ACCT Ethic Midterm Examination

Summer Semester, 2017

Carefully read the questions below and provide your written response. 

Exam structure: 10 essay questions worth 10 points each.

Please note this examination is to be completed by each student individually.  Sharing answers and or posting this exam on any Website for any purpose is a violation of school Policy 150.25.  All professors are required to turn students in to the Dean’s office if they suspect academic dishonesty.

Be sure your answers are well reasoned, conclusions are well supported, and your writing is well organized with few, if any, spelling/grammatical errors. Use spell and grammar check.  Remember the 3-C’s of writing: correct, clear, and concise.   All professors have access to TurnItIn.com and may submit student papers to test for plagiarism.

You must submit your answers in the appropriate LEO Assignment folder on or before the due date.  See the course schedule in the syllabus for the due date.  All assignments are due by 11:59 PM Eastern time.

Questions:

1.  A shift toward greater accountability and professional responsibility has taken place over the past twenty years.  In your own words, discuss some of the issues that may have caused this shift in the accounting profession.

2.  In your own words, discuss your understanding of the differences among the terms, ethics, morals, and laws.

3.  Define professional skepticism and explain how it is helpful for accountants, particularly auditors and tax preparers.

4.  In your own words, discuss how the AICPA’s Code of Professional Conduct assists accountants’ in making ethical professional judgments.  Be specific.

5.  In your own words, discuss how responsibility, accountability, fairness, and transparency help to create ethical corporate governance systems.

6. Select any two provisions of the AICPA Code of Professional Conduct and in your own words, explain how they contribute to maintaining high ethical standards in the accounting profession.

7. In your own words, discuss the difference between ethical rights and obligations in the accounting profession.

8. Supreme Justice Warren Burger, wrote the following opinion in the case: United States v. Arthur Young & Co: “By certifying the public reports that collectively depict a corporation’s financial status, the independent auditor assumes a public responsibility transcending any employment responsibility with the client.  The independent public accountant performing this special function owes ultimate allegiance to the corporation’s creditors’ and stockholders, as well as to the investing public.  This “public watchdog” function demands that the accountant maintain total independence from the client at all times and requires complete fidelity to the public trust.”

~ How does the auditor’s public responsibility transcend his/her employment responsibility with the client?

9. While you are engaged in the audit, the client asks if you would like to be the company’s guest for a weekend in New York City.  Discuss specific professional codes of ethics that specifically provide guidance on how the auditor should respond.

10. In your own words, discuss ethical relativism from an objective perspective.  In addition, then state and justify your opinion of the theory of relativism.

 

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Storm Tools has formed a new business unit to produce battery-powered drills.Thebusiness unit was formed by the transfer of selected assets and obligations from theparent company.The unit’s initial balance sheet on January 1 contained cash($500,000),plantandequipment($2,500,000),notespayabletotheparent($1,000,000), and residual equity ($2,000,000).The business unit is expected to repay the note at $50,000 per month, plus allaccrued interest at 1/2% per month.Payments are made on the last day of eachmonth.The unit is scheduled to produce 25,000 drills during January, with an increase of2,500 units per month for the next three months.Each drill requires $40 of rawmaterials.Raw materials are purchased on account, and paid in the month followingthe month of purchase.The plant manager has established a goal to end each monthwith raw materials on hand, suFcient to meet 25% of the following month’s plannedproduction.The unit expects to sell 20,000 drills in January; 25,000 in ±ebruary, 25,000 in March,and 30,000 per month thereafter.The selling price is $100 per drill.Half of the drillswill be sold for cash through a website. The others will be sold to retailers on account,who pay 40% in the month of purchase, and 60% in the following month.Uncollectible accounts are not material.Each drill requires 20 minutes of direct labor to assemble.Labor rates are $24 perhour.Variable factory overhead is applied at $9 per direct labor hour.The ²xedfactory overhead is $25,000 per month; 60% of this amount is related to depreciationof plant and equipment.With the exception of depreciation, all overhead is funded asincurred.Selling, general, and administrative costs are funded in cash as incurred, and consistof ²xed components (salaries, $100,000; oFce, $40,000; and advertising, $75,000)and variable components (15% of sales).Prepare a monthly comprehensive budget plan for Storm’s new business unit forJanuary through March.The plan should include the (a) sales and cash collectionsbudget, (b) production budget, (c) direct materials purchases and payments budget,(d) direct labor budget, (e) factory overhead budget, (f) ending ²nished goods budget(assume total factory overhead is applied to production at the rate of $11.73 perdirect labor hour), (g) SG&A budget, and (h) cash bud

 

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