Question 1

Pickens and Perkins,CPAs,decide to incorporate their practice of accountancy.According to the AICPA Code of Professional Conduct:

Accepted Answer

A) This is an acceptable form of organization. 
B) This is only an acceptable form of organization if the firm performs no audits. 
C) This is an acceptable form of organization if a minority interest of public shareholders is established. 
D) This is not an acceptable form of organization. 
A) This is an acceptable form of organization. 
B) This is only an acceptable form of organization if the firm performs no audits. 
C) This is an acceptable form of organization if a minority interest of public shareholders is established. 
D) This is not an acceptable form of organization. A

Question 2

Which of the following is a possible safeguard implemented by the client that might mitigate an audit independence threat?

Accepted Answer

A) CPA firm leaderships stresses the importance of complying with professional standards. 
B) Management has suitable skills to make managerial decisions. 
C) Management maintains substantial common stock investments in the company. 
D) Top management selects the auditing firm. 
A) CPA firm leaderships stresses the importance of complying with professional standards. 
B) Management has suitable skills to make managerial decisions. 
C) Management maintains substantial common stock investments in the company. 
D) Top management selects the auditing firm. B

Question 3

Independence is required of a CPA performing:

Accepted Answer

A) Audits,but not any other professional services. 
B) Attestation services,but not other professional services. 
C) Attestation and tax services,but not other professional services. 
D) All professional services. 
A) Audits,but not any other professional services. 
B) Attestation services,but not other professional services. 
C) Attestation and tax services,but not other professional services. 
D) All professional services. B

Question 4

The American Institute of Certified Public Accountants has been the primary source for ethical rules for internal auditors.

Accepted Answer

A) True 
 B)False

Question 5

An immaterial loan from a covered member to an officer of a client impairs the independence of the CPA.

Accepted Answer

A) True 
 B)False

Question 6

Contingency fee based pricing of accounting services is:

Accepted Answer

A) Always strictly prohibited in public accounting practice. 
B) Never restricted in public accounting practice. 
C) Prohibited for clients for whom attestation services are provided. 
D) Considered an act discreditable to the profession. 
A) Always strictly prohibited in public accounting practice. 
B) Never restricted in public accounting practice. 
C) Prohibited for clients for whom attestation services are provided. 
D) Considered an act discreditable to the profession.

Question 7

Which of the following is least likely to impair a CPA firm's independence with respect to a nonpublic audit client in the Chicago office of a national CPA firm?

Accepted Answer

A) A partner in the Chicago office owns an immaterial amount of stock in the client. 
B) A partner in the Milwaukee office owns 8% of the client's stock. 
C) A partner in the Chicago office,who does not work on the audit,previously served as controller for the audit client. 
D) A partner in the Pittsburgh office is also the vice president of finance for the audit client. 
A) A partner in the Chicago office owns an immaterial amount of stock in the client. 
B) A partner in the Milwaukee office owns 8% of the client's stock. 
C) A partner in the Chicago office,who does not work on the audit,previously served as controller for the audit client. 
D) A partner in the Pittsburgh office is also the vice president of finance for the audit client.

Question 8

The following is a list of circumstances that might be faced by a public accounting firm.Select the rule violated of the AICPA Code of Professional Conduct in the second column.If no rule is violated select "no violation" (this may be used once,more than once,or not at all).Rules may be used either once,or not at all.
-A CPA robs a bank.

Accepted Answer

A) Acts discreditable. 
B) Accounting principles. 
C) Integrity and objectivity. 
D) Compliance with standards. 
E) Independence.
F)Contingent fees.
G)No violation. 
A) Acts discreditable. 
B) Accounting principles. 
C) Integrity and objectivity. 
D) Compliance with standards. 
E) Independence.
F)Contingent fees.
G)No violation.

Question 9

The following is a list of circumstances that might be faced by a public accounting firm.Select the rule violated of the AICPA Code of Professional Conduct in the second column.If no rule is violated select "no violation" (this may be used once,more than once,or not at all).Rules may be used either once,or not at all.
-A CPA charges an audit fee that depends on the amount of credit the client obtains.

Accepted Answer

A) Acts discreditable. 
B) Accounting principles. 
C) Integrity and objectivity. 
D) Compliance with standards. 
E) Independence.
F)Contingent fees.
G)No violation. 
A) Acts discreditable. 
B) Accounting principles. 
C) Integrity and objectivity. 
D) Compliance with standards. 
E) Independence.
F)Contingent fees.
G)No violation.

Question 10

Which of the following is prohibited by the AICPA Code of Professional Conduct?

Accepted Answer

A) Advertising in a general newspaper to attract clients. 
B) Auditing a competitor of the current audit client. 
C) Charging and accepting a contingent fee for a financial statement review engagement. 
D) Purchasing a product and reselling that product at a higher price. 
A) Advertising in a general newspaper to attract clients. 
B) Auditing a competitor of the current audit client. 
C) Charging and accepting a contingent fee for a financial statement review engagement. 
D) Purchasing a product and reselling that product at a higher price.

Question 11

A client company has not paid its 20X6 audit fees.According to the AICPA Code of Professional Conduct,in order for the auditor to be considered independent with respect to the 20X7 audit,the 20X6 audit fees must be paid before the:

Accepted Answer

A) 20X6 report is issued. 
B) 20X7 fieldwork is started. 
C) 20X7 report is issued. 
D) 20X8 fieldwork is started. 
A) 20X6 report is issued. 
B) 20X7 fieldwork is started. 
C) 20X7 report is issued. 
D) 20X8 fieldwork is started.

Question 12

CPAs may advertise having special expertise other than accounting,auditing,and tax.

Accepted Answer

A) True 
 B)False

Question 13

The following is a list of circumstances that might be faced by a public accounting firm.Select the rule violated of the AICPA Code of Professional Conduct in the second column.If no rule is violated select "no violation" (this may be used once,more than once,or not at all).Rules may be used either once,or not at all.
-A CPA owns 100 shares in a consulting client for which the firm provides no attest services.

Accepted Answer

A) Acts discreditable. 
B) Accounting principles. 
C) Integrity and objectivity. 
D) Compliance with standards. 
E) Independence.
F)Contingent fees.
G)No violation. 
A) Acts discreditable. 
B) Accounting principles. 
C) Integrity and objectivity. 
D) Compliance with standards. 
E) Independence.
F)Contingent fees.
G)No violation.

Question 14

The following is a list of circumstances that might be faced by a public accounting firm.Select the rule violated of the AICPA Code of Professional Conduct in the second column.If no rule is violated select "no violation" (this may be used once,more than once,or not at all).Rules may be used either once,or not at all.
-In preparing a tax return,a CPA takes a deduction at the client's request that the CPA believes is not justified.

Accepted Answer

A) Acts discreditable. 
B) Accounting principles. 
C) Integrity and objectivity. 
D) Compliance with standards. 
E) Independence.
F)Contingent fees.
G)No violation. 
A) Acts discreditable. 
B) Accounting principles. 
C) Integrity and objectivity. 
D) Compliance with standards. 
E) Independence.
F)Contingent fees.
G)No violation.

Question 15

The AICPA Code of Professional Conduct will ordinarily be considered to have been violated when the CPA represents that specific consulting services will be performed for a stated fee and it is apparent at the time of the representation that the:

Accepted Answer

A) There was a referral fee that was not disclosed to the client. 
B) Actual fee would be substantially lower than the fees charged by other CPAs for comparable services. 
C) Fee was a competitive bid. 
D) CPA would not be independent. 
A) There was a referral fee that was not disclosed to the client. 
B) Actual fee would be substantially lower than the fees charged by other CPAs for comparable services. 
C) Fee was a competitive bid. 
D) CPA would not be independent.

Question 16

The concept of materiality would be least important to an auditor when considering the:

Accepted Answer

A) Total value of the account being audited. 
B) Adequacy of disclosure of a client's illegal act. 
C) Discovery of weaknesses in a client's internal control. 
D) Effects of a direct financial interest in the client upon the CPA's independence. 
A) Total value of the account being audited. 
B) Adequacy of disclosure of a client's illegal act. 
C) Discovery of weaknesses in a client's internal control. 
D) Effects of a direct financial interest in the client upon the CPA's independence.

Question 17

While performing an audit of a public company,the auditors discovered material illegal acts and resigned due to the client's refusal to disclose them.The auditors' reason for resignation should be disclosed through:

$\begin{array} { lc c } 
  & \text { CPA Direct Corrrrurucation With } &   \
\text { Item} & \text {Shareholders } & \text { The Process of Filing } \
 \text { A } & \text { Yes } & \text { Yes } \ \text { B. } & \text { No } & \text { Yes } \ \text { C. } & \text { Yes } & \text { No } \ \text { D. } & \text { No } & \text { No } \end{array}$

Accepted Answer

A) Option A 
B) Option B 
C) Option C 
D) Option D 
A) Option A 
B) Option B 
C) Option C 
D) Option D

Question 18

The following is a list of circumstances that might be faced by a public accounting firm.Select the rule violated of the AICPA Code of Professional Conduct in the second column.If no rule is violated select "no violation" (this may be used once,more than once,or not at all).Rules may be used either once,or not at all.
-A CPA does not follow generally accepted auditing standards in the audit of a nonpublic US company.

Accepted Answer

A) Acts discreditable. 
B) Accounting principles. 
C) Integrity and objectivity. 
D) Compliance with standards. 
E) Independence.
F)Contingent fees.
G)No violation. 
A) Acts discreditable. 
B) Accounting principles. 
C) Integrity and objectivity. 
D) Compliance with standards. 
E) Independence.
F)Contingent fees.
G)No violation.

Question 19

The AICPA Conceptual Framework for Independence requires that CPAs evaluate whether a particular threat would lead which type of person to conclude that an unacceptable risk of non-independence exists?

Accepted Answer

A) AICPA ethics examiner. 
B) Peer. 
C) PCAOB inspector. 
D) Reasonably informed third party. 
A) AICPA ethics examiner. 
B) Peer. 
C) PCAOB inspector. 
D) Reasonably informed third party.

Question 20

Which of the following acts by a CPA would notnecessarily be considered an act discreditable to the profession under the AICPA Code of Professional Conduct?

Accepted Answer

A) Prohibiting a client's new CPA firm from reviewing the audit working papers after the client has requested the CPA to do so. 
B) Engaging in discriminatory employment practices. 
C) Robbing a convenience store. 
D) Knowingly signing a false tax return. 
A) Prohibiting a client's new CPA firm from reviewing the audit working papers after the client has requested the CPA to do so. 
B) Engaging in discriminatory employment practices. 
C) Robbing a convenience store. 
D) Knowingly signing a false tax return.

Pickens and Perkins,CPAs,decide to incorporate their practice of accountancy.According to the AICPA Code of Professional Conduct:

Which of the following is a possible safeguard implemented by the client that might mitigate an audit independence threat?

Independence is required of a CPA performing:

The American Institute of Certified Public Accountants has been the primary source for ethical rules for internal auditors.

An immaterial loan from a covered member to an officer of a client impairs the independence of the CPA.

Contingency fee based pricing of accounting services is:

Which of the following is least likely to impair a CPA firm's independence with respect to a nonpublic audit client in the Chicago office of a national CPA firm?

Which of the following is prohibited by the AICPA Code of Professional Conduct?

A client company has not paid its 20X6 audit fees.According to the AICPA Code of Professional Conduct,in order for the auditor to be considered independent with respect to the 20X7 audit,the 20X6 audit fees must be paid before the:

CPAs may advertise having special expertise other than accounting,auditing,and tax.

The AICPA Code of Professional Conduct will ordinarily be considered to have been violated when the CPA represents that specific consulting services will be performed for a stated fee and it is apparent at the time of the representation that the:

The concept of materiality would be least important to an auditor when considering the:

The AICPA Conceptual Framework for Independence requires that CPAs evaluate whether a particular threat would lead which type of person to conclude that an unacceptable risk of non-independence exists?

Which of the following acts by a CPA would notnecessarily be considered an act discreditable to the profession under the AICPA Code of Professional Conduct?

The Role of the Public Accountant in the American Economy

Professional Standards

Legal Liability of Cpas

Audit Evidence and Documentation

Audit Planning, understanding the Client, assessing Risks, and Responding

Internal Control

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Property,plant,and Equipment: Depreciation and Depletion

Accounts Payable and Other Liabilities

Debt and Equity Capital

Auditing Operations and Completing the Audit

Auditors Reports

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, operational, and Compliance Auditing

Filters

Exam 3: Professional Ethics

Pickens and Perkins,CPAs,decide to incorporate their practice of accountancy.According to the AICPA Code of Professional Conduct:

Which of the following is a possible safeguard implemented by the client that might mitigate an audit independence threat?

Independence is required of a CPA performing:

The American Institute of Certified Public Accountants has been the primary source for ethical rules for internal auditors.

An immaterial loan from a covered member to an officer of a client impairs the independence of the CPA.

Contingency fee based pricing of accounting services is:

Which of the following is least likely to impair a CPA firm's independence with respect to a nonpublic audit client in the Chicago office of a national CPA firm?

Which of the following is prohibited by the AICPA Code of Professional Conduct?

A client company has not paid its 20X6 audit fees.According to the AICPA Code of Professional Conduct,in order for the auditor to be considered independent with respect to the 20X7 audit,the 20X6 audit fees must be paid before the:

CPAs may advertise having special expertise other than accounting,auditing,and tax.

The AICPA Code of Professional Conduct will ordinarily be considered to have been violated when the CPA represents that specific consulting services will be performed for a stated fee and it is apparent at the time of the representation that the:

The concept of materiality would be least important to an auditor when considering the:

The AICPA Conceptual Framework for Independence requires that CPAs evaluate whether a particular threat would lead which type of person to conclude that an unacceptable risk of non-independence exists?

Which of the following acts by a CPA would notnecessarily be considered an act discreditable to the profession under the AICPA Code of Professional Conduct?

The Role of the Public Accountant in the American Economy

Professional Standards

Legal Liability of Cpas

Audit Evidence and Documentation

Audit Planning, understanding the Client, assessing Risks, and Responding

Internal Control

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Property,plant,and Equipment: Depreciation and Depletion

Accounts Payable and Other Liabilities

Debt and Equity Capital

Auditing Operations and Completing the Audit

Auditors Reports

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, operational, and Compliance Auditing

Filters