Question 1

Who distinguished between earnings manipulation and earnings management?

Accepted Answer

A) Hopwood et al. 
B) Thomas 
C) Arthur Levitt 
D) Belverd Needles 
E) McKee 
A) Hopwood et al. 
B) Thomas 
C) Arthur Levitt 
D) Belverd Needles 
E) McKee

Question 2

The best definition of a financial restatement is:

Accepted Answer

A) A company,either voluntarily or under prompting by its auditors or regulators,revises its public financial information that was previously reported 
B) A company,either voluntarily or under prompting by its auditors or regulators,revises its public financial information for the current period 
C) An adjustment of financial information due to an error correction 
D) All are part of the definition 
A) A company,either voluntarily or under prompting by its auditors or regulators,revises its public financial information that was previously reported 
B) A company,either voluntarily or under prompting by its auditors or regulators,revises its public financial information for the current period 
C) An adjustment of financial information due to an error correction 
D) All are part of the definition

Question 3

Vorhies identities four perspectives to help CPAs identify key internal control exceptions under the Sarbanes Oxley Act (SOX) including:

Accepted Answer

A) An internal control deficiency caused by accounting manipulations 
B) A large variance in an accounting estimate compared with the actual determined amount 
C) A misstatement that changes a loss into income or vice versa 
D) All were identified 
A) An internal control deficiency caused by accounting manipulations 
B) A large variance in an accounting estimate compared with the actual determined amount 
C) A misstatement that changes a loss into income or vice versa 
D) All were identified

Question 4

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

Accepted Answer

A) Dechow and Skinner 
B) Healy and Wahlen 
C) Schipper 
D) Thomas 
E) McKee 
A) Dechow and Skinner 
B) Healy and Wahlen 
C) Schipper 
D) Thomas 
E) McKee

Question 5

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

Accepted Answer

A) Fastow developed the concept of buying up oil and gas companies to establish SPEs 
B) Fastow worked to structure ventures that met the conditions under GAAP to keep the partnership activities off Enron's books and on the separate books of the partnership 
C) Fastow created SPEs that borrowed money from banks and transferred it to Enron in a sale of an operating asset no longer need by Enron 
D) The SPE created by Fastow enabled Enron to keep debt off its books while benefiting from transfer and use of the cash borrowed by the SPE 
A) Fastow developed the concept of buying up oil and gas companies to establish SPEs 
B) Fastow worked to structure ventures that met the conditions under GAAP to keep the partnership activities off Enron's books and on the separate books of the partnership 
C) Fastow created SPEs that borrowed money from banks and transferred it to Enron in a sale of an operating asset no longer need by Enron 
D) The SPE created by Fastow enabled Enron to keep debt off its books while benefiting from transfer and use of the cash borrowed by the SPE

Question 6

Which of the following was NOT one of the schemes used by Beazer Homes to manipulate its earnings?

Accepted Answer

A) Improper recording of revenue on sale-leaseback transactions 
B) Fraudulently increased land inventory expense accounts to reduce earnings 
C) Over-reserving of house cost-to-complete expenses to increase reported earnings in earlier periods 
D) Recording revenue from roundtrip transactions prematurely 
A) Improper recording of revenue on sale-leaseback transactions 
B) Fraudulently increased land inventory expense accounts to reduce earnings 
C) Over-reserving of house cost-to-complete expenses to increase reported earnings in earlier periods 
D) Recording revenue from roundtrip transactions prematurely

Question 7

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

Accepted Answer

A) A misstatement that changes a loss into income or vice versa 
B) The existence of statutory or regulator reporting requirements that affect materiality thresholds 
C) The potential effect of the misstatement on trends,especially trends in profitability 
D) The use of simplistic numerical thresholds and rules of thumb 
A) A misstatement that changes a loss into income or vice versa 
B) The existence of statutory or regulator reporting requirements that affect materiality thresholds 
C) The potential effect of the misstatement on trends,especially trends in profitability 
D) The use of simplistic numerical thresholds and rules of thumb

Question 8

In the CVS acquisition of Longs Drug,the SEC concluded that the purchase price accounting (PPA) was not in compliance with GAAP because:

Accepted Answer

A) The amount did not reflect current use of Longs personal property at the acquisition date 
B) CVS used an overly-aggressive technique to value Longs 
C) CVS did not account for its use of Long's assets to generate revenue after the acquisition date 
D) All of the above 
A) The amount did not reflect current use of Longs personal property at the acquisition date 
B) CVS used an overly-aggressive technique to value Longs 
C) CVS did not account for its use of Long's assets to generate revenue after the acquisition date 
D) All of the above

Question 9

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

Accepted Answer

A) Recording sales that lack economic substance 
B) Boosting profits by selling undervalued assets 
C) Including investment income or gains as part of revenue 
D) Including investment income or gains as a reduction in operating expenses 
A) Recording sales that lack economic substance 
B) Boosting profits by selling undervalued assets 
C) Including investment income or gains as part of revenue 
D) Including investment income or gains as a reduction in operating expenses

Who distinguished between earnings manipulation and earnings management?

The best definition of a financial restatement is:

Vorhies identities four perspectives to help CPAs identify key internal control exceptions under the Sarbanes Oxley Act (SOX) including:

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

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

Which of the following was NOT one of the schemes used by Beazer Homes to manipulate its earnings?

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

In the CVS acquisition of Longs Drug,the SEC concluded that the purchase price accounting (PPA) was not in compliance with GAAP because:

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

Ethical Reasoning: Implications for Accounting

Cognitive Processes and Ethical Decision Making in Accounting

Organizational Ethics and Corporate Governance

Ethics and Professional Judgment in Accounting

Fraud in Financial Statements and Auditor Responsibilities

Legal, Regulatory, and Professional Obligations of Auditors

Ethical Leadership and Decision-Making in Accounting

Filters

Exam 7: Earnings Management

Who distinguished between earnings manipulation and earnings management?

The best definition of a financial restatement is:

Vorhies identities four perspectives to help CPAs identify key internal control exceptions under the Sarbanes Oxley Act (SOX) including:

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

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

Which of the following was NOT one of the schemes used by Beazer Homes to manipulate its earnings?

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

In the CVS acquisition of Longs Drug,the SEC concluded that the purchase price accounting (PPA) was not in compliance with GAAP because:

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

Ethical Reasoning: Implications for Accounting

Cognitive Processes and Ethical Decision Making in Accounting

Organizational Ethics and Corporate Governance

Ethics and Professional Judgment in Accounting

Fraud in Financial Statements and Auditor Responsibilities

Legal, Regulatory, and Professional Obligations of Auditors

Ethical Leadership and Decision-Making in Accounting

Filters