ETH557 – ACCOUNTING ETHICS Final exam

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?

A change in assets has occurred and can be appropriately measured.

Payment for the sale must be received prior to recognizing the revenue.

The product or deliverable, in the case of a service business, has been received by the customer.

A promise to deliver has been established.

Failure to provide any care in fulfilling a duty owed to another is called

gross negligence

constructive fraud

breach of contract

negligence

Which of the following is a fundamental characteristic of the market system?

Unselfish behavior

Central planning by government

Government-set wages and prices

Property rights

The income effect indicates that

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

when the price of a product falls, a consumer will be able to buy more of it with a specific income

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

The price elasticity of demand coefficient measures

the slope of the demand curve

how far business executives can stretch their fixed costs

buyer responsiveness to price changes

the extent to which a demand curve shifts as incomes change

A normative statement is one that

applies only to microeconomics

is based on the law of averages

is based on value judgments

applies to macroeconomics

Many conflicts of interest in business contracts can be remedied ethically by which of the following?

Deception and disclosure

Camouflage and consent

Disclosure and consent

Conflicts of interest can never be remedied ethically

Four professional general standards and responsibilities for Certified Public Accountants are quality control and assurance, professional judgment, competence, and:

integrity

diligence

independence

knowledge

In 2002, Adelphia Cable filed bankruptcy when it was discovered that

excess fictitious expenses of $1 million were added to the income statement

bank debt in excess of $2.3 billion was not shown on the financial statements

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