Bigger than Enron Assignment:

Please print this document. Answer the multiple choice questions and bring it to class with you on
Wednesday.

1. Arthur Levitt, the former chair of the SEC, referred to the zeal of companies to project greater
earnings from year-to-year as:

a. leap frogging

b. one upsmanship

c. beyond the brink

d. the culture of gamesmanship

2. As discussed in the video, Arthur Andersen had audited several companies that engaged in massive
frauds. Which of the following were audit clients of Andersen?

a. Enron, Sunbean, and Waste Management

b. Enron, Sunbean, and Chrysler

c. Ford, Chrysler and Enron

d. Lucent, Enron and Waste Management

3. When the FASB proposed to record stock options as an expense:

a. Companies across the board were very enthusiastic about the change because they viewed it as an
improvement in GAAP.

b. In general, newer, high-tech companies resisted the proposal, but older, more established
companies generally supported the move.

c. Many companies, including both high-tech companies and more established companies, fought the
move.

d. More established companies fought the move, but high-tech companies supported it.
4. Senator Joe Lieberman indicated that he opposed recording stock options as an expense because:

a. Stock options increase in value, and therefore, should not be recorded as an expense.

b. It was too difficult to measure the value of the stock options at the date of grant.

c. Stock options are immaterial to the financial statements of most companies.

d. Stock options are rarely used by companies.

5. Sunbean engaged in all of the following, EXCEPT:

a. Sales channel stuffing

b. Using Cookie Jar Reserves

c. Recognizing excessive losses when the new CEO was hired

d. Recording advertising expenditures as fixed assets

6. In the video, it was mentioned that audit documentation was destroyed on which two Andersen
audits?

a. Enron and Waste Management

b. Enron and Sunbean

c. Enron and Chrysler

d. Sunbean and Waste Management

7. John Byrne, a reporter for Business Week, indicated that when it comes to policing companies and
protecting the investing public:

a. The SEC is outmanned and outgunned.

b. The SEC has been very effective.

c. The SEC is incompetent.

d. The SEC has used a 'hands off' approach to policing companies.

8. What happened when Congress voted to pass securities litigation reform?

a. The bill was fillibustered.

b. It was signed into law by President Clinton.

c. President Clinton vetoed the bill, and congress overrode the veto.

d. The bill died because President Clinton vetoed it, and congress was not able to override his veto.

9. When the SEC proposed limiting consulting by CPA firms, what occurred?

a. Members of Congress pressured the SEC to 'back down' from this proposal (ie. to withdraw it).

b. It was passed by Congress and signed into law by President Clinton.

c. The CPA firms were equally split with many firms endorsing the proposal and many firms opposing it.

d. CPAs enthusiastically endorsed the proposal.

10. What happened when Enron demanded that Carl Bass, the Arthur Andersen technical group partner
assigned to oversee the Enron account, be removed from the Enron account?

a. Joseph Berodino, the head partner at Arthur Andersen, stood by Bass and refused to remove him
from the account.

b. Bass was forced to resign from Arthur Andersen.

c. Bass accepted a job offer from Enron.

d. Andersen removed him from the audit.