Question 1

Which of the following is not a broad category of safeguards that mitigate or eliminate threats to independence?

Accepted Answer

A) Safeguards created by the profession,legislation,or regulation. 
B) Safeguards created to assure proper training within both the client and attest environment. 
C) Safeguards implemented by the attest client. 
D) Safeguards implemented by the firm,including policies and procedures to implement professional and regulatory requirements. 
A) Safeguards created by the profession,legislation,or regulation. 
B) Safeguards created to assure proper training within both the client and attest environment. 
C) Safeguards implemented by the attest client. 
D) Safeguards implemented by the firm,including policies and procedures to implement professional and regulatory requirements.

Question 2

In which of the following circumstances would a covered member be considered independent when performing the audit of the financial statements of a new client for the year ended December 31,20X3?

Accepted Answer

A) The covered member resigned on January 17,20X3 from the board of directors of the client,prior to accepting the new audit engagement. 
B) The covered member continues to hold an immaterial indirect financial interest in the client. 
C) The covered member continues to serve as a trustee for the client's pension plan and has the authority to make investment decisions. 
D) The covered member's spouse owns an immaterial amount of shares of common stock in the client. 
A) The covered member resigned on January 17,20X3 from the board of directors of the client,prior to accepting the new audit engagement. 
B) The covered member continues to hold an immaterial indirect financial interest in the client. 
C) The covered member continues to serve as a trustee for the client's pension plan and has the authority to make investment decisions. 
D) The covered member's spouse owns an immaterial amount of shares of common stock in the client.

Question 3

The AICPA Code of Professional Conduct would be violated if a CPA accepted a fee for services and the fee was:

Accepted Answer

A) Fixed by a public authority. 
B) Based on a price quotation submitted in competitive bidding. 
C) Based on performing work relating to judicial proceedings. 
D) Past due for over one year. 
A) Fixed by a public authority. 
B) Based on a price quotation submitted in competitive bidding. 
C) Based on performing work relating to judicial proceedings. 
D) Past due for over one year.

Question 4

Which of the following types of employees must be independent of an audit client?

Accepted Answer

A) A partner in the office that performs the engagement. 
B) Senior auditors assigned to the office that performs the audit. 
C) Managers assigned to an office that does not participate in the engagement. 
D) All firm professionals,regardless of their position. 
A) A partner in the office that performs the engagement. 
B) Senior auditors assigned to the office that performs the audit. 
C) Managers assigned to an office that does not participate in the engagement. 
D) All firm professionals,regardless of their position.

Question 5

A primary purpose for establishing a code of conduct within a professional organization is to:

Accepted Answer

A) Reduce the likelihood that members of the profession will be sued for substandard work. 
B) Ensure that all members of the profession perform at approximately the same level of competence. 
C) Demonstrate acceptance of responsibility to the interests of those served by the profession. 
D) Require members of the profession to exhibit loyalty in all matters pertaining to the affairs of their organization. 
A) Reduce the likelihood that members of the profession will be sued for substandard work. 
B) Ensure that all members of the profession perform at approximately the same level of competence. 
C) Demonstrate acceptance of responsibility to the interests of those served by the profession. 
D) Require members of the profession to exhibit loyalty in all matters pertaining to the affairs of their organization.

Question 6

Wilson Company is audited by the Denver office of Anderson CPAs.Which of the following individuals would be least likely to be considered a "covered member" by the independence standard?

Accepted Answer

A) Staff assistant on the audit. 
B) A staff assistant who prepares Wilson Company's tax returns. 
C) A tax partner in Denver who performs no attest services for Wilson Company or for any other clients. 
D) The partner in charge of Anderson CPAs (she does no work on the Wilson Company Audit). 
A) Staff assistant on the audit. 
B) A staff assistant who prepares Wilson Company's tax returns. 
C) A tax partner in Denver who performs no attest services for Wilson Company or for any other clients. 
D) The partner in charge of Anderson CPAs (she does no work on the Wilson Company Audit).

Question 7

CPAs are allowed to advertise under the Rules of the AICPA Code of Professional Conduct.
a.List the general guidelines regarding the nature of acceptable advertising.
b.Describe two specific forms of unacceptable advertising.

Accepted Answer

a.Advertising is acceptable if it is not

Question 8

Auditors are periodically punished for holding an investment in a client.This violates which ethical rule?

Accepted Answer

A) Integrity. 
B) Independence. 
C) Non compliance with GAAP. 
D) Confidentiality. 
A) Integrity. 
B) Independence. 
C) Non compliance with GAAP. 
D) Confidentiality.

Question 9

A CPA sole practitioner purchased stock in a client corporation and placed it in a trust as an educational fund for the CPA's minor child.The trust securities were not material to the CPA but were material to the child's personal net worth.Would the independence of the CPA be considered to be impaired with respect to the client?

Accepted Answer

A) Yes,because the stock would be considered a direct financial interest and,consequently,materiality is not a factor. 
B) Yes,because the stock would be considered an indirect financial interest that is material to the CPA's child. 
C) No,because the CPA would not be considered to have a direct financial interest in the client. 
D) No,because the CPA would not be considered to have a material indirect financial interest in the client. 
A) Yes,because the stock would be considered a direct financial interest and,consequently,materiality is not a factor. 
B) Yes,because the stock would be considered an indirect financial interest that is material to the CPA's child. 
C) No,because the CPA would not be considered to have a direct financial interest in the client. 
D) No,because the CPA would not be considered to have a material indirect financial interest in the client.

Question 10

When a threat to independence arises,an auditor should consider:

Accepted Answer

A) Alternative threats to a lack of independence. 
B) Available safeguards to independence. 
C) Global independence rules. 
D) Required lack of independence approaches. 
A) Alternative threats to a lack of independence. 
B) Available safeguards to independence. 
C) Global independence rules. 
D) Required lack of independence approaches.

Question 11

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 discloses information about a client because the information was subpoenaed.

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 12

A CPA may receive a commission for recommending a particular computer system to an audit client.

Accepted Answer

A) True 
 B)False

Question 13

Competence as a certified public accountant includes all of the following except:

Accepted Answer

A) Having the technical qualifications to perform an engagement. 
B) Possessing the ability to supervise and to evaluate the quality of staff work. 
C) Guaranteeing the accuracy of the work performed. 
D) Consulting others if additional technical information is needed. 
A) Having the technical qualifications to perform an engagement. 
B) Possessing the ability to supervise and to evaluate the quality of staff work. 
C) Guaranteeing the accuracy of the work performed. 
D) Consulting others if additional technical information is needed.

Question 14

CPAs can advertise the fees only for their nonattest services.

Accepted Answer

A) True 
 B)False

Question 15

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 client knowingly issues financial statements that inappropriately and materially depart from a FASB standard.

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 16

A small CPA firm provides audit services to a large local company.Almost eighty percent of the CPA firm's revenues come from this client.Which statement is most likely to be true?

Accepted Answer

A) Appearance of independence may be lacking. 
B) The small CPA firm does not have the proficiency to perform a larger audit. 
C) The situation is satisfactory if the auditor exercises due skeptical negative assurance care in the audit. 
D) The auditor should provide an "emphasis of a matter paragraph" to his/her audit report adequately disclosing this information and then it may issue an unqualified opinion. 
A) Appearance of independence may be lacking. 
B) The small CPA firm does not have the proficiency to perform a larger audit. 
C) The situation is satisfactory if the auditor exercises due skeptical negative assurance care in the audit. 
D) The auditor should provide an "emphasis of a matter paragraph" to his/her audit report adequately disclosing this information and then it may issue an unqualified opinion.

Question 17

A CPA should maintain objectivity and be free of conflicts of interest when performing:

Accepted Answer

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

Question 18

Which of the following is considered a type of threat to compliance with the Rules of the Code of Professional Conduct?

Accepted Answer

A) Self interest. 
B) Illegitimate skepticism. 
C) Lack of management participation. 
D) Irrevocability. 
A) Self interest. 
B) Illegitimate skepticism. 
C) Lack of management participation. 
D) Irrevocability.

Question 19

The AICPA allows an auditor to perform which of the following services for an audit client?

Accepted Answer

A) Performance of bookkeeping services for the client. 
B) Authorization of transactions for the client. 
C) Preparation of client source documents. 
D) Preparation and posting of journal entries without the client's approval. 
A) Performance of bookkeeping services for the client. 
B) Authorization of transactions for the client. 
C) Preparation of client source documents. 
D) Preparation and posting of journal entries without the client's approval.

Question 20

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.
-The dependent-son of a partner in a CPA firm owns ten shares of stock in an audit client.

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.

Which of the following is not a broad category of safeguards that mitigate or eliminate threats to independence?

In which of the following circumstances would a covered member be considered independent when performing the audit of the financial statements of a new client for the year ended December 31,20X3?

The AICPA Code of Professional Conduct would be violated if a CPA accepted a fee for services and the fee was:

Which of the following types of employees must be independent of an audit client?

A primary purpose for establishing a code of conduct within a professional organization is to:

Wilson Company is audited by the Denver office of Anderson CPAs.Which of the following individuals would be least likely to be considered a "covered member" by the independence standard?

CPAs are allowed to advertise under the Rules of the AICPA Code of Professional Conduct. a.List the general guidelines regarding the nature of acceptable advertising. b.Describe two specific forms of unacceptable advertising.

Auditors are periodically punished for holding an investment in a client.This violates which ethical rule?

When a threat to independence arises,an auditor should consider:

A CPA may receive a commission for recommending a particular computer system to an audit client.

Competence as a certified public accountant includes all of the following except:

CPAs can advertise the fees only for their nonattest services.

A small CPA firm provides audit services to a large local company.Almost eighty percent of the CPA firm's revenues come from this client.Which statement is most likely to be true?

A CPA should maintain objectivity and be free of conflicts of interest when performing:

Which of the following is considered a type of threat to compliance with the Rules of the Code of Professional Conduct?

The AICPA allows an auditor to perform which of the following services for an audit client?

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

Which of the following is not a broad category of safeguards that mitigate or eliminate threats to independence?

In which of the following circumstances would a covered member be considered independent when performing the audit of the financial statements of a new client for the year ended December 31,20X3?

The AICPA Code of Professional Conduct would be violated if a CPA accepted a fee for services and the fee was:

Which of the following types of employees must be independent of an audit client?

A primary purpose for establishing a code of conduct within a professional organization is to:

Wilson Company is audited by the Denver office of Anderson CPAs.Which of the following individuals would be least likely to be considered a "covered member" by the independence standard?

CPAs are allowed to advertise under the Rules of the AICPA Code of Professional Conduct. a.List the general guidelines regarding the nature of acceptable advertising. b.Describe two specific forms of unacceptable advertising.

Auditors are periodically punished for holding an investment in a client.This violates which ethical rule?

When a threat to independence arises,an auditor should consider:

A CPA may receive a commission for recommending a particular computer system to an audit client.

Competence as a certified public accountant includes all of the following except:

CPAs can advertise the fees only for their nonattest services.

A small CPA firm provides audit services to a large local company.Almost eighty percent of the CPA firm's revenues come from this client.Which statement is most likely to be true?

A CPA should maintain objectivity and be free of conflicts of interest when performing:

Which of the following is considered a type of threat to compliance with the Rules of the Code of Professional Conduct?

The AICPA allows an auditor to perform which of the following services for an audit client?

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