Question 1

The provisions of the Sarbanes-Oxley Act of 2002 are most likely to allow which of the following non-audit services for audit clients?

Accepted Answer

A) Appraisal or valuation services (e.g., pension, post-employment benefit liabilities) 
B) Financial information systems design and implementation 
C) Internal audit outsourcing 
D) Tax consulting 
A) Appraisal or valuation services (e.g., pension, post-employment benefit liabilities) 
B) Financial information systems design and implementation 
C) Internal audit outsourcing 
D) Tax consulting

Question 2

The audit committee of a private company need not approve all non-audit services provided by the company's financial statement auditor.

Accepted Answer

A) True 
 B)False

Question 3

An advantage of specific rules in the Code of Professional Conduct is the enforceability of minimum behavior and performance standards.

Accepted Answer

A) True 
 B)False

Question 4

"Independence" in auditing means:

Accepted Answer

A) maintaining an indirect financial interest. 
B) not being financially dependent on a client. 
C) taking an unbiased viewpoint. 
D) being an advocate for a client. 
A) maintaining an indirect financial interest. 
B) not being financially dependent on a client. 
C) taking an unbiased viewpoint. 
D) being an advocate for a client.

Question 5

Rule 505, Form of Organization and Name, prohibits CPA firms from practicing as limited liability partnerships.

Accepted Answer

A) True 
 B)False

Question 6

Describe the methods used by the AICPA and State Boards of Accountancy to enforce the rules of conduct.

Accepted Answer

The AICPA uses two levels of disciplinar

Question 7

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 8

Which of the following activities is allowed for a CPA firm's attestation clients?

Accepted Answer

A) Contingent fees fixed by a court 
B) Commissions for referring a review client to an insurance agency for insurance coverage 
C) Preparation of tax returns for which fees are based upon client refunds 
D) Each of the above is allowed. 
A) Contingent fees fixed by a court 
B) Commissions for referring a review client to an insurance agency for insurance coverage 
C) Preparation of tax returns for which fees are based upon client refunds 
D) Each of the above is allowed.

Question 9

For a public company, the Sarbanes-Oxley Act requires audit committee approval of all non-audit services prior to their performance by the company's external auditor.

Accepted Answer

A) True 
 B)False

Question 10

Four of the six Ethical Principles in the AICPA's Code of Professional Conduct are equally applicable to all members of the AICPA.Which of the following principles applies only to members in public practice?

Accepted Answer

A) Scope and Nature of Services 
B) Integrity 
C) Due Care 
D) The Public Interest 
A) Scope and Nature of Services 
B) Integrity 
C) Due Care 
D) The Public Interest

Question 11

Identify and describe each of the four parts to the AICPA's Code of Professional Conduct.Also discuss which parts are officially enforceable and which are not.

Accepted Answer

The four parts to the Code are:
•Princip

Question 12

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 13

Rule 502, Advertising and Other Forms of Solicitation, prohibits members of the AICPA in public practice from performing comparative advertising.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following circumstances impairs an auditor's independence?
I.Litigation by a client against an audit firm claiming a deficiency in the previous audit
II.Litigation by a client against an audit firm related to tax services
III.Litigation by an audit firm against a client claiming management fraud or deceit

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 15

Imprisonment for a period of six months or longer will result in automatic expulsion from the AICPA.

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

Independence is required of a CPA when performing:

Accepted Answer

A) external audits. 
B) all attestation services. 
C) all attestation and tax services. 
D) all professional services. 
A) external audits. 
B) all attestation services. 
C) all attestation and tax services. 
D) all professional services.

Question 18

One of the main reasons people act unethically is that they choose to act selfishly.

Accepted Answer

A) True 
 B)False

Question 19

The underlying reason for a code of professional conduct for any profession is:

Accepted Answer

A) the need for public confidence in the quality of service of the profession. 
B) it provides a safeguard to keep unscrupulous people out. 
C) it is required by federal legislation. 
D) it allows licensing agencies to have a yardstick to measure deficient behavior. 
A) the need for public confidence in the quality of service of the profession. 
B) it provides a safeguard to keep unscrupulous people out. 
C) it is required by federal legislation. 
D) it allows licensing agencies to have a yardstick to measure deficient behavior.

Question 20

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

Exam 4: Professional Ethics

The provisions of the Sarbanes-Oxley Act of 2002 are most likely to allow which of the following non-audit services for audit clients?

The audit committee of a private company need not approve all non-audit services provided by the company's financial statement auditor.

An advantage of specific rules in the Code of Professional Conduct is the enforceability of minimum behavior and performance standards.

"Independence" in auditing means:

Rule 505, Form of Organization and Name, prohibits CPA firms from practicing as limited liability partnerships.

Describe the methods used by the AICPA and State Boards of Accountancy to enforce the rules of conduct.

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?

Which of the following activities is allowed for a CPA firm's attestation clients?

For a public company, the Sarbanes-Oxley Act requires audit committee approval of all non-audit services prior to their performance by the company's external auditor.

Four of the six Ethical Principles in the AICPA's Code of Professional Conduct are equally applicable to all members of the AICPA.Which of the following principles applies only to members in public practice?

Identify and describe each of the four parts to the AICPA's Code of Professional Conduct.Also discuss which parts are officially enforceable and which are not.

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

Rule 502, Advertising and Other Forms of Solicitation, prohibits members of the AICPA in public practice from performing comparative advertising.

Imprisonment for a period of six months or longer will result in automatic expulsion from the AICPA.

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

Independence is required of a CPA when performing:

One of the main reasons people act unethically is that they choose to act selfishly.

The underlying reason for a code of professional conduct for any profession is:

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

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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