ETH557 – ACCOUNTING ETHICS Final exam

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.

2

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

·

gross negligence

·

constructive fraud

·

breach of contract

·

negligence

3

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

4

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

5

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

6

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

7

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

8

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

·

integrity

·

diligence

·

independence

·

knowledge

9

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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