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By serving on the Board of Directors of various charities, Bernie Madoff was able to:

Hide his profits through the use of nonprofit organizations that were highly unlikely to be audited by the IRS

Invest funds in a nontaxable manner

Gain their trust

Utilize their tax-exempt status to his advantage

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A side agreement:

An comparatively minor agreement that forensic investigators set aside during the course of conducting a fraud examination of major improprieties

Allows a company to charge a lower selling price to attract a new customer, without existing customers discovering this reduction

A secondary agreement that overrides a primary agreement, for the purposes of committing accounting fraud

A technique used by Certified Fraud Examiners and others to deter potentially fraudulent actions

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ccording to the Fraud Triangle, which the following is one of the requisites for fraud to occur?

The existence of a clear-cut opportunity for ill-gotten financial gain

The perception of an opportunity for ill-gotten financial gain

The existence of sound justification for a person to receive greater financial rewards

Employment in a sensitive financial capacity in which peers reap greater financial rewards than the employee contemplating fraud receives

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rom the perspective of accounting, the downfall of Lehman Brothers was primarily attributable to:

The companys blatantly deceptive revenue recognition policy on complex financial products and services

Debt repayment transactions that lacked enduring economic substance

A subtle variation on cookie jar accounting

The companys undue focus on short-term earnings

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Big bath accounting describes a companys actions when it:

Optimizes the amount of Goodwill recognized upon paying a premium to acquire another company

Manages its earnings in a downward direction in the year of a major acquisition or restructuring

Cleans its books, so to speak, of improperly recorded items in anticipation of a rigorous audit examination

Manages its earnings by maintaining such a large number of discretionary items that it could fill a bathtub, so to speak

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n some jurisdictions, laborers, including accountants, are given a lien over client records. (A lien is a priority legal and economic right that is created when a client fails to pay agreed-upon fees.) This lien customarily entitles an accountant to retain possession of client records until outstanding fees are paid in full. When such a lien right arises, the AICPA Code of Professional Conduct states that:

The CPA is obligated to abide by the set of rules that is most favorable to the client

The CPA professions rules of ethical conduct are given priority over state law

The CPA is allowed to select the set of rules that are most favorable to the CPA

State law is given priority over the CPA professions rules of ethical conduct

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Preparing financial statements for an unincorporated business on a basis that does not comply with GAAP usually will result in:

A CPA being suspended from membership in the AICPA

No professional discipline as long as the noncompliance with GAAP is adequately disclosed

A professional accountant suffering adverse professional consequences if the accountant practices in a country that has adopted IFRS

A CPA being permanently disqualified from continuing membership in the AICPA

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The name of a CPA firm may:

Include the name of a founder who is deceased

Include the name of a founder who is retired, as long as he or she remains an active member of the AICPA

May include the name of a non-CPA without needing to identify the non-CPA as being, in fact, a non-CPA

Not include the name of a CPA unless that CPA is a member in good standing of the AICPA

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Which of the following acts is clearly discreditable?

Creating and posting a youtube video in which a CPA berates the IRS for incompetence

Refusing to return client records, even if a CPA is owed unpaid fees, if these records are needed by the client to prepare its tax return

Mentioning on your CPA firms website that you formerly worked for the IRS, if a reader might conclude from this statement that you are better able to negotiate favorable settlements with the IRS for clients

Commenting on how graceful an administrative assistant is when she wears high-heeled shoes

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Which of the following is most likely to be considered material even if the amounts involved are small?

Amounts that cause an upward earnings trend to become even larger

Amounts that cause reported Gross Profit to be larger than Net Income

Amounts that cause an earnings trend to swing from slightly positive to slightly negative

Amounts that mask a retailers inability to control its Cost of Goods Sold