question

If a company is managing its earnings, which of the ethical theories are they most likely following?

answer

egoism

question

Which of the following is NOT a motivation to manage earnings?

answer

Companies try to accelerate as much revenue as possible into early periods regardless of the effects on later periods

question

Which technique was used by both WorldCom and Waste Management to manage earnings?

answer

Manipulating asset net valuation amounts to minimize operating expenses for a period

question

Which of the following author(s) emphasize(s) a "purposeful act by management in pursuit of its own self-interests as might be the case when earnings are manipulated to get the stock price up in advance of the exercise stock options"?

answer

Schipper

question

Which of the following author(s) focus(es) on "management's intent to deceive the stakeholders by using accounting devices to positively influence reported earnings"?

answer

Healy and Wahlen

question

Which of the following author(s) link earnings management to choices made in determining earnings that may comprise aggressive, but acceptable, accounting estimates and judgements, as compared to fraudulent practices that are clearly intended to deceive others?

answer

Dechow and Skinner

question

Which of the following author(s) define(s) earnings management as "reasonable and legal management decision making and reporting intended to achieve stable and predictable financial results"?

answer

Thomas E. McKee

question

Who said "the ethics issue might possibly be mitigated by clearly disclosing aggressive accounting assumptions in the financial statement disclosures?"

answer

Hopwood et al

question

In surveys of managers, which technique to manage earnings was considered most acceptable?

answer

Manipulating operating decisions

question

Which of the following is NOT a qualitative factor when assessing materiality?

answer

The use of simplistic numerical thresholds and rules of thumb

question

SAS No. 107 identifies the following aspects of disclosure amounts deemed to be material except for:

answer

Disclosing an item in one year but not in the next year

question

The best definition of a financial restatement is

answer

A company, either voluntarily or under prompting by its auditors or regulators, revises its public financial information that was previously reported

question

The SEC requires stealth restatements to be

answer

disclosed only in an 8-K report or amended 10-K/A or 10-Q/A

question

The SEC Advisory Committee on Improvements in Financial Reporting identified each of the following as a view of equity and credit analysts about investors' views on materiality and financial statement restatements except for:

answer

bright line rules are useful in making materiality judgments

question

Which of the following is NOT an earnings management technique?

answer

Creating an allowance for uncollectible accounts and adjusting it at year end

question

Which of the following was not pointed to by the SEC as a motivation for fraud in the Xerox case?

answer

Xerox top management overrode the internal control to manipulate earnings

question

Which of the following earnings management techniques were not used in the Lucent Technologies, Inc.'s case?

answer

Shifting current revenue to a later period

question

Which of the following was not true according to the Enron case?

answer

Fastow developed the concept of buying up oil and gas companies to establish SPEs

question

Which of the following partnerships that Enron created eventually led to its demise?

answer

Chewco

question

What was the original motivation by FASB on SPEs?

answer

to establish a mechanism to encourage companies to inset in needed assets while keeping related debt off its books

question

There are several aspects of Enron fraud that are death with directly in SOX, further connecting Enron to reform in the accounting profession. Which of the following is true?

answer

Related-party transactions require disclosure in the notes

question

The best way to characterize the role of Sherron Watkins in the downfall of Enron is

answer

she tried to alert Ken Law about the accounting scandal at Enron

question

The basic ethical principle violated by Andy Fastow in his role as Enron's CFO and involvement with SPEs was

answer

he had a conflict of interest in his dual roles

question

"Cookie jar reserves" can best be described as

answer

overstating or understating allowances and reversing amounts in the future to smooth out net income over time

question

All of the following are examples of "Boosting Income with One-Time Gains" except for:

answer

recording sales that lack economic substance

question

The expression "Too many corporate managers, auditors, and analysts, are participants in a game of nods and winks" is attributable to:

answer

Arthur Levitt

question

Congress passed the "Sarbanes-Oxley Act" on July 30, 2002. Which of the following is NOT true?

answer

New audit standards include a prohibition against independent auditors providing many non-audit services and mandatory audit engagement partner rotation

question

"Earnings management either ignores or does not consider the rights of the investors and creditors to receive accurate, reliable, and transparent financial statements." This statement is from

answer

a rights perspective

question

Inherent risk refers to

answer

the possibility that a material misstatement will occur within the reporting company's accounting information system

question

The main difference between a discretionary and non discretionary accrual is

answer

discretionary accruals are items that management has full control over

question

In the Matrixx Intiatives V. Siracusano case, the Supreme Court adopted the position about materiality that

answer

it should be determined by considering whether the total mix of information would be viewed by a reasonable investor as possibly accepting judgment

question

You work for a company that pushes the envelope with respect to reporting revenues and expenses. You often disagree with the company because it's approach to reporting these amounts cannot be justified from a GAAP perspective. You are upset and are considering whether this is a company that has a culture you want to be a part of. Which of the following best characterizes the ethical issues of concern?

answer

Ethical dissonance

question

Debbie and Steve are discussing a lecture given by their ethics professor after class one day. The professor said that misstatements of earnings are always unethical. Debbie aggress with this situation but Steve does not. What statement might Steve make to best support his point of view?

answer

it depends on whether the misstatements were made deliberately

question

The swap transactions used in the Solutions Network case to manage earnings can best be described as

answer

recording revenue on software systems transactions in an earlier period that when obligated to buy the same in a later period

question

The Solway case looks at the accounting issue of

answer

recording of accruals to manage earnings

question

The accounting shenanigan used in the Dell Computer case can best be described as

answer

shifting current revenue from exclusivity payments to a later period

question

In the Sweat Construction case, the company tried to manipulate earnings through the use of which accounting technique?

answer

percentage of competition method

question

Which of the following was not an accounting issue in the Sunbeam case?

answer

swap transactions

question

The North Face case deals with materiality and how auditors employ that metric in an audit. The following are all true except

answer

Crawford followed the GAAP methods that Deloitte suggested

question

The former CEO of Vivendi Universal, Jean-Marie Messier, used as his defense in the case that

answer

while some of his actions may have turned out to be wrong, there was never an intent to defraud

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