Exam 4: Professional Ethics

Which one of the following statements is false?

Which of the following statements best describes the enforceability of the Interpretations of the Rules of Conduct?

Interpretations of Independence Rule 101 prohibit covered members from owning any stock or other direct investment in audit clients.Covered members would include which of the following?

In some situations, the interpretations of the Rules of Conduct permit former partners to have relationships with a client of the firm without affecting the firm's independence.Which of the following situations would cause a loss of independence?

________ means that a person acts according to conscience, regardless of the situation.

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

When determining whether independence is impaired because of an ownership interest in a client company, materiality will affect ownership:

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

The Conceptual Framework for AICPA Independence Standards can be used when making decisions on ethical matters not explicitly addressed in the Code.

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

In the AICPA Code of Professional Conduct, ethical rulings are less specific than rules of conduct.

Rule 101, Independence, prohibits a CPA from performing both audit services and bookkeeping services for the same public company in the same year.

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.

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?

Explain why there is a special need for ethical conduct in the auditing profession.

Of the four parts of the AICPA's Code of Professional Conduct, which part is enforceable?

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?

Several months after an unqualified audit report was issued, the auditor discovers the financial statements were materially misstated.The client's CEO agrees that there are misstatements, but refuses to correct them.She claims that "confidentiality" prevents the CPA from informing anyone.Which of the following statements is correct?

The scenarios below all involve a possible violation of the AICPA's Cod of Professional Conduct. 1.Using the list below, indicate which of the Code of Conduct Rules applies to the scenario. a.101: Independence b.102: Integrity and Objectivity c.302: Contingent Fees d.501: Acts Discreditable e.503: Commissions and Referral Fees f. 505: Form of Organization and Name 2. State if the scenario is a violation of the Code. Scenario: 1.Margaret Henry is a partner in the Tupelo office of Jenkins & Thorn, CPAs.Margaret's father is the controller at Markrich Sporting Supplies, Inc., a publicly held company in Tupelo.Markrich is one of Jenkins & Thorn's audit clients.Margaret is not involved in the audit of Markrich. 2.Jason Alexander is an audit manager with Reese & Co., CPAs.Jason owns 100 share of common stock in one of the firm's audit clients, but he does not provide any audit or non-audit services to the company. 3.The accounting firm of Fine & Herman, CPAs, provides bookkeeping and tax services for Henderson Corporation, a privately held company.Mr.Herman also performs the annual audit of Henderson Corporation. 4.Elaine Cooper CPA, is the auditor of Paula's Pizza.Toward the end of the audit, Paula gave Elaine her estimate of receivable collectability and Elaine accepted it without any testing. 5.Charley Ray, CPA, is a member of the engagement team that performs the audit of Desiree Corporation.Charley's five-year-old daughter, Becky, received ten shares of Desiree common stock for her fifth birthday in a trust fund established by Becky's grandmother. 6. Freeman and Johnson formed a successful CPA practice ten years ago.In the current year, they approached Adam Sawtooth, a surgeon and medical expert, and asked him to assist them with their growing medical consulting practice.Sawtooth agreed, but only after he was given an ownership interest in the firm.Sawtooth does intend to reduce his private practice hours and spend 40% of his working hours devoted to the Freeman & Johnson practice. 7. Sally Preen has a successful computer network consulting business.Sally has recommended one of her clients to Sam Walton, CPA.To show gratitude for the referral, Sam has agreed to pay Sally a token gift of $50.Sam has not disclosed the payment arrangement to his ne clients. 8.The accounting firm of Smith & Black, CPAs, is negotiating a fee with a new audit client where the client will pay $50,000 if the client obtains the line of credit needed for working capital purposes.Otherwise, the fee will be $40,000. 9. Brad Barns, CPA, was traveling from Las Vegas to the Grand Canyon when he was pulled over by a police officer for suspicion of driving under the influence.He was convicted in court of driving under the influence of alcohol and received six months probation. 10. Manuel Lopez, CPA, is a senior in a small, local, CPA firm that audits Childress, Inc., a closely held corporation.Manuel's sister was recently appointed as the controller for Childress, Inc.