Question 1

The "Milton Manufacturing" case illustrates:

Accepted Answer

A)   What can go wrong when a company sets a policy that potentially harms one area of its operations.
B)   How the failure to exercise professional skepticism can cloud objective judgment.
C)   The pressure that can be placed on accountants by top management.
D)   What can go wrong when fraudulent accounting is dictated by top management. A

Question 2

In stage 5 of Kohlberg's model, ethical reasoning is motivated by:

Accepted Answer

A)   Acting in the best interests of others
B)   Following the law
C)   Upholding the rights, values, and legal contracts of society
D)   Acting based on universal principles C

Question 3

Describe the Giving Voice to Values framework. What are the reasons and rationalizations frequently given in financial statement fraud situations?

Accepted Answer

"Giving Voice to Values (GVV)" is a behavioral ethics approach that shifts the focus away from traditional philosophical reasoning to an emphasis on developing the capacity to effectively express one's values in a way that positively influences others by finding the levers to effectively voice and enact one's values. The methodology asks the protagonist to think about the arguments others might make that create barriers to expressing one's values in the workplace and how best to counteract these "reasons and rationalizations." GVV is used post-decision-making, that is, you have already decided what to do. It can be used to ward off the necessity for whistle-blowing if by voicing values others can be convinced about the wrongness of their intended behavior/decisions.
GVV provides a framework to deal with the opposing points of view based on the following series of questions.
What are the main arguments you are trying to counter? That is, what are the reasons and rationalizations you need to address?
What is at stake for the key parties, including those who disagree with you?
What levers can you use to influence those who disagree with you?
What is your most powerful and persuasive response to the reasons and rationalizations you need to address? To whom should the argument be made? When and in what context?
The most frequent categories of argument or rationalization that we face when we speak out against unethical practice. Some of the most common arguments include:
Expected or Standard Practice: "Everyone does this, so it's really standard practice. It's even expected."
Materiality: "The impact of this action is not material. It doesn't really hurt anyone."
Locus of Responsibility: "This is not my responsibility; I'm just following orders here."
Locus of Loyalty: "I know this isn't quite fair to the customer but I don't want to hurt my reports/team/boss/company."
Isolated Incident: "This is a one-time request; you won't be asked to do it again."
A good example in accounting is the WorldCom fraud. Betty Vinson was convinced it was a one-time request. She felt the need to be loyal and a team player. She believed Scott Sullivan knew what was the correct accounting because of his higher position, and rationalized she did not develop the questionable accounting. She was just following orders.
On the other hand, Cynthia Cooper was the hero in the WorldCom fraud ordering her internal audit staff to do an exhaustive investigation into the recording of "prepaid capacity" costs, which were payments for telecommunications access on other providers' networks that should have been expensed as incurred each year but, instead, were capitalized to show a higher level of earnings. Cooper knew it was her responsibility as the vice president of internal audit to make sure the improper accounting was corrected. She knew it was material in amount and wasn't (or shouldn't have been) standard practice. She did not fall for the "locus of loyalty" argument of Scott Sullivan, the CFO.

Question 4

In his evaluation of Kidder's model, Johnson points out that:

Accepted Answer

A)   It is not easy to determine who has responsibility for solving a problem
B)   A time constraint prevents making timely decisions
C)   Decisions lead to action
D)   We cannot apply lessons learned in one dilemma to future problems

Question 5

Thorne's "Integrated Model of Ethical Decision Making" can best be described as:

Accepted Answer

A)   A depiction of a model of moral development
B)   A depiction of how the Principles in the AICPA Code of Professional Conduct influences decision making
C)   A model of the role of virtue in decision making
D)   A model of the role of moral development and virtue in decision making

Question 6

In the Gateway Hospital case, Kristen's best argument to counter the reasons and rationalizations Troy might give for requesting an extra days' reimbursement is?

Accepted Answer

A)   Her loyalty is to the hospital and not Troy.
B)   Her ethical obligation is ensuring that employees do not get reimbursed for unsubstantiated expenditures.
C)   Troy did not stay the extra day for which he is requesting reimbursement.
D)   All of the above.

Question 7

Assume your values conflict with what you are being asked to do. Under the Giving Voice to Values methodology which of the following statements reflects the thought process you might have in developing a game plan to voice your values?

Accepted Answer

A)   Use philosophical ethical theories to reason through alternative courses of action
B)   Use the ethical decision making model to evaluate the ethics of the situation
C)   Reflect on the objections that might be raised to your intended expressed views
D)   Use Systems 2 thinking to decide on a course of action

Question 8

Assume your supervisor has reduced the number of hours you charged to the client because it was over budget. You will not be paid for those hours. What would you do and why? Use ethical reasoning.

Accepted Answer

The answer of Assume your supervisor has reduced the number...

Question 9

In reference to Rest's four-component Model of Morality, which component reflects an individual's willingness to place ethical values ahead of non-ethical values that relate to self-interest?

Accepted Answer

A)   Moral Character
B)   Moral Motivation
C)   Moral Sympathy
D)   Moral Judgment

Question 10

A criticism of the Kohlberg model is that it:

Accepted Answer

A)   Suggests that people continue to change their decision priorities over time.
B)   Considers development of moral reasoning necessary to be a moral person.
C)   Makes deontological ethics superior to other ethical perspectives.
D)   Considers all complexities of decision-making and behavior.

Question 11

What is an important part in making an ethical choice, according to Kidder?

Accepted Answer

A)   Knowledge
B)   Loyalty
C)   Courage
D)   Trustworthiness

Question 12

In using the GVV framework, questions to pose for dealing with the opposing points of view include all of the following except:

Accepted Answer

A)   What is the way to appeal all parties?
B)   What is at stake for the key parties?
C)   What is your most powerful and persuasive response you need to address?
D)   What levers can you to influence others?

Question 13

Taken from Case 1-2 Giles and Regas.
Ed Giles and Susan Regas have never been happier than during the past four months since they have been seeing each other. Giles is a 35-year-old CPA and a partner in the medium-sized accounting firm of Saduga & Mihca. Regas is a 25-year-old senior accountant in the same firm. Although it is acceptable for peers to date, the firm does not permit two members of different ranks within the firm to do so. A partner should not date a senior in the firm any more than a senior should date a junior staff accountant. If such dating eventually leads to marriage, then one of the two must resign because of the conflicts of interest. Both Giles and Regas know the firm's policy on dating, and they have tried to be discreet about their relationship because they don't want to raise any suspicions.
While most of the staff seem to know about Giles and Regas, it is not common knowledge among the partners that the two of them are dating. Perhaps that is why Regas was assigned to work on the audit of CAA Industries for a second year, even though Giles is the supervising partner on the engagement.
As the audit progresses, it becomes clear to the junior staff members that Giles and Regas are spending personal time together during the workday. On one occasion, they were observed leaving for lunch together. Regas did not return to the client's office until three hours later. On another occasion, Regas seemed distracted from her work, and later that day, she received a dozen roses from Giles. A friend of Regas's who knew about the relationship, Ruth Revilo, became concerned when she happened to see the flowers and a card that accompanied them. The card was signed, "Love, Poochie." Regas had once told Revilo that it was the nickname that Regas gave to Giles.
Revilo pulls Regas aside at the end of the day and says, "We have to talk."
"What is it?" Regas asks.
"I know the flowers are from Giles," Revilo says. "Are you crazy?"
"It's none of your business," Regas responds.
Revilo goes on to explain that others on the audit engagement team are aware of the relationship between the two. Revilo cautions Regas about jeopardizing her future with the firm by getting involved in a serious dating relationship with someone of a higher rank. Regas does not respond to this comment.
Regas promises to talk to Giles and thanks Revilo for her concern. That same day, Regas telephones Giles and tells him she wants to put aside her personal relationship with him until the CAA audit is complete in two weeks. She suggests that, at the end of the two-week period, they get together and thoroughly examine the possible implications of their continued relationship. Giles reluctantly agrees.
However, Giles appears at the CAA audit a few days later. He pulls Regas aside and states, "I do want to put our relationship on hold until after this audit."
"We cannot be talking about this now! The audit team or the client could hear."
"Then let's have dinner tonight to discuss it. I won't leave until you say yes."
"Okay."
As Regas is returning to the audit room, Revilo says, "The team is uncomfortable with you and Giles having personal conversations in front of them. You promised this would stop."
"I appreciate your concerns again. I am working on it! Please give me some time and space."
"You don't have much time. Some of the team are talking of going to HR or the managing partner about the situation."
Required:
Analyze the case using GVV.
What are the main arguments Revilo (and the audit team) are trying to counter? What the reasons and rationalizations Revilo needs to address?
What is at stake for the key parties?
What levers can Revilo use to influence Regas and Giles?
What levers can Revilo use to influence Regas and Giles?
What is the most powerful and persuasive response to the reasons and rationalizations Revilo needs to address? To whom and when?

Accepted Answer

The answer of Taken from Case 1-2 Giles and Regas.
Ed...

Question 14

The ethical conflict in A Team Player can be described as:

Accepted Answer

A)   There is no conflict; Barbara and Diane both identify the deficiency.
B)   The conflict is between Diane and the rest of the audit team on whether there is a deficiency.
C)   The conflict is between Barbara and Haley, and the rest of the team as to whether or not to take the deficiency to Jessica, the audit senior.
D)   The conflict is between Barbara and the rest of the team as to whether or not to take the deficiency to Jessica, the audit senior.

Question 15

The philosophical methods of moral reasoning suggest that once we have ascertained the facts, we should ask ourselves certain questions when trying to resolve a moral issue. Which of the following is NOT one of those questions?

Accepted Answer

A)   Which course of action maximizes my net benefits?
B)   Which course of action develops moral virtues?
C)   Which course of action advances the common good?
D)   What benefits and what harms will each course of action produce and which alternative will lead to the best overall consequences?

Question 16

Which of the following is NOT one of the levers Larry Davis might use to convince Paul Jones about the rightness of his point of view in the Ace Manufacturing case discussed in the chapter?

Accepted Answer

A)   Davis can ask Paul Jones for supporting documentation to back up the coding of expenses to different accounts
B)   Davis can try to convince Paul that his actions are harmful to the company and potentially very embarrassing for his dad
C)   Davis can threaten to go to all the owners if Paul doesn't admit the mistake and take corrective action
D)   Davis can threaten to go to the SEC to protect shareholder interests if Paul agrees to pay back the amounts taken out of the company and correct the accounting

Question 17

According to Kidder, which of the following is least likely to be a step or checkpoint in ethical decision-making guidelines?

Accepted Answer

A)   Recognize there is an ethical issue
B)   Determine the actor
C)   Test for wrong issues
D)   Look for a third way

Question 18

Cognitive dissonance creates a problem that can be described as:

Accepted Answer

A)   Inconsistency between thoughts and beliefs and our intended actions
B)   Consistency between thoughts and beliefs and our intended actions
C)   Reducing the importance of the beliefs and attitudes on our actions
D)   Acquiring new information that outweighs the dissonant beliefs

Question 19

In the "Heinz and the Drug" case described in the chapter, if Heinz was reasoning at stage 5 he might decide to steal the drug based on which of the following reasoning?

Accepted Answer

A)   Heinz should steal the medicine, because he will be much happier if he saves his wife, even if he will have to serve a prison sentence.
B)   Heinz should steal the medicine, because his wife expects it.
C)   Heinz should steal the medicine, because the law prohibits exceptions.
D)   Heinz should steal the medicine, because everyone has a right to live, regardless of the law.

Question 20

The results of studies indicate that CPAs reason primarily at:

Accepted Answer

A)   Stages 1 and 2
B)   Stages 2 and 3
C)   Stages 3 and 4
D)   Stages 4 and 5

Exam 2: Cognitive Processes and Ethical Decision Making in Accounting