INSTRUCTOR TEST BANK CHAPTER 2

Copyright ©2016 John Wiley & Sons, Inc. Klein, Ethics in Accounting, 1/e (For Instructor Use Only) 2-1

INSTRUCTOR TEST BANK – CHAPTER 2

MULTIPLE CHOICE

1. An unethical act:

• Is always illegal as well
• Is not necessarily illegal
• Must, at minimum, violate a government regulation
• Is determined for the accounting profession by the FASB

SOLUTION: B

• If a CPA violates one of the Principles of the AICPA’s Code of Professional

Conduct, the CPA:

• Will never be subject to disciplinary action by the AICPA
• May lose the right to practice accounting for a period of time unless the

violation was justified

• Definitely will lose the right to practice accounting for a period of time unless

the violation was justified

• May or may not lose the right to practice accounting, depending on the

severity of the violation

SOLUTION: A

3. The AICPA and IFAC Codes of Conduct are:

• Substantially similar, but not identical
• Identical, except that the AICPA Code applies to Certified Public Accountants

and the IFAC Code applies to other professional accountants

• Identical, except that the AICPA Code applies to accountants licensed in the

United States and the IFAC Code applies to professional accountants licensed outside the United States

• Identical, except that the AICPA Code applies to individual accountants and

the IFAC Code applies to accounting firms and other organizations of accountants

SOLUTION: A

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Copyright ©2016 John Wiley & Sons, Inc. Klein, Ethics in Accounting, 1/e (For Instructor Use Only) 2-2

4. Self-regulation of the auditing profession in the United States:

• Has always been, and remains, a distinguishing feature of the auditing

profession

• Historically has characterized the oversight of auditors of privately-held

companies, but no longer does

• Historically has characterized the oversight of auditors of publicly-held

companies, but no longer does

• Never has been a characteristic of the auditing profession because

government understandably recognizes the need to assure strict compliance with ethical standards designed to protect the investing public

SOLUTION: C

• The substantial similarity of the AICPA and IFAC Codes of Conduct tends to

support the concept of:

• The ethical conformity doctrine
• Self-regulation
• Ethical absolutism
• Ethical relativism

SOLUTION: C

6. The usury laws:

• Are an example of ethical absolutism
• Are an example of ethical relativism
• Bar excessively high interest rates on certain types of loans
• Reflect the consensus among all countries that interest rates need to

regulated by a universal body or multi-governmental entity

SOLUTION: C

• Some societies believe that justice is best determined by juries comprised of

ordinary citizens, but other societies believe that justice is best administered by

judges. This is an example of:

• Ethical relativism
• Ethical absolutism, with certain groups differing in their application of a core

ethical principle

• The ethical standardization doctrine
• Ethical self-determination

SOLUTION: B

Copyright ©2016 John Wiley & Sons, Inc. Klein, Ethics in Accounting, 1/e (For Instructor Use Only) 2-3

• If a CPA violates the Principles section of the AICPA Code of Professional

Conduct, the CPA is subject to professional disciplinary actions:

• By the SEC or by the AICPA’s Disciplinary Committee
• By the state accountancy board in the state where the CPA practices

accounting

• Only if the CPA is still an active (non-retired) accounting practitioner
• Never

SOLUTION: D

9. One hallmark of a profession is:

• Its members’ unrelenting dedication to clients’ interests over the

countervailing public interest

• Its classification as a profession by the U.S. Department of Labor
• Its members’ willingness to cooperate with clients by subordinating their

judgments in deference to clients‘ desires

• A member’s exercise of independent judgment

SOLUTION: D

• Creation of the PCAOB was an important event in the development of the

accounting profession because it altered the accounting profession’s historical

policy of self-regulation in the area of:

• Internal auditing
• Tax return preparation
• Tax advocacy on behalf of clients accused of fraud
• External auditing of publicly-traded companies

SOLUTION: D

• According to the Responsibility Principle of the AICPA’s Code of Professional

Conduct, accountants should always:

• Make sensitive moral judgments
• Pursue the public interest
• Maintain client confidentiality
• Use the highest degree of care in performing all professional activities

SOLUTION: A

• According to the Objectivity and Independence Principle of the AICPA’s Code of

Professional Conduct, accountants should always be independent in providing:

• All professional services
• All services to their employer
• All audit services
• All tax advisory services

SOLUTION: C

Copyright ©2016 John Wiley & Sons, Inc. Klein, Ethics in Accounting, 1/e (For Instructor Use Only) 2-4

13. Kohlberg’s three levels of moral development, in order, focus on:

• Self-interest, achieving justice, and achieving peer approval
• Self-interest, adhering to principles over laws, and learning to disregard the

need for peer approval

• The avoidance of punishment, compliance with laws, and compliance with

societal expectations

• Self-interest, achieving peer approval, and the pursuit of justice

SOLUTION: D

• In Kohlberg’s Six Stages of Moral Development, striving to act in accordance with

laws occurs at:

• Stage 2
• Stage 4
• Stage 5
• Stage 6

SOLUTION: B

• Which of the following is not one the four stages in Rest’s Four-Component

Model of Ethical Decision-Making?

• Developing moral sensitivity
• Developing sound moral judgment
• Developing a willingness to challenge unjust laws
• Developing the character to initiate actions

SOLUTION: C

16. Legal mandates and ethical mandates are:

• Identical
• Different, with legal mandates usually imposing higher behavioral

requirements than ethical mandates

• Different, with ethical mandates usually imposing higher behavioral

requirements than legal mandates

• Both imposed on professional accountants, with legal mandates typically

having broader application

SOLUTION: C

17. To act ethically, a person always must:

• Follow the formal expression of a law
• Follow both the spirit and the formal expression of a law
• Do the right thing, even if violates a law
• Adhere to the spirit, intent, and formal expression of a law

SOLUTION: C