Possible Exam 3

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Dec

3

Exam 3 Sample Questions

Possible Exam 3 Questions

True or false:

1. Due to insurance arrangements and the securitization of mortgage investments, many U.S. bankers did not adequately gauge the risks of subprime loans. TRUE

2. A commonly accepted theory is that the Subprime lending crisis was due the Government placing more restrictions and regulations on the investment banking industry starting in 1999. FALSE

3. For the most part, the credit ratings granted to mortgage-backed securities did not accurately reflect the true risk of the securities. TRUE

4. In hindsight, most observers agree that Enron’s problems were caused by a failure of the board of directors to exercise adequate oversight. TRUE ??

5. Although The Board of Directors is responsible for approving the hiring of auditors, they are not responsible for the financial statements. It is strictly the auditor’s responsibility to make sure the financial statements are fairly presented. FALSE

6. Many agree that Worldcom’s misstated financial statements were due to a lack of qualified accounting personnel rather than intentional manipulations by management. FALSE

8. Ninja loans are loans:

a. loans given to top tier qualified applicants

b. loans given to ninjas

c. mortgagee had no income, no job, and no assets

d. None of the above

9. True or false: No document loans attracted people with poor credit histories

a. True

b. False

10 A provision of the Dodd-Frank Act helped to create an “advance warning system” to identify and address large, complex entities before they could potentially harm the economy.

a. True

b. False

11. Some of Enron’s “questionable transactions” included

a. Overstating revenue and profits

b. Improperly enriching several executives

c. Circumventing accounting rules for the valuation of treasury shares

d. All of the above

12. Arthur Andersen acted in the following roles for Enron:

a. Auditor

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