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1) Which of the following (according to Charles Fombrum) is not one of the four determinants that

influence a company's reputation?

a. Credibility. b. Reliability. c. Profitability. d. Responsibility.

2) The 5 E's of the accounting profession in Texas are Ethics, Enthusiasm, Education,

Examination and Experience. a. True b. False

3) The P in CPA stands for Public? a. True b. False

4) The difference between what the public thinks it is getting in audited financial statements and what the public is actually getting is known as:

a. Credibility gap b. Expectations gap c. Audit gap d. Stewardship gap e. None of the above

5) Which of the following is not a trend described in Chapter 1 as having an impact on the

ethics of business?

a. Directors’ legal liability b. Management’s stated intention to protect reputation c. Auditors’ legal liability d. Management’s assertions to shareholders on the adequacy of internal controls e. Management’s stated intention to manage risk

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6) Which corporate report discusses subjects that include environmental, health and safety, philanthropic and other social impacts?

a. Corporate annual report b. Corporate social responsibility report c. Corporate quarterly report d. Corporate stakeholder report e. Corporate ethics committee report

7) The goal of the State Board of Public Accounting is to protect the public?

a. True b. False

8) Professional Accountants, in their fiduciary role, owe their primary loyalty to:

a. The accounting profession b. The client c. The general public d. Government regulations e. All of the above

9) A CPA license issued by the State of Texas is a form of a social contract between the

CPA license holder and the public and the State of Texas. a. True b. False

10) Ethical corporate behaviour is expected to lead to:

a. Higher profitability in the short-term b. Higher profitability both in the short-term and long-term c. Lower profitability in the long-term d. Higher profitability in the long-term e. Lower profitability both in the short-term and long-term

11) A value that is almost universally respected by stakeholder groups is:

a. Super norm b. Alfa norm c. Value norm d. Hypernorm e. General norm

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12) Incomplete disclosure of the company’s revenue recognition policy is an example of:

a. Lack of transparency b. Lack of integrity c. Lack of accuracy d. All of the above e. None of the above

13) This philosophical approach requires that an ethical decision depends upon the duty,

rights, and justice involved:

a. Consequentialism b. Virtue ethics c. Duty ethics d. Righteousness e. Deontology

14) Who does the AICPA Code of Professional Conduct apply to:

a. Members in Public practice b. Members in Industry c. Members in Government d. Members in Education e. All of the above

15) The Moral Standards Approach focuses on the following dimensions of the impact of a proposed action:

a. Net benefit to society, fair to all stakeholders, whether it is right b. Net benefit to society and whether it is legal c. Net benefit to society, fair to all stakeholders, whether it is legal d. Fair to most stakeholders and whether it is right e. Net benefit to society, fair to most stakeholders, whether it is right

16) The following is a fundamental factor in having an effective ethical corporate culture:

a. Tone at the top b. Inefficient oversight by the company’s Board of Directors c. Unenforced code of conduct d. None of the above e. All of the above

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17) Which entity has final approval of financial accounting and reporting rules and regulation

for publically traded companies in the United States of America? a. IRS b. DOJ c. PCAOB d. AICPA e. all of the above

18) Effective crisis management could represent:

a. An opportunity to avoid costs b. An opportunity to change employee’s perspectives on risk c. An opportunity to enhance the company’s reputation d. All of the above e. None of the above

19) To sign a tax return as a tax return preparer you need which of the following?

a. CPA License b. PTIN holder c. Enrolled Agent d. Attorney e. All the above may sign a tax return as a return preparer

20) Tax return preparers who are members of a firm are specified tax return preparers and must electronically file the income tax returns they prepare and file if the firm’s preparers, in the aggregate, expect to file "_______" or more of these income tax returns in 2011. (Fill in the blank.) a. 2 b. 50 c. 100 d. 1,000 e. 1 million

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21) The IRS recommended in 2011 a number of steps that it plans to implement for future filing seasons, including: a. Requiring all paid tax return preparers who must sign a federal tax return to register with the IRS and obtain a preparer tax identification number (PTIN). These preparers will be subject to a limited tax compliance check to ensure they have filed federal personal, employment and business tax returns and that the tax due on those returns has been paid. b. Requiring competency tests for all paid tax return preparers except attorneys, certified public accountants (CPAs) and enrolled agents who are active and in good standing with their respective licensing agencies. c. Requiring ongoing continuing professional education for all paid tax return preparers except attorneys, CPAs, enrolled agents and others who are already subject to continuing education requirements. d. Extending the ethical rules found in Treasury Department Circular 230 -- which currently only apply to attorneys, CPAs and enrolled agents who practice before the IRS -- to all paid preparers. This expansion would allow the IRS to suspend or otherwise discipline tax return preparers who engage in unethical or disreputable conduct. e. All of the above.

22) The Board of Directors’ paramount duty is:

a. To determine management’s compensation b. To safeguard the interest of the company’s stakeholders c. To safeguard the company’s assets d. To formulate the company’s strategy e. To safeguard the interest of the company’s shareholders

23) In order to ensure an investment-grade credit rating, Enron began to emphasize the following three

actions:

a. Reducing accruals, increasing cash flow, and lowering debt b. Smoothing accruals, increasing cash flow, and lowering debt c. Increasing cash flow, lowering debt, and smoothing earnings d. Increasing cash flow, lowering earnings and decreasing option expense e. Increasing cash flow, lowering debt, and decreasing option expense

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24) Which of the following was not a committee in Enron’s Board?

a. Risk Management Committee b. Executive Committee c. Finance Committee d. Audit and Compliance Committee e. Nominating Committee

25) Enron referred to this transactions as “monetizing” or “syndicating” its assets:

a. Buy more assets using syndicated loans b. Sell assets to third parties and record cash income as earnings c. Hedge the company’s assets d. Lend money to third parties to buy assets e. Recording profits on energy derivatives trading

26) At the time of Enron’s collapse, the prevailing treatment for employee stock option expense was:

a. Record stock options only when and if exercised, at exercise price b. Record all stock options when issued, at exercise price c. Record all stock options at market price d. Record stock options only when exercised at market price e. Record not exercised options at market price

27) Which of the following was not a conflict of interest that Arthur Andersen’s personnel

encountered?

a. Auditing their own work as SPE consultants b. Losing a very large client c. A partner reviewed another partner’s work d. Internal debates about Enron’s questionable accounting treatments were not discussed

with the audit committee e. Audit staff leaving the firm to work for Enron

28) Which of the following was not among Arthur Andersen’s shortcomings in conducting Enron’s

audit?

a. Lack of competence b. Failure of quality control standards c. Misunderstanding of auditor’s fiduciary role d. Inconclusive testing of control e. Insufficient information provided by Enron’s staff

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29) Which of the following is not a requirement imposed by the SOX Corporate Governance

Framework?

a. The audit committee must be comprised solely by independent directors b. The audit committee is responsible for appointing the company’s external auditor c. The audit committee must establish procedures to allow employees to submit anonymous

complaints d. The audit committee must approve non audit services to be provided by the auditors e. The audit committee must be comprised solely by financial experts

30) SOX increased the time requirement and legal risk for company directors. These requirements will

likely:

a. Increase the number of directors in the board b. Reduce the number of directors in the audit committee c. Increase audit fees d. Reduce the number of boards that each director sits on e. All of the above

31) These companies are more likely to voluntarily adopt improved governance measures:

a. Larger companies b. Less profitable companies c. Foreign companies d. Smaller companies e. Private companies

32) Ethical dilemmas arise when:

a. Norms and values are in conflict b. There is only one alternative course of action available c. Norms and values are not in conflict d. There are several theories of ethical decision making e. All of the above

33) Individuals may be ethical because of:

a. Religious concerns b. Emotional attachment to other people c. Enlightened self-interest d. All of the above e. None of the above

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34) This theory argues that the best ethical alternative is the one that will produce the greatest amount

of happiness to the largest number of stakeholders:

a. Deontology b. Distributive Justice c. Utilitarianism d. Moral Imagination e. Virtue Ethics

35) This theory focuses on the moral character of the decision maker:

a. Deontology b. Distributive Justice c. Utilitarianism d. Moral Imagination e. Virtue Ethics

36) This approach focuses on coming up with an innovative solution to an ethical dilemma:

a. Deontology b. Distributive Justice c. Utilitarianism d. Moral Imagination e. Virtue Ethics

37) This theory argues that equals should be treated equally in relationship to their relevant equalities

and differences:

a. Deontology b. Distributive Justice c. Utilitarianism d. Moral Imagination e. Virtue Ethics

38) This theory is concerned with the motivation of the decision maker rather than the consequences of

the decision:

a. Deontology b. Distributive Justice c. Utilitarianism d. Moral Imagination e. Virtue Ethics

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39) Two weaknesses of the following approach are (1) it is difficult to determine who demonstrates

integrity in the workplace, and (2) it is difficult to choose between compassion and not betraying somebody’s trust:

a. Deontology b. Distributive Justice c. Utilitarianism d. Moral Imagination e. Virtue Ethics

40) A problem with this theory is that the categorical imperative does not provide clear guidelines for

deciding what is right and wrong when two or more moral laws conflict and only one can be chosen:

a. Deontology b. Distributive Justice c. Utilitarianism d. Moral Imagination e. Virtue Ethics

41) Minority rights may be violated under this approach:

a. Deontology b. Distributive Justice c. Utilitarianism d. Moral Imagination e. Virtue Ethics

42) This approach presupposes that happiness, utility, pleasure, pain and anguish can be quantified:

a. Deontology b. Distributive Justice c. Utilitarianism d. Moral Imagination e. Virtue Ethics

43) This approach, a variant of utilitarianism, considers an action to be ethically good if it will

probably produce a greater balance of good over evil:

a. Act Utilitarianism b. Active Utilitarianism c. Sub-Utilitarianism d. Consequentialism e. Virtue Ethics

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44) Under this approach what is important is that the decision was made for the right reasons:

a. Deontology b. Distributive Justice c. Utilitarianism d. Moral Imagination e. Virtue Ethics

45) This philosopher argued that self-interest leads to economic cooperation:

a. Adam Smith b. John Locke c. Thomas Hobbes d. Jeremy Bentham e. John Rawls

46) There are two aspect of justice, but under this aspect there should be a consistent application of

law:

a. Distributive justice b. Procedural justice c. Balance of justice d. Deontology e. Teleology

47) If managers use moral imagination to determine ethical alternatives, the decisions need to be good

for:

a. The individual b. The firm c. Society d. (a) and (b) only e. All of the above

48) This philosopher argued that social and economic inequalities are just if these inequalities

are to everyone’s benefit:

a. Adam Smith b. John Locke c. Thomas Hobbes d. Jeremy Bentham e. John Rawls

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49) Norman Jones, CPA is not independent of his audit client, Nora Jones when

a) he charges a contingent fee for audit services b) he charges a commission for audit services c) all of the above

50) Which of the following is false?

a. A hypernorm is a value that is almost universally respected by stakeholder groups. b. The three basic philosophical approaches for corporate decision makers are consequentialism, deontology, and virtue ethics. c. Hypernorms involve the demonstration of the following basic values: Honesty, Fairness,

Compassion, Integrity, Predictability, and Responsibility. d. None of the above

51. Which of the following is true for a publicly traded company?

a. An audit partner cannot serve as the engagement partner or the concurring partner for over five concurrent years.

b. Public Company Accounting Oversight Board consists of five CPAs c. Auditors may offer actuarial services if permitted by the client’s Audit Subcommittee. d. None of the above.

52. According to Article 2 in the Code of Professional Conduct, members should act in a way that will:

a. Serve the public interest

b. Honor the public trust

c. Demonstrate commitment to professionalism

d. All of the above

e. None of the above

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53. A practitioner who, having been retained by a client with respect to a matter administered by the IRS, knows that the client has not complied with the revenue laws of the U.S. or has made an error in or omission from any return, document, affidavit, or other paper which the client submitted or executed under the revenue laws of the U.S., MUST

a. advise the client promptly of the fact of such noncompliance, error, or omission. b. stay silent because informing the client of such noncompliance, error, or omission now

makes the practitioner liable. c. advise the client of the consequences as provided under the Code and regulations of such

noncompliance, error, or omission. d. Both A and C.

54. The expectations gap has been coined to describe:

a. the gap between what the public expects of a certain stock and what value the stock actually closes on that day.

b. the difference between how the public believes a company will perform and how the company actually performs after one year.

c. the difference between what the public thinks it is getting in audited financial statements and what it is actually getting.

d. Both B and C. 55. A public accounting firm must be independent of the firm's audit client throughout the audit. a. True b. False 56. Which of the following are not examples of stakeholders? a. Employees b. Customers c. Suppliers d. Borrowers e. All above could be stakeholders

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57. What is risk? a. Risk is the culture, processes, and structures that are directed towards the effective management of potential opportunities. b. Risk includes the systematic application of management policies and procedures. c. Risk is when the stock market goes down. d. Risk is the chance of something happening that will have an impact on objectives. 58. Regarding the fees of registered independent accounting firms on a audit engagement the following is true:

a. The firm may charge a client a commission based on recovery received due to finding an issue on the financials. b.The firm may charge a flat fee for all work. c.The firm may charge a fee based on the number of errors it find in the clients financials. d.The firm can receive commissions from third parties for work performed on a client.

59. The following is true about return of client tax related records: 1. Generally client records do not have to be returned if there is a dispute over fees. 2. Generally a practitioner must, at the request of the client, return any and all records of the

client. 3. A practitioner may not keep copies of client records. 4. A Practitioner has no obligation to allow a client to view their tax file.

60. All of the following are approaches of comprehensive ethical decision making known as stakeholder impact analysis except for?

a. Five Questions Approach. b. Moral Standard Approach. c. Stakeholder Impact Analysis Approach. d. Pastin Approach.

61. Which of the following (according to Charles Fombrum) is not one of the four determinants that influence a company's reputation?

a. Credibility. b. Reliability. c. Profitability. d. Responsibility.

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62. Stakeholder impact analysis as a form of ethical decision making commences with which of the following:

a. Identification of significant stakeholders. b. Investigation of stakeholder interests. c. Ranking of stakeholder interests. d. All of the above. e. None of the above.

64. According to Chapter 1, which of these determinant factors define a corporation's reputation?

A. Credibility. B. Reliability. C. Responsibility. D. Trustworthiness. E. All of the above.

65. A CPA may conduct a financial statement audit when he or she is not independent, but the

audit report must be modified to disclose the lack of independence.

a. True b. False

66. According to Circular 230, Part 10.33, which of these is the best practice for tax advisors?

a. Communicate clearly with the client the terms of the engagement. b. Establish the facts (relevance, reasonableness of assumptions, applicability to law,

derived conclusions). c. Advise client import of conclusions. d. Act with fairness and integrity. e. All of the above.

67. According to the AICPA Code of Professional Conduct, Rule 101-Independence, an audit

requires that an individual perform his or her services with integrity and objectivity. There must be reasonable assurance that this is being done during the engagement. What must an accountant do to be in compliance with the generally accepted auditing standards?

a. Be independent in fact. b. Be independent in appearance. c. Both. d. Neither.

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68. Weasel & Mink, CPAs prepared an original tax return for Ms. Fleece and charged her $5,000

for the preparation of the return. In the event the Internal Revenue Service does not sustain her tax deductions on her chinchilla farm, Weasel & Mink, CPAs will refund Ms. Fleece $500.

a. This is a lawful practice because Weasel & Mink, CPAs made a mistake on the tax

return. b. This is not lawful practice because Weasel and Mink, CPAs because CPAs cannot

refund for work already performed. c. This is a lawful practice because Weasel & Mink, CPAs can reimburse a client for all

or a portion of a fee in the event that the position taken on the tax returned is challenged by the Internal Revenue Service.

d. This is not lawful practice because Weasel and Mink, CPAs because CPAs cannot charge a contingent fee for preparing an original tax return.

e. None of the above. 69. Which of the following organizations licences CPAs:

a. AICPA. b. Texas Society of CPAs. c. Texas State Board of Public Accountancy. d. All of the above. e. None of the above.

70. In regards to solicitation of clients, Jim Matter, C.P.A. would not be in violation of Circular

230 in which of the following scenarios:

a. Mr. Matter had been persistently soliciting and contacting a potential client. He has been so persistent because he feels that, if he could sign this client, it would generate huge profits for his firm. However, the client in question has asked Mr. Matter to stop contacting him. Even after he has clearly told Jim to stop contacting him because he did not want Jim's services, Mr. Matter still keeps pursuing the client.

b. Jim Matter has published a fee schedule that specifically states his hourly rate for

preparing 1040's is $125/hour. A potential client calls Jim up 6 weeks later after the brochure has been published and tells Mr. Matter that she would like him to prepare her 1040. Under the assumption that his going rate is $125/hour, the client in question is shocked when she receives her bill for preparation of her 1040. Mr. Matter charged her $135/hour, rather than the published rate of $125/hour.

c. Jim has taken it upon himself to mail out a brochure to a list of people he has

obtained through a friend. The brochure is an advertisement of all of the services

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offered by Jim and his firm. The list of names that Jim is going to mail brochures to are not current clients, have not invited Jim to contact them through direct mail, and are not seeking the type of services offered by a CPA. Mr. Matter only kept copies of the brochures mailed out to these people for 24 months after they were mailed.

d. Mr. Matter's brochures explicitly state that he is Acertified by the Internal Revenue

Service to perform tax services.

71. Johnson CPAs practice before the IRS and have implemented a policy requiring all tax refund checks of its clients be sent to the firm.

a. Johnson CPAs may endorse its client's refund checks and deposit the checks into Johnson CPAs' operating accountant if the client has not paid its bill for the preparation of the tax return. b. Johnson CPAs may require that its client endorse the check and then negotiate the check by depositing the check into its operating account if the client has not paid its bill for the preparation of the tax return. c. Johnson CPAs may hold a refund check until its client picks up the check. d. All of the above. e. None of the above.

72. Under PCAOB’s ethics rule 3524 governing an “Audit Committee Pre-Approval of Certain Tax Services”, which step is not required of auditors in seeking preapproval of tax services?

a. Provide the audit committee a written, detailed description of the scope of the proposal, related fee and other

b. Discuss the proposal and the potential impact on independence and ethics with the audit committee

c. Document the substance of the discussion in a uniform format

d. Submit a sworn statement that the tax services are to be performed only by senior staff in financial reporting oversight roles with the audit client (or its affiliates)

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73. Which of the following laws was enacted as a result of the corporate scandals of Enron, Arthur Anderson, and WorldCom?

A. Sarbanes-Oxley Act of 2002 B. Securities Act of 1933 C. Securities Act of 1934 D. Jones Act

74. Under PCAOB's audit professional standards, a registered public accounting firm and its associated persons must be

a. Independent of the firm’s audit client throughout the audit and professional engagement period. b. A CPA certification holder. c. Understand the company’s process very well. d. The person is in a financial reporting oversight role.

75. Which of the following statements are not correct regarding a publicly traded company:

a. The board of directors appoints the audit committee and has the authority to remove members at anytime. b. The committee should consist of at least three member of the board of directors and one audit financial expert. c. At least one member of the audit committee should be able to understand and analyze the financial statements of the organization and the financial expert.

d. Consideration should give to individuals who have authority in the organization. e. All statements are correct.

76. The recent corporate accounting scandals have brought to light the void between what investors think they are getting in audited financial statements and what they are actually getting in audited financial statements. This is commonly referred to as:

a. The credibility gap. b. The financial statement gap. c. The accountability gap. d. The expectations gap. e. All of the above.

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77. The Sarbanes Oxley Act of 2002 provides for the reform of: a. Corporate Governance b. Accounting Profession c. Both of the above d. None of the above 78. A practitioner who knows that the client has not complied with the revenue Laws of the United States must: a. Advise the client promptly of the fact of such non-compliance b. Advise the client of the consequences of such non-compliance c. Advise the IRS promptly d. Advise the client promptly of the fact and the consequences of such non-compliance 79. Under PCAOB rules the “Audit and professional engagement period” include(s):

a. the period covered by any financial statements being audited b. the period of the engagement to audit or review the audit client’s financial statement c. all of the above d. none of the above

80. Paul Brown provides audit services to a client, an SEC registrant. Which of the following

services can Paul Brown provide to some of this same client's employees?

a. Bookkeeping services related to the client's financial records. b. Financial information system design and implementation. c. Tax services in limited circumstances. d. Appraisal or valuation services. e. Internal audit outsourcing services.

81. After discussing an ethical issue or a financial report that deviates from GAAP with your manager and other executives, you found out that they were involved in the issue; your next step is going to be: a. Resign right away. b. Consider advising the Board of Directors. c. Secure all documentation related to that issue, take into consideration the fact that the problem continues to persist after reporting it and your inability to do anything to resolve the problem,then consider resigning. d. None of the above.

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82. SOX established a Public Accounting Oversight Board (PCAOB) that will:

a. Establish auditing and attestation standards. b. Maintain and register foreign firms that audit SEC registrants, and who will be

subject to PCAOB regulations and discipline. c. Consist of five members with five year staggered terms. d. Inspect, discipline, and write rules governing accounting firms that audit public

companies. e. All of the above.

83. Under Sarbanes-Oxley, the audit committee of a public company shall do the following:

a. Appoint and oversee outside auditors. b. Establish procedures for anonymous employee complaints. c. Receive audit reports from the auditors without management present. d. Approve any non-audit services provided by auditors. e. All of the above.

85. A practitioner may be censured, suspended or disbarred from practice before IRS due to incompetence and disreputable conduct, including:

a. Conviction of any criminal offense under the revenue laws of United States. b. Conviction of any criminal offense involving dishonesty or breach of trust. c. Conviction of any felony under federal or state law for which the conduct involved renders the practitioner unfit to practice before the IRS. d. All of the above. e. None of the above.

86. The Moral Standards Approach focuses on all of the below except:

a. Whether it provides a net benefit to society. b. Whether it helps the officers of the corporation. c. Whether it is fair to all stakeholders. d. Whether it is right

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87. Weasel & Mink, CPAs prepared an original tax return for Ms. Fleece and charged her $5,000 for the preparation of the return. In the event the Internal Revenue Service does not sustain her tax deductions on her chinchilla farm, Weasel & Mink, CPAs will refund Ms. Fleece $500. a. This is a lawful practice because Weasel & Mink, CPAs made a mistake on the tax return.

b. This is not lawful practice because Weasel and Mink, CPAs because CPAs cannot refund for work already performed. c. This is a lawful practice because Weasel & Mink, CPAs can reimburse a client for all or a portion of a fee in the event that the position taken on the tax returned is challenged by the Internal Revenue Service. d. This is not lawful practice because Weasel and Mink, CPAs because CPAs cannot charge a contingent fee for preparing an original tax return. e. None of the above.

D 88. John Jacob, CPA works for XYZ Firm, which was hired to audit the financial statements of Garbage Management, Inc. On the 3rd day of his audit work at XYZ Firm, John Jacob, CPA runs into Shelly Rogers, a new executive of the company, who went to college with John Jacob, CPA. They used to be very good friends, but haven't had contact with one another in over 15 years. Actually, they used to date, but Shelly Rogers left John Jacob, CPA for another man, and left him with $10,000.00 in debt for a diamond ring which she did not return. During the course of the audit, it was discovered that some of the financial data was not presented in conformity with Generally Accepted Accounting Principles, and for the financial statements to be in conformity with Generally Accepted Accounting Principles would mean a major modification to the financial statements of Garbage Management, Inc. Shelly Rogers asks John Jacob, CPA if XYZ Firm could overlook the non-conformity. What are the potential violations of the AICPA Code of Professional Conduct that this situation presents. Choose the best answer. a. General Standards (Rule 201) and Compliance with Standards (Rule 202). b. Independence (Rule 101); Accounting Principals (Rule 203); and Compliance with Standards (Rule 202).

c. Accounting Principals (Rule 203) and General Standards (Rule 201). d. Integrity and Objectivity (Rule 102); Accounting Principals (Rule 203); and Independence (Rule 101).

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89. A member of the AICPA must:

a. Undertake only those professional services that the member of member=s firm can reasonably expect to be completed with professional competence. b. Exercise due professional care in the performance of professional services. c. Adequately plan and supervise the performance of professional services. d. All of the above.

90. A company’s comprehensive culture-building and risk reduction services include:

a. Strategy and Assessment b. Training and Communication c. Measurement and Reporting d. All of the above.

91. Congress enacted the in response to a spate of highly publicized business failures, allegations of corporate improprieties and financial restatements.

a. Public accounting rule. b. Security act of 1933 c. Sarbanes Oxley Act of 2002 d. All of the above.

93. Based upon the PCAOB’s Rules on Ethics, a registered public accounting firm would not be independent of its client if during the audit the firm provided tax services to an immediate family member of the client, such as the officer’s brother-in-law.

a) True b) False

93. The period of the engagement to audit or review the audit client’s financial statements or to prepare a report filed with the Commission is called:

A. The “audit engagement period” B. The “audit period” C. The “professional audit period” D. The “professional engagement period”

94. Who may practice before the internal Revenue Services?

a. Attorney b. Certified public accountants c. Enrolled agents d. Enrolled actuaries e. All of the above

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95. Gary Daman, CPA, determined to have a conflict of interest with a client, Lisa Billup. Gary

Daman is NOT allowed to represent Lisa Billup before the IRS when:

a. Gary reasonably believes that he will be able to provide competent and diligent representation to Lisa Billup. b. The representation is not prohibited by law. c. Lisa Billup gives informed consent, confirmed in writing. d. The representation of Lisa Billup will be directly adverse to Gary’s another client, Carol O’Neil.

96. Gary Daman’s CPA firm has been engaged in Beast Hungary Inc.’s financial audit for the

past 3 years. Gary Daman also files personal tax return for Scott Beast, a member of the Beast

Inc. Under what circumstance Gary Daman is still considered independent of Beast Hungary

Inc.?

a. Scott Hungary is the CEO of Beast Inc.

b. Scott Hungary is the CFO of Beast Inc.

c. Scott Hungary is a member of Board of Directors of Beast Inc.

d. Scott Hungary is the Controller of one of the Beast Inc.’s subsidiaries.

97. Joe the Client requests that Mike the CPA return to him all of his records so that Joe the Client can comply with his Federal Tax obligations. Mike the CPA must return:

A. Any and all records necessary to fulfill the tax obligation, even if there is a fee dispute. Mike the CPA is not allowed to make copies of these records.

B. Any and all records necessary to fulfill the tax obligation, unless there is a fee dispute. In such case, Mike the CPA will not return the records until fee dispute is solved.

C. Any and all records necessary to fulfill the tax obligation, even if there is a fee dispute. Mike the CPA is allowed to make copies of these records.

D. Any records that Mike is not using at the time.

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98. In connection with seeking Audit Committee pre-approval to perform an audit client any permissible tax service, a registered public accounting firm shall:

A. Describe, in writing, to the audit committee of the client the scope of the services performed, the fee structure of the engagement, as well as any other side letter on the engagement letter.

B. Describe, in writing, to the audit committee of the client any compensation agreement or other agreement, such as a referral agreement.

C. Discuss with the audit committee of the client any potential effects of the services on the independence of the firm, and document the substance of the discussion with the audit committee of the issuer.

D. All of the above. 99. John Fry, the Chairman and CEO of XYZ Corp., was arrested for using, growing, and selling marijuana out of his home in Austin, TX. As a result, the stock price of XYZ Corp. plummeted. The reason being is because John Fry’s actions affected the corporate reputation of his company. The four determinates of corporate reputation are:

A. Credibility, trustworthiness, reliability, and responsibility. B. Productivity, sales, cash flow, and equity. C. Fairness, compassion, integrity, and honesty. D. None of the above

100. The PCAOB which is charged with overseeing, regulating, inspecting, and disciplining accounting firms in their roles as auditors of public companies.

a. True b. false

101 What of the following is not considered as stakeholders? a- Employees b- Government c- Suppliers d- None of the above

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102. Which of these is the best practice for tax advisors? A. Communicate clearly with the client the terms of the engagement. B. Establish the facts, (relevance, reasonableness of assumptions, applicability of law,

derived conclusions). C. Advise client import of conclusions. D. Act with fairness and integrity. E. All of the above.

103. What is a positive way to maintain a quality relationship with a client?

A. Have written fee agreements, with clearly defined terms (i.e. billing) and, if needed, provide cost estimates.

B. Complete work at agreed upon deadlines. C. Use appropriate phone protocol to maintain confidentiality with clients. D. Monitor quality of all work, including drafts as well as client status reports. E. All of the above.

104. Which of the following does not belong to the checklist for maintaining good client relations?

A. Have written fee agreements. B. Return all phone calls promptly. C. Maintain professional office appearance. D. They all belong to the checklist.

105. According to Article 2 in the Code of Professional Conduct, members should act in a way that will

a. Serve the public interest

b. Honor the public trust

c. Demonstrate commitment to professionalism

d. All of the above

e. None of the above

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106. A practitioner who, having been retained by a client with respect to a matter administered by the IRS, knows that the client has not complied with the revenue laws of the U.S. or has made an error in or omission from any return, document, affidavit, or other paper which the client submitted or executed under the revenue laws of the U.S., MUST

a. advise the client promptly of the fact of such noncompliance, error, or omission. b. stay silent because informing the client of such noncompliance, error, or omission now makes the practitioner liable. c. advise the client of the consequences as provided under the Code and regulations of such noncompliance, error, or omission. d. Both A and C.

107. The expectations gap has been coined to describe:

a. the gap between what the public expects of a certain stock and what value the stock actually closes on that day. b. the difference between how the public believes a company will perform and how the company actually performs after one year. c. the difference between what the public thinks it is getting in audited financial statements and what it is actually getting. d. Both B and C.

108 . Who may practice before the IRS? a. Anybody b. Any person with a college degree c. A CPA candidate d. Any licensed attorney(s) in good standing 109. Taxes R Us, a CPA firm, has notified Mr. Jones that his federal income tax return and extension for 2006 is complete and ready to be mailed to the IRS. Mr. Jones requests an estimate of his payment. He then complains that Taxes R Us accounting fees are too high priced and demands his records so he can go elsewhere. What must Taxes R Us do? a. Taxes R Us must return the entire file of records provided by Mr. Jones at once because those are his personal belongings. b. Taxes R Us must allow Mr. Jones to only review and copy all the records he had provided. c. Taxes R Us must return the documents that the IRS requires attached to a return and allow Mr. Jones to copy the remaining records needed to abide by his Federal tax responsibility. d. None of the above.

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110. Since the new SOX governance framework was established, Eileen’s company has reviewed the executive board, discussed the roles they play in the company, and revised the penalties of misconduct. This reveals how SOX has had an impact on a. Governance, Accountability and Reporting, and Management Practice b. Accounting Profession and Auditing Practice c. Business Ethics Trends d. None of the above. 111. Regarding the fees of registered independent accounting firms on a audit engagement the following is true:

1. The firm may charge a client a commission based on recovery received due to finding an issue on the financials.

2. The firm may charge a flat fee for all work. 3. The firm may charge a fee based on the number of errors it find in the clients financials. 4. The firm can receive commissions from third parties for work performed on a client.

112. Jason has a hearing scheduled before a panel of IRS appeals officers relating to his 2005 Individual Federal Income Tax Return. Due to business travel he won’t be able to attend & represent himself. Which of the following individuals can represent Jason at his hearing?

A) Jason’s best friend, a seasonal employee for H&R Block, who prepared and signed his 2005 return as the preparer

B) Jason’s aunt, an employee at the 5th Circuit Federal Court of Appeals, who advised him on the tax deductions he claimed on his 2005 return

C) Jason’s mother who is employed as a bookkeeper at a local bank

D) Jason’s brother-in-law, who is a former CPA who practiced in the State of Texas

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113. Under PCAOB’s ethics rules governing an “Audit Committee Pre-Approval of Certain Tax Services”, which step is not required of auditors in seeking preapproval of tax services?

A) Provide the audit committee a written, detailed description of the scope of the proposal, related fee and other

B) Discuss the proposal and the potential impact on independence and ethics with the audit committee

C) Document the substance of the discussion in a uniform format

D) Submit a sworn statement that the tax services are to be performed only by senior staff in financial reporting oversight roles with the audit client (or its affiliates)

114. In the 1980’s business evolved from a profit-only mandate to one recognizing the interdependence of business & society. As a result, several trends developed that impacted the ethics of business & the professional accountant. Which of the following is not one of those trends?

a) decreasing legal liability for corporate directors b) mgmt. assertion to shareholders on the adequacy of internal controls c) a stated intention to manage risk & protect reputation d) delayering, employee empowerment & the use of EDI e) increased reliance by management on non-financial performance indicators used on a

real-time basis 115. Managements report upon the corporation’s internal controls, including management’s responsibility for establishing, maintaining & assessing their effectiveness is governed by which title of the Sarbanes-Oxley Act?

A) Title III – Corporate Responsibility B) Title IV – Enhanced Financial Disclosures C) Title VIII – Studies & Reports D) Title XI – Corporate Fraud & Accountability

116. The Director of Practice will maintain roasters of all the following individuals:

A. Persons that have been granted active enrollment to practice before the IRS. B. Persons that have been placed in inactive status for failure to meet the requirements for

renewal of enrollment. C. Persons who have been censured, suspended, or disbarred from practice before the IRS. D. All of the above.

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117. Which of the following laws was enacted as a result of the corporate scandals of Enron, Arthur Anderson, and WorldCom?

a. Sarbanes-Oxley Act of 2002 b. Securities Act of 1933 c. Securities Act of 1934 d. Jones Act

118. In Circular 230, means any person who is a member in good standing of the bar of the highest court of any State, territory, possession of the United States, including a Commonwealth, or the District of Columbia.

a. CPA b. Attorney c. Commissioner d. Enrolled agents.

119. A company’s comprehensive culture-building and risk reduction services include:

a. Strategy and Assessment b. Training and Communication c. Measurement and Reporting d. All of the above.

120. Based upon the PCAOB’s Rules on Ethics, a registered public accounting firm would not be independent of its client if during the audit the firm provided tax services to an immediate family member of the client, such as the officer’s brother-in-law.

a. True b. False

121. __________ includes the culture, processes, and structures that are directed towards the effective management of potential opportunities and adverse effects.

a) Risk Management b) Hypernorms c) Ethics d) Synergy

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122. Gary Daman, CPA, determined to have a conflict of interest with a client, Lisa Billup.

Gary Daman is NOT allowed to represent Lisa Billup before the IRS when:

a. Gary reasonably believes that he will be able to provide competent and diligent

representation to Lisa Billup.

b. The representation is not prohibited by law.

c. Lisa Billup gives informed consent, confirmed in writing.

d. The representation of Lisa Billup will be directly adverse to Gary’s another client, Carol

O’Neil.

123. Gary Daman’s CPA firm has been engaged in Beast Hungary Inc.’s financial audit for

the past 3 years. Gary Daman also files personal tax return for Scott Beast, a member of the

Beast Inc. Under what circumstance Gary Daman is still considered independent of Beast

Hungary Inc.?

a. Scott Hungary is the CEO of Beast Inc.

b. Scott Hungary is the CFO of Beast Inc.

c. Scott Hungary is a member of Board of Directors of Beast Inc.

d. Scott Hungary is the Controller of one of the Beast Inc.’s subsidiaries.

124. “Stakeholders increasingly expect that a company’s activities will respect their values and interests. To a large extent, this respect for stakeholder values and interests determines the ethical standing and success of a corporation.” (Brooks, P. 2) Which of the following entities is not considered a “stakeholder” of a company?

a. Creditor. b. Debtor. c. Employee. d. Stockholder.

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125. “The new SOX governance framework will focus the attention of directors and

management on issues that are of critical importance to the proper governance and reporting

process.” Which one of the following developments is not the result of SOX framework?

a. Strengthening of the role of the audit committee.

b. Clarification of roles, responsibilities, and competencies of directors and board

subcommittees.

c. Decrease of the demand of qualified audit personnel.

d. Increased penalties for wrongdoing.

126. The Board of Director’s of ABC Corporation have three broad duties that stem from the fiduciary status of corporate directors. Those three duties are the duties of obedience, loyalty, and care. The duty of obedience requires the director to:

A. Ensure committing acts beyond the scope of the powers of ABC Corp. as defined by its charter or laws of the state of corporation.

B. Avoid committing acts beyond the scope of the powers of ABC Corp. as defined by its charter or laws of the state of corporation.

C. Avoid committing acts within the scope of the powers of ABC Corp. as defined by its charter or laws of the state of corporation.

D. None of the above. 127. SOX of 2002 is primarily regulated and overseen by A. SEC B. PCAOB C. AICPA D. all of these 128. Under the Sarbanes-Oxley Act (SOX), management is responsible for, must assess, and certify by signature which of the following:

a. The attestation standards, including quality control and independence standards of the auditing firm performing contract internal work for the company.

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b. The five members (only two of which can be CPAs) of the Public Company Accounting Oversight Board (PCAOB) are certified in the Company=s headquarters. c. The non-audit services of the auditing company were performed according to the appropriate SARS. d. Quarterly and annual financial reports, SEC forms, and period reports on systems of internal control. 129. A member of the AICPA must:

a. Undertake only those professional services that the member of member=s firm can

reasonably expect to be completed with professional competence.

b. Exercise due professional care in the performance of professional services.

c. Adequately plan and supervise the performance of professional services.

d. All of the above. 130. The Sarbanes Oxley Act of 2002 provides for the reform of: a. Corporate Governance b. Accounting Profession c. Both of the above d. None of the above 131. A practitioner who knows that the client has not complied with the revenue Laws of the United States must: a. Advise the client promptly of the fact of such non-compliance b. Advise the client of the consequences of such non-compliance c. Advise the IRS promptly d. Advise the client promptly of the fact and the consequences of such non- compliance

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132. The term that refers to a set of values that, for the most part, is universally respected by

various stakeholders group is:

a. Due Diligence. b. Morals. c. Hypernorm. d. Ethical framework. e. All of the above.

133. The recent corporate accounting scandals have brought to light the void between what investors think they are getting in audited financial statements and what they are actually getting in audited financial statements. This is commonly referred to as: a. The credibility gap. b. The financial statement gap. c.The accountability gap. d. The expectations gap. e. All of the above. 134. According to distributive justice theory, there are three main criteria for determining the just distribution: Need, fairness, and merit

a. Need, arithmetic equality, and merit b. Opportunity, fairness, and merit c. Opportunity, fairness, and arithmetic equality d. Need, arithmetic equality, and equivalence