession is maintained.

members who ve offended the rules of the society can be sent to jail.

the public will learn to trust no one, but rely on their own findings.

extremely voluminous details are generated and professional judgment can be avoided.

Question 6.6. (TCO 4) When Arthur Andersen shredded their audit documents related to the Enron audit, they (Points : 6)

were merely carrying out the normal, systematic procedures necessary for all auditors when they try to balance cost of storage with benefits or need for future reference.

they were violating the rule that audit documents should NEVER be destroyed.

illustrated an ethical culture designed to protect top management from blame.

were attempting to encourage employee commitment to the firm.

Question 7.7. (TCO 5) The professional accountant must use his or her judgment about which services to offer to a client. Critical value added by the professional accountant should include all of the following exept: (Points : 6)

credibility.

competence.

integrity.

conflicts of interest.

Question 8.8. (TCO 5) Accountants have a special responsibility in their relationships with clients. The fiduciary responsibility can be properly characterized by the following: (Points : 6)

confidentiality is not required.

loyalty to the client should always exceed other considerations.

fiduciary responsibility occurs especially when there is a difference in knowledge and expertise between two parties, that one must trust in the competency and integrity of the other.

fiduciary responsibility is a myth; the only reasonable moral ethic is buyer beware.”

Question 9.9. (TCO 6) Kent is associated with deontological reasoning (contrasting the consequentialist s logic). He argued that a rational person making a decision about what would be good to do would consider what action would be good for all members of society to do. Which of the following statements can describe accurately his concept of universal law? (Points : 6)

The golden rule would not qualify as a universal law, since the golden rule encourages citizens to accumulate gold for their self interest.

If you cannot wish that everyone will follow the same decision rule, it is not a moral one.

The rule is rendered useless, since Kant failed to foresee that an individual might wish bad results or consequences on everyone.

None of the above reflects fairly the deontology proposed by Kant.

Question 10.10. (TCO 9) When approaching a difficult decision making process or complex ethical dilemma, which statement would best reflect your author s view? (Points : 6)

The Five Question approach is the best method.

The six steps of problem solving is the best method.

A virtues approach will always lead to the best decision.

The circumstances will dictate which approach or combination of approaches is most suitable.

Question 11.11. (TCO 8) In utilizing the sniff test in making ethical decisions, all of the following are used in making a decision, except: (Points : 6)

Would I be comfortable if this action or decision were to appear on the front page of a national newspaper tomorrow morning?

Does my father s ethics matter in this decision?

Will my mother be proud of this decision?

Does this feel right to me?

Question 12.12. (TCO 7) CSR (Corporate Social Responsibility) has in recent times changed. Some of the trends in this area include (Points : 6)

there is a paradigm shift towards accountability to stockholders versus stakeholders.

corporations should consider their strategic goals in their operations and reporting with concern for who they wish to appear as a corporate citizen.

it is really not possible at this time to report on a company s social responsibility.

social responsibility is best limited primarily to political donations and intervention in government processes through lobbyists.

Question 13.13. (TCO 1) In the 1980s and 1990s, various activist stakeholders become apparent and started expressing their views to the general public. Some were interested in buying products and services made in ethically acceptable manners. Which of the following were not concerned with ethical matters in business? (Points : 6)

Ethical consumers

Ethical investors

Both A and B

Neither A nor B

Question 14.14. (TCO2) The Senate Permanent Subcommittee on Investigations released its report. Based upon the evidence presented to it, the subcommittee made the following findings with regard to Enron s Board of Directors. Which finding was not a part of the report? (Points : 6)

Fiduciary failure

Inappropriate Conflicts of Interest

Lack of Independence

Allowed the SPEs to be separate from Enron

Question 15.15. (TCO 3) Moral and ethical codes contain various characteristics. Which of the following is not a characteristic? (Points : 6)

Beliefs about ideals, about what is good or desirable or worthy of pursuit for its own sake.

Inquiry about ways of life and rules of conduct

Rules laying down what ought to be done and what ought not to be done

Motives that incline us to choose the right or the wrong course

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Question 1. 1. (TCO 3 and 4) A typical framework for a code of conduct for professional accountants will include at least six different areas of concern. What are these six areas? Give an example of each. (Points : 30)

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Question 2. 2. (TCO 6) The Encyclopedia of Philosophy has three definitions of ethics. Please describe each definition and give an example. (Points : 30)

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Question 3. 3. (TCO 7) The professional codes of conduct are meant to clarify the relationships between various acts that can be carried out by an individual or firm. However, there are some items that codes of conduct do not seem to be able to clarify. What are some of these items? (Name and explain at least four of these). (Points : 30)

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Question 4. 4. (TCO 2) The Enron Board of Directors formed a subcommittee headed by William Powers, Jr. This subcommittee submitted a report of its findings. Summarize the findings presented by this subcommittee. (Points : 30)

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Question 5. 5. (TCO 4) Discuss the philosophy of Consequentialism. (Points : 20)

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Question 6. 6. (TCO 5) What is a stakeholder-accountability oriented governance process? (Points : 20)

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