Question 1

An example of an "indirect financial interest in a client" would be

Accepted Answer

A) ownership of less than 10% of the client's stock by the covered members spouse. 
B) an ownership of less than 10% of the client's stock by a staff member who is not involved in the audit. 
C) the covered member's ownership of a mutual fund that has an investment in the client. 
D) All of the above are examples of an indirect financial interest in a client. 
A) ownership of less than 10% of the client's stock by the covered members spouse. 
B) an ownership of less than 10% of the client's stock by a staff member who is not involved in the audit. 
C) the covered member's ownership of a mutual fund that has an investment in the client. 
D) All of the above are examples of an indirect financial interest in a client.

Question 2

A public company may obtain internal audit services from their financial statement auditor if it is approved by the company's audit committee.

Accepted Answer

A) True 
 B)False

Question 3

Interpretations of the independence rule of the AICPA Code prohibit covered members from owning any stock or other direct investment in audit clients.Covered members would include which of the following?

Accepted Answer

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

Question 4

When CPAs are able to maintain their actual independence,it is referred to as independence in

Accepted Answer

A) conduct. 
B) appearance. 
C) fact. 
D) total. 
A) conduct. 
B) appearance. 
C) fact. 
D) total.

Question 5

The financial interests of a CPA's family members can affect the CPA's independence.Which of the following parties would not be included as a "direct financial interest" of the CPA?

Accepted Answer

A) spouse 
B) dependent child 
C) relative supported by the CPA 
D) sibling living in the same city as the CPA 
A) spouse 
B) dependent child 
C) relative supported by the CPA 
D) sibling living in the same city as the CPA

Question 6

Adverse interest is the threat that a member will not act with objectivity because their interests are opposed to the client's interests.

Accepted Answer

A) True 
 B)False

Question 7

The AICPA Code of Conduct includes a conceptual framework approach for the member to evaluate threats to compliance with the Code.List the three steps necessary to evaluate the threats.

Accepted Answer

The three steps to evaluate th

Question 8

A CPA firm may charge a contingent fee for

Accepted Answer

A) an audit. 
B) consulting services for a client for which they do not perform any attestation services. 
C) the preparation of an original tax return for a client for which they do not perform any attestation services. 
D) the preparation of an amended tax return. 
A) an audit. 
B) consulting services for a client for which they do not perform any attestation services. 
C) the preparation of an original tax return for a client for which they do not perform any attestation services. 
D) the preparation of an amended tax return.

Question 9

Which of the following services are allowed by the SEC whenever a CPA also audits the company?

Accepted Answer

A) internal audit outsourcing 
B) legal services unrelated to the audit 
C) appraisal or valuation services 
D) services related to assessing the effectiveness of internal control over financial reporting 
A) internal audit outsourcing 
B) legal services unrelated to the audit 
C) appraisal or valuation services 
D) services related to assessing the effectiveness of internal control over financial reporting

Question 10

CPAs may provide bookkeeping services to their private company audit clients,but there are a number of conditions that must be met if the auditor is to maintain independence.Which of the following conditions is not necessary?

Accepted Answer

A) The CPA must not assume a management role or function. 
B) The client must hire an external CPA to approve all of the journal entries prepared by the auditor. 
C) The auditor must comply with GAAS when auditing work prepared by his/her firm. 
D) The client must accept responsibility for the financial statements. 
A) The CPA must not assume a management role or function. 
B) The client must hire an external CPA to approve all of the journal entries prepared by the auditor. 
C) The auditor must comply with GAAS when auditing work prepared by his/her firm. 
D) The client must accept responsibility for the financial statements.

Question 11

When a member observes the profession's technical and ethical standards and strives to continually improve her competence and quality of services,she is exercising

Accepted Answer

A) due care. 
B) integrity. 
C) independence. 
D) objectivity. 
A) due care. 
B) integrity. 
C) independence. 
D) objectivity.

Question 12

The AICPA's Code of Professional Conduct requires independence for all

Accepted Answer

A) attestation engagements. 
B) services performed by accountants in public practice. 
C) accounting and auditing services performed. 
D) professional work performed by CPAs. 
A) attestation engagements. 
B) services performed by accountants in public practice. 
C) accounting and auditing services performed. 
D) professional work performed by CPAs.

Question 13

Both SEC rules and the Sarbanes-Oxley Act prohibit auditors from providing bookkeeping services to their public company audit clients.

Accepted Answer

A) True 
 B)False

Question 14

Under the Confidential Client Information rule,permission is not required from the client to use the audit documentation relating to that client during an AICPA authorized peer review program with another CPA firm.

Accepted Answer

A) True 
 B)False

Question 15

According to the profession's ethical standards,an auditor would be considered independent in which of the following instances?

Accepted Answer

A) The auditor's checking account,which is fully insured by a federal agency,is held at a client financial institution. 
B) The auditor is also an attorney who advises the client as its general counsel. 
C) An employee of the auditor serves as treasurer of a charitable organization that is a client. 
D) The client owes the auditor fees for two consecutive annual audits. 
A) The auditor's checking account,which is fully insured by a federal agency,is held at a client financial institution. 
B) The auditor is also an attorney who advises the client as its general counsel. 
C) An employee of the auditor serves as treasurer of a charitable organization that is a client. 
D) The client owes the auditor fees for two consecutive annual audits.

Question 16

The prohibition on direct financial interests applies to covered members in a position to influence an engagement.

Accepted Answer

A) True 
 B)False

Question 17

Interpretations of the rules of conduct

Accepted Answer

A) are enforceable. 
B) are finalized after being approved by the FASB. 
C) are issued as exposure drafts to the profession and others for comments. 
D) do not apply to members in business. 
A) are enforceable. 
B) are finalized after being approved by the FASB. 
C) are issued as exposure drafts to the profession and others for comments. 
D) do not apply to members in business.

Question 18

All litigation by a client related to tax or other nonaudit services will impair independence.

Accepted Answer

A) True 
 B)False

Question 19

In which of the following circumstances would a CPA be ethically bound to refrain from disclosing any confidential client information?

Accepted Answer

A) The CPA is issued a summons enforceable by a court order which orders the CPA to present confidential information. 
B) A major stockholder of a client company seeks accounting information from the CPA after management declined to disclose the requested information. 
C) The confidential client information is made available as part of a quality review of the CPA's practice by a peer review team authorized by the AICPA. 
D) An inquiry by a disciplinary body of a state CPA society requests confidential client information. 
A) The CPA is issued a summons enforceable by a court order which orders the CPA to present confidential information. 
B) A major stockholder of a client company seeks accounting information from the CPA after management declined to disclose the requested information. 
C) The confidential client information is made available as part of a quality review of the CPA's practice by a peer review team authorized by the AICPA. 
D) An inquiry by a disciplinary body of a state CPA society requests confidential client information.

Question 20

In the AICPA Code of Professional Conduct,the second principle of professional conduct,entitled "The Public Interest," applies only to members of the AICPA in public practice and not to members who work as accountants in business,government,or education.

Accepted Answer

A) True 
 B)False

Exam 4: Professional Ethics

An example of an "indirect financial interest in a client" would be

A public company may obtain internal audit services from their financial statement auditor if it is approved by the company's audit committee.

Interpretations of the independence rule of the AICPA Code prohibit covered members from owning any stock or other direct investment in audit clients.Covered members would include which of the following?

When CPAs are able to maintain their actual independence,it is referred to as independence in

The financial interests of a CPA's family members can affect the CPA's independence.Which of the following parties would not be included as a "direct financial interest" of the CPA?

Adverse interest is the threat that a member will not act with objectivity because their interests are opposed to the client's interests.

The AICPA Code of Conduct includes a conceptual framework approach for the member to evaluate threats to compliance with the Code.List the three steps necessary to evaluate the threats.

A CPA firm may charge a contingent fee for

Which of the following services are allowed by the SEC whenever a CPA also audits the company?

CPAs may provide bookkeeping services to their private company audit clients,but there are a number of conditions that must be met if the auditor is to maintain independence.Which of the following conditions is not necessary?

When a member observes the profession's technical and ethical standards and strives to continually improve her competence and quality of services,she is exercising

The AICPA's Code of Professional Conduct requires independence for all

Both SEC rules and the Sarbanes-Oxley Act prohibit auditors from providing bookkeeping services to their public company audit clients.

Under the Confidential Client Information rule,permission is not required from the client to use the audit documentation relating to that client during an AICPA authorized peer review program with another CPA firm.

According to the profession's ethical standards,an auditor would be considered independent in which of the following instances?

The prohibition on direct financial interests applies to covered members in a position to influence an engagement.

Interpretations of the rules of conduct

All litigation by a client related to tax or other nonaudit services will impair independence.

In which of the following circumstances would a CPA be ethically bound to refrain from disclosing any confidential client information?

In the AICPA Code of Professional Conduct,the second principle of professional conduct,entitled "The Public Interest," applies only to members of the AICPA in public practice and not to members who work as accountants in business,government,or education.

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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