Question;ETH/557 - ACCOUNTING ETHICS Final examABC;Company owes XYZ Enterprises $1 million for goods purchased from XYZ over a;year ago. XYZ Enterprises continues to list the $1 million in their accounts;receivable balance and does not record any allowance for doubtful accounts. XYZ;Enterprises is failing to follow;?;Financial Accounting;Standards Board FAS 157;?;SFAS 169;?;Financial Accounting Standards Board Statement No. 5;?;SFAS 101;2;The;bankruptcy of WorldCom in 2002 was due to the company?s actions in;?;recording fictitious;liabilities;?;failing to record revenues;?;classifying expenses as;assets;?;expensing equipment purchases rather than capitalizing;these purchases;3;The;price elasticity of demand coefficient measures;?;buyer responsiveness to price changes;?;the slope of the demand;curve;?;how far business executives;can stretch their fixed costs;?;the extent to which a;demand curve shifts as incomes change;4;Which;of the following is a fundamental characteristic of the market system?;?;Government-set wages and;prices;?;Property rights;?;Central planning by;government;?;Unselfish behavior;5;In;2002, Adelphia Cable filed bankruptcy when it was discovered that;?;bank debt in excess of $2.3 billion was not shown on the;financial statements;?;sales in excess of $72;billion were omitted from the financial statements;?;excess fictitious expenses;of $1 million were added to the income statement;?;assets on the financial;statements were considerably undervalued;6;When;applying for a bank loan or trade credit, one way a company can appear to be in;a healthier financial position would be to;?;overstate its expenses;?;undervalue its assets;?;understate its sales;?;understate its liabilities;7;A;normative statement is one that;?;applies to macroeconomics;?;is based on value judgments;?;applies only to;microeconomics;?;is based on the law of;averages;8;Section;55 of the Principles of Professional Conduct of the AICPA states that;?;members should perform all;professional responsibilities with the highest sense of integrity;?;a member should observe the;profession?s technical and ethical standards, strive continually to improve;competence and quality of services, and discharge professional responsibility;to the best of the member?s ability;?;members should accept the;obligation to act in a way that will serve the public interest, honor the;public trust, and demonstrate commitment to professionalism;?;a member should maintain objectivity and be free of;conflicts of interest in discharging professional responsibilities;9;Four;professional general standards and responsibilities for Certified Public;Accountants are quality control and assurance, professional judgment;competence, and;?;knowledge;?;diligence;?;integrity;?;independence;10;When;budgets are used to measure performance, there is a danger that budgetary slack;may occur. This happens when;?;sales budgets are set too low and cost budgets are;set too high;?;sales budgets are set too;high and cost budgets are set too high;?;sales budgets are set too;high and cost budgets are set too low;?;sales budgets are set too;low and cost budgets are set too low;11;Failure;to provide any care in fulfilling a duty owed to another is called;?;gross negligence;?;constructive fraud;?;breach of contract;?;negligence;12;Assuming;an economy has fixed quantities of resources, that economy;?;is able to satisfy all;consumer wants;?;will produce the same;output whether or not resources are used efficiently;?;is more efficient, the larger the amount of goods and;services it produces;?;is able to produce the same;amount of output regardless of the production technologies it chooses;13;When;revenue is recognized and shipment has not been made and the criteria for;recognizing revenue on bill-and-hold transactions set out in SEC Staff;Accounting Bulletin No. 101 have not been met, this is known as;?;premature revenue recognition;?;postrevenue recognition;?;timely revenue recognition;?;conservative revenue;recognition;14;According;to the Agency Theory, in a corporation there are two types of information;consumers known as;?;agents and principals;?;customers and agents;?;principals and vendors;?;vendors and customers;15;The;EU Privacy Directive presents problems for the United States in that;?;several layers of approval;are necessary before any data may be transferred to a non-EU entity;?;data may not be transferred to a non-EU entity unless;guarantees are provided that equal security measures are in place;?;high transfer charges are;required to be paid by the recipient in the currency of the country;transferring the data;?;transferred data may not be;translated into another language;16;Tom;Donaldson and Tom Dunfee are proponents of ethical guidelines related to;technology that are based on differentiating hypernorms from nonhypernorms.;This theory is known as;?;Transparent Ethical Dilemma;Theory;?;Electronic Communications;Privacy Theory;?;Integrative Social Contracts Theory;?;Social Contract Network;Theory;17;If;a conflict of interest arises prior to entering into a business contract, the;parties should;?;commence a cooling-off;period until the conflict is removed;?;determine the type of;conflict and if disclosure of the conflict of interest is sufficient to proceed;with the contract;?;stop negotiations immediately and contact a mediator to;negotiate the terms of the contract;?;cease and desist because;all conflicts of interest are irreconcilable;18;When;evaluating the performance of managers in investment centers, performance;metrics should be based on;?;revenue and costs under;their control;?;only costs under their;control;?;revenues, costs, and investments under their control;?;only investments under;their control;19;Agency;costs arise when agents fail to act in the best interests of the principals.;One example of losses from poor decisions would be;?;increasing the scope of the audit of the financial;statements;?;investing additional funds;in profitable projects;?;prioritizing projects;according to the best interests of the corporation;?;purchasing inferior;material to earn yearly bonus;20;If;the price of normal good X rises, the income;?;effect will induce the;consumer to buy more of X and the substitution effect will induce him to buy;less;?;and substitution effects;will both induce the consumer to buy less of X;?;and substitution effects will both induce the consumer to;buy more of X;?;effect will induce the;consumer to buy less of X and the substitution will induce him to buy more;21;Suppose;that as the price of Y falls from $2.00 to $1.90 the quantity of Y demanded;increases from 110 to 118. Then, the price elasticity of demand is;?;3.94;?;1.37;?;4.00;?;2.09;22;Many;conflicts of interest in business contracts can be remedied ethically by which;of the following?;?;Camouflage and consent;?;Deception and disclosure;?;Conflicts of interest can;never be remedied ethically;?;Disclosure and consent;23;The;pursuit of self-interest;?;means the same as;selfishness;?;is highly detrimental to;the market system;?;gives direction to the market system;?;is reflected in the;behavior of firms, but not in the behavior of consumers;24;The;concept of economic efficiency is primarily concerned with;?;the limited wants-unlimited;resources dilemma;?;obtaining the maximum output from available;resources;?;the conservation of;irreplaceable natural resources;?;considerations of equity in;the distribution of wealth;25;Other;things equal, an excise tax on a product will;?;increase its supply;?;increase the quantity sold;?;increase its price;?;increase its demand;26;When;the economist says that economic wants are insatiable, this means that;?;these wants are virtually unlimited and therefore;incapable of complete satisfaction;?;economic resources are;valuable only because they can be used to produce consumer goods;?;the structure of consumer;demand varies from time to time and from country to country;?;economic resources?land;labor, capital, and entrepreneurial ability?are scarce;27;The;income effect indicates that;?;when the price of a product;falls, the lower price will induce the consumer to buy more of that product now;that it is relatively cheaper;?;when the price of a product falls, a consumer will be;able to buy more of it with a specific income;?;consumers should substitute;among various products until the marginal utility from the last unit of each;product purchased is the same;?;a rise in money income will;cause consumers to buy smaller quantities of normal goods;28;In;2003, FASB and IASB met and established four criteria for establishing revenue;recognition. To recognize revenue, which of the following conditions must be;present?;?;Payment for the sale must;be received prior to recognizing the revenue.;?;A promise to deliver has;been established.;?;A change in assets has occurred and can be appropriately;measured.;?;The product or deliverable;in the case of a service business, has been received by the customer.;29;Productive;efficiency refers to;?;the production of the;product-mix most wanted by society;?;the full employment of all;available resources;?;production at some point;inside of the production possibilities curve;?;the use of the least-cost method of production;30;Which;of the following is a normative statement?;?;It will cool off later this;evening.;?;The humidity is high today.;?;It is too hot to play tennis today.;?;The temperature is high;today.
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