Adm4342 Mid-Term

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ADM 4342M
Accounting Theory
Mid-Term Exam
February 4, 2009

Instructor: B. La Rochelle, Ph.D., C.A.
Duration:2 hours
Value:25% of your final grade

Note to students: This is a closed-book exam, containing 3 questions, worth 30 marks in total. Apart from sundry writing materials (pens, pencils and the like), no examination aids are permitted

NAME: __________________________________________

STUDENT #: ________________________

Statement of Academic Integrity

The School of Management does not condone academic fraud, an act by a student that may result in a false academic evaluation of that student or of another student. Without limiting the generality of this definition, academic fraud occurs when a student commits any of the following offences: plagiarism or cheating of any kind, use of books, notes, mathematical tables, dictionaries or other study aid unless an explicit written note to the contrary appears on the quiz, to have in his/her possession cameras, radios (radios with head sets), tape recorders, pagers, cell phones, or any other communication device which has not been previously authorized in writing.

Statement to be signed by the student:

I have read the text on academic integrity and I pledge not to have committed or attempted to commit academic fraud in this exam.


Note: An exam without this signed statement will not be graded and will receive a grade of zero.

Question 1

The following is an edited article originally published in 2002 at

The Accounting Cycle: Wash, Rinse and Spin
The Disintegration of Professional Judgment
Miller's "collectivization of judgment"
By: J. Edward Ketz

April 2002 (SmartPros) — Was the current disorder of the accounting profession predicted by an Arthur Andersen partner over 25 years ago? Has a rule-based profession diminished professional judgment? ________________________________________

Herb Miller, a retired partner from Arthur Andersen and a former accounting professor, wrote an important essay entitled "Collectivization of Judgment," which first appeared in The Arthur Andersen Chronicle in January 1974 and was later reprinted in Journal of Accountancy. He begins by asserting that professional judgment lies at the heart of the accounting profession, in part because few measurements, recognitions, and aggregations of accounting data can be undertaken in an objective fashion. Accounting is essentially subjective; thus, accountants must hone their individual professional judgment to carry out the tasks they take on. Society holds accountants responsible for their decisions, whether in their roles as corporate financial officers or as external auditors, hence they need to exercise good professional judgment so they can meet their responsibilities. After noting these fundamental considerations, Miller focuses on the collectivization of judgment. He begins by stating that, "Judgment develops from the interaction of education and experience." However, "the quality of the judgment developed by the interaction of education and experience is not automatically assured." Accounting firms and professional associations such as the American Institute of CPAs engage in various activities that help increase the quality of a person's judgment. Dr. Miller then contrasts judgment developed by a profession vis-à-vis judgment cultivated by a professional firm, and he argues that the profession's activities cannot enhance the quality of personal judgment nearly as much as the accounting firm. Essentially, the accounting profession has taken the route of attempting to improve judgment by increasing the uniformity of accounting standards. Miller argues that merely creating rules under the guise of self-regulation does not enhance professional judgment by individual accountants because it actually replaces judgment with a sense of uniformity, whether uniformity...
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