Question 1

Which of the following fee arrangements is not a violation of the AICPA's Code of Professional Conduct?

Accepted Answer

A) basing fees as an expert witness on the amount awarded to the plaintiff,even though the CPA performs a compilation for client use 
B) basing consulting fees on a percentage of a bond issue,even though the CPA performs a review of the client's financial statements 
C) basing fees for a tax service on the amount of the refund that the client will receive 
D) basing consulting fees on a percentage of a bond issue,even though the CPA performs an audit of the client's financial statements 
A) basing fees as an expert witness on the amount awarded to the plaintiff,even though the CPA performs a compilation for client use 
B) basing consulting fees on a percentage of a bond issue,even though the CPA performs a review of the client's financial statements 
C) basing fees for a tax service on the amount of the refund that the client will receive 
D) basing consulting fees on a percentage of a bond issue,even though the CPA performs an audit of the client's financial statements

Question 2

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

Accepted Answer

A) A partner in the Oklahoma City office owns an immaterial amount of stock in the client. 
B) A partner in the Jersey City office owns 25% of the client's stock. 
C) A partner in the Oklahoma City office,who does not work on the audit engagement,previously served as controller for the audit client. 
D) A partner in the Chicago office previously served as vice president of finance for the audit client. 
A) A partner in the Oklahoma City office owns an immaterial amount of stock in the client. 
B) A partner in the Jersey City office owns 25% of the client's stock. 
C) A partner in the Oklahoma City office,who does not work on the audit engagement,previously served as controller for the audit client. 
D) A partner in the Chicago office previously served as vice president of finance for the audit client.

Question 3

Expulsion from the AICPA for failing to follow the rules of conduct is,by itself,sufficient to prevent a CPA from practicing public accounting.

Accepted Answer

A) True 
 B)False

Question 4

Most people define unethical behavior as conduct that differs from what they believe is appropriate given the circumstances.

Accepted Answer

A) True 
 B)False

Question 5

Under the AICPA's Code of Professional Conduct,CPAs are prohibited from offering audit clients a discount for referring a prospective client even if they are disclosed.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following instances would impair a CPA's independence when they have been retained as the auditor?
I. A charitable organization where the CPA serves as treasurer
II. A municipality where the CPA owns $250,000 of the $25 million outstanding bonds of the municipality
III. A company that the CPA's investment club owns a 10% investment interest

Accepted Answer

A) I and II 
B) I and III 
C) II and III 
D) I,II,and III 
A) I and II 
B) I and III 
C) II and III 
D) I,II,and III

Question 7

Discuss the Confidential Client Information Rule,including the four exceptions to the rule.

Accepted Answer

The Confidential Client Information Rule

Question 8

An advantage of the principles of professional conduct in the Code of Professional Conduct is that they are more easily enforced than are the specific rules of conduct.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following loans would be prohibited between a CPA firm or its members and an audit client?

Accepted Answer

A) automobile loans 
B) loans fully collateralized by cash deposits at the same financial institution 
C) new home mortgage loans 
D) unpaid credit card balances not exceeding $10,000 in total 
A) automobile loans 
B) loans fully collateralized by cash deposits at the same financial institution 
C) new home mortgage loans 
D) unpaid credit card balances not exceeding $10,000 in total

Question 10

Which of the following is not one of the major parts of the AICPA's Code of Professional Conduct?

Accepted Answer

A) principles 
B) rules 
C) interpretations 
D) definitions 
A) principles 
B) rules 
C) interpretations 
D) definitions

Question 11

Don Crosby,a partner in a national CPA firm,has just learned that his self-sufficient daughter has accepted a position as the CFO of Sunglasses,Inc.,a current client within the office with which he is employed.Explain the independence ramifications on 1)Don's independence,2)his office,and 3)the firm's independence.

Accepted Answer

1.Don's non-dependent daughter is consid

Question 12

The following situations involve a possible violation of the AICPA's Code of Professional Conduct.For each situation,(1)determine the applicable rule from the Code,(2)decide whether or not the Code has been violated,and (3)briefly explain how the situation violates (or does not violate)the Code.
a.In 2014,Freeman and Johnson,both CPAs,decided to form a CPA practice.In 2016,Freeman and Johnson approached Bill Delaney,a physician and medical expert,and asked him to assist them with their growing medical consulting practice.Delaney agreed,but only after he was given an ownership interest in the firm.Delaney does not intend to quit his private medical practice.
Rule: ________ Violation?
 Yes No

Accepted Answer

a.Violation of the rule on Form of Organ

Question 13

Each state also has rules of conduct that are required for licensing by the state.

Accepted Answer

A) True 
 B)False

Question 14

Under the AICPA independence rules,independence can be considered impaired when

Accepted Answer

A) billed fees remain unpaid for professional services for more than ninety days. 
B) a client in bankruptcy has unpaid fees for more than one year. 
C) there is litigation by the client related to the auditor's tax or other nonaudit services for an immaterial amount. 
D) there is a lawsuit by the client claiming deficiencies in the previous year's audit. 
A) billed fees remain unpaid for professional services for more than ninety days. 
B) a client in bankruptcy has unpaid fees for more than one year. 
C) there is litigation by the client related to the auditor's tax or other nonaudit services for an immaterial amount. 
D) there is a lawsuit by the client claiming deficiencies in the previous year's audit.

Question 15

A CPA firm may practice public accounting only in a form of organization permitted by federal law or regulation.

Accepted Answer

A) True 
 B)False

Question 16

The Sarbanes-Oxley Act requires which employees of an accounting firm to rotate off the engagement every five years?

Accepted Answer

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

Question 17

If the board of accountancy in the state in which a CPA firm is licensed has rules that are different than the AICPA's rules,the CPA firm must follow

Accepted Answer

A) whichever rules are less restrictive. 
B) whichever rules are more restrictive. 
C) the rules of the AICPA. 
D) the rules of the state's board of accountancy. 
A) whichever rules are less restrictive. 
B) whichever rules are more restrictive. 
C) the rules of the AICPA. 
D) the rules of the state's board of accountancy.

Question 18

The following situations involve a possible violation of the AICPA's Code of Professional Conduct.For each situation,(1)determine the applicable rule from the Code,(2)decide whether or not the Code has been violated,and (3)briefly explain how the situation violates (or does not violate)the Code.
a.Howard Cunningham & Co.,CPAs,designates its firm as "Members of the American Institute of Certified Public Accountants." All of the partners of the firm are CPAs.However,one of the partners has recently chosen to allow her membership to lapse because of personal reasons.
Rule: ________ Violation?
 Yes No

Accepted Answer

a.Violation of the Form of Organization

Question 19

Interpretations to the Rules of Conduct permit a CPA firm to do both bookkeeping and auditing for the same private company client if three criteria are met.Which of the following is not one of those criteria?

Accepted Answer

A) The client must accept full responsibility for the financial statements. 
B) The client is required to file an annual report,including audited financial statements,with the Securities and Exchange Commission. 
C) The CPA must not assume the role of employee or of manager. 
D) The CPA must follow applicable auditing standards. 
A) The client must accept full responsibility for the financial statements. 
B) The client is required to file an annual report,including audited financial statements,with the Securities and Exchange Commission. 
C) The CPA must not assume the role of employee or of manager. 
D) The CPA must follow applicable auditing standards.

Question 20

Which of the following statements is True with respect to audit committees?

Accepted Answer

A) Audit committee members should consist of members of the company's management. 
B) All members of the audit committee must be financial experts. 
C) The audit committee of a public company is responsible for hiring the auditor. 
D) Audit committees must have a minimum of ten members. 
A) Audit committee members should consist of members of the company's management. 
B) All members of the audit committee must be financial experts. 
C) The audit committee of a public company is responsible for hiring the auditor. 
D) Audit committees must have a minimum of ten members.

Exam 4: Professional Ethics

Which of the following fee arrangements is not a violation of the AICPA's Code of Professional Conduct?

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

Expulsion from the AICPA for failing to follow the rules of conduct is,by itself,sufficient to prevent a CPA from practicing public accounting.

Most people define unethical behavior as conduct that differs from what they believe is appropriate given the circumstances.

Under the AICPA's Code of Professional Conduct,CPAs are prohibited from offering audit clients a discount for referring a prospective client even if they are disclosed.

Discuss the Confidential Client Information Rule,including the four exceptions to the rule.

An advantage of the principles of professional conduct in the Code of Professional Conduct is that they are more easily enforced than are the specific rules of conduct.

Which of the following loans would be prohibited between a CPA firm or its members and an audit client?

Which of the following is not one of the major parts of the AICPA's Code of Professional Conduct?

Each state also has rules of conduct that are required for licensing by the state.

Under the AICPA independence rules,independence can be considered impaired when

A CPA firm may practice public accounting only in a form of organization permitted by federal law or regulation.

The Sarbanes-Oxley Act requires which employees of an accounting firm to rotate off the engagement every five years?

If the board of accountancy in the state in which a CPA firm is licensed has rules that are different than the AICPA's rules,the CPA firm must follow

Interpretations to the Rules of Conduct permit a CPA firm to do both bookkeeping and auditing for the same private company client if three criteria are met.Which of the following is not one of those criteria?

Which of the following statements is True with respect to audit committees?

The Demand for Audit and Other Assurance Services

The Cpa Profession

Audit Reports

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Fraud Auditing

Internal Control and Coso Framework

Assessing Control Risk and Reporting on Internal Controls

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls,

Completing the Tests in the Acquisition and Payment Cycle:

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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