Question 1

Rule 101, Independence, applies to covered members in a position to influence an attest engagement.

Accepted Answer

A) True 
 B)False

Question 2

Auditors are allowed to have an indirect financial interest in an audit client, such as ownership of stock in a client's company by the auditor's brother, as long as the amount of the financial interest is immaterial to the brother.

Accepted Answer

A) True 
 B)False

Question 3

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 4

All owners of a CPA firm must be CPAs who are qualified to practice.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Ethics are:

Accepted Answer

A) needed in the professions, but is not needed for society in general. 
B) a set of moral principles or values. 
C) not formed by life experiences. 
D) always incorporated in laws. 
A) needed in the professions, but is not needed for society in general. 
B) a set of moral principles or values. 
C) not formed by life experiences. 
D) always incorporated in laws.

Question 7

Oehlers, CPA, is a staff auditor participating in the engagement of Capital Trust, Inc.Which of the following circumstances impairs Oehlers independence?

Accepted Answer

A) Oehlers' sister is an internal auditor employed by Capital Trust. 
B) Oehlers' friend, and employee of another local accounting firm, prepares the tax return of Capital Trust's CEO. 
C) Oehlers and Capital Trust's 401K plan own stock with the same corporation. 
D) During the period of professional engagement, Capital Trust and Oehlers discussed business over lunch at a first-class restaurant. 
A) Oehlers' sister is an internal auditor employed by Capital Trust. 
B) Oehlers' friend, and employee of another local accounting firm, prepares the tax return of Capital Trust's CEO. 
C) Oehlers and Capital Trust's 401K plan own stock with the same corporation. 
D) During the period of professional engagement, Capital Trust and Oehlers discussed business over lunch at a first-class restaurant.

Question 8

Which of the following would be a violation of the rule requiring "objectivity" by the CPA?
I.The auditor accepts management's opinion regarding the collection of accounts receivable without an independent evaluation.
II.In preparing a client's tax return, the CPA encourages a client to take a deduction for which there is no support.

Accepted Answer

A) I only 
B) II only 
C) I and II 
D) Neither I nor II 
A) I only 
B) II only 
C) I and II 
D) Neither I nor II

Question 9

Interpretations of rules of conduct in the Code of Professional Conduct are not officially enforceable and practitioners need not justify departure from them.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is true? The CPA firm will lose its independence if:

Accepted Answer

A) a staff auditor providing audit services to the client acquires stock in that client. 
B) a staff tax preparer who provides 15 hours of non-audit services to the client acquires stock in that client. 
C) an audit manager in an office different than the office providing audit services has a direct, immaterial financial interest in the audit client. 
D) a covered member has an indirect, immaterial financial interest in an audit client. 
A) a staff auditor providing audit services to the client acquires stock in that client. 
B) a staff tax preparer who provides 15 hours of non-audit services to the client acquires stock in that client. 
C) an audit manager in an office different than the office providing audit services has a direct, immaterial financial interest in the audit client. 
D) a covered member has an indirect, immaterial financial interest in an audit client.

Question 11

A CPA firm should decline an offer to perform consulting services engagement if:

Accepted Answer

A) the proposed engagement is not accounting-related. 
B) recommendations made by the CPA firm are to be subject to review by the client. 
C) acceptance would require the CPA firm to make management decisions for an audit client. 
D) any of the above is true. 
A) the proposed engagement is not accounting-related. 
B) recommendations made by the CPA firm are to be subject to review by the client. 
C) acceptance would require the CPA firm to make management decisions for an audit client. 
D) any of the above is true.

Question 12

A CPA's financial interests in nonclients may have an effect on independence if the nonclients are investors in or investees of the client.Which situation would not impair a CPA's independence?

Accepted Answer

A) The client has an immaterial investment in a nonclient investee in which the CPA has an immaterial investment. 
B) The CPA has a material indirect financial interest in a nonclient in which the client has a material investment. 
C) The client investor has a nonmaterial investment in the nonclient investee in which the CPA has a material investment. 
D) The CPA has a joint closely held investment with the client in a nonclient that is material to the client as well as the CPA. 
A) The client has an immaterial investment in a nonclient investee in which the CPA has an immaterial investment. 
B) The CPA has a material indirect financial interest in a nonclient in which the client has a material investment. 
C) The client investor has a nonmaterial investment in the nonclient investee in which the CPA has a material investment. 
D) The CPA has a joint closely held investment with the client in a nonclient that is material to the client as well as the CPA.

Question 13

Under the AICPA independence rules, the auditor:

Accepted Answer

A) is prohibited from performing a company's audit and installing and designing the client's new information system. 
B) does not need to document the understanding and willingness of the client to perform all management functions associated with the nonaudit service. 
C) is prohibited from doing any bookkeeping services for the client if performing the audit. 
D)  must follow the more restrictive SEC independence rules when dealing with a public company. 
A) is prohibited from performing a company's audit and installing and designing the client's new information system. 
B) does not need to document the understanding and willingness of the client to perform all management functions associated with the nonaudit service. 
C) is prohibited from doing any bookkeeping services for the client if performing the audit. 
D)  must follow the more restrictive SEC independence rules when dealing with a public company.

Question 14

What are the six Ethical Principles stated in the Code of Professional Conduct?
 Briefly discuss each principle.Are these principles enforceable?

Accepted Answer

The six Ethical Principles of the Code o

Question 15

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 16

Rule 101, Independence, applies to members of the AICPA when performing any professional service.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Interpretations of the AICPA Code of Professional Conduct are dominated by the concept of:

Accepted Answer

A) independence. 
B) compliance with standards. 
C) accounting. 
D) acts discreditable to the profession. 
A) independence. 
B) compliance with standards. 
C) accounting. 
D) acts discreditable to the profession.

Question 19

Discuss Rule 301-Confidential Client Information, including the four exceptions to the rule.

Accepted Answer

Rule 301 prohibits a member from disclos

Question 20

Under Rule 301, Confidential Client Information, 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

Exam 4: Professional Ethics

Rule 101, Independence, applies to covered members in a position to influence an attest engagement.

Auditors are allowed to have an indirect financial interest in an audit client, such as ownership of stock in a client's company by the auditor's brother, as long as the amount of the financial interest is immaterial to the brother.

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

All owners of a CPA firm must be CPAs who are qualified to practice.

A CPA firm may charge a contingent fee for:

Ethics are:

Oehlers, CPA, is a staff auditor participating in the engagement of Capital Trust, Inc.Which of the following circumstances impairs Oehlers independence?

Interpretations of rules of conduct in the Code of Professional Conduct are not officially enforceable and practitioners need not justify departure from them.

Which of the following statements is true? The CPA firm will lose its independence if:

A CPA firm should decline an offer to perform consulting services engagement if:

A CPA's financial interests in nonclients may have an effect on independence if the nonclients are investors in or investees of the client.Which situation would not impair a CPA's independence?

Under the AICPA independence rules, the auditor:

What are the six Ethical Principles stated in the Code of Professional Conduct? Briefly discuss each principle.Are these principles enforceable?

Rule 101, Independence, applies to members of the AICPA when performing any professional service.

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

Interpretations of the AICPA Code of Professional Conduct are dominated by the concept of:

Discuss Rule 301-Confidential Client Information, including the four exceptions to the rule.

Under Rule 301, Confidential Client Information, 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.

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

Internal Control, Control Risk, and Section 404 Audits

Fraud Auditing

The Impact of Information Technology on the Audit Process

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

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, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

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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