Question 1

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 2

Each of the following situations involves a possible violation of the rule on independence. For each situation, (1) decide whether the Code of Professional Conduct has been violated, and (2) briefly explain how the situation violates (or does not violate) the Code of Professional Conduct.
a. Harry Brown is a partner in the Topeka office of Hedley & Co., CPAs. Harry's brother is employed in an audit-sensitive position by Jensen Appliances, a publicly held company in Kansas. Jensen Appliances is one of Hedley & Co.'s audit clients. Neither Harry nor personnel from the Topeka office is involved in the audit of Jensen.
Violation?
 Yes No

Accepted Answer

a. No violation. Although partners in a

Question 3

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 4

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 5

In the AICPA's Code of Professional Conduct, the sixth principle of professional conduct, entitled "Scope and Nature of Services," applies to members of the AICPA who work in public practice, business, government, or education.

Accepted Answer

A) True 
 B)False

Question 6

It is a violation of the rules of conduct if someone does something on behalf of a member that is a violation if the member does it.

Accepted Answer

A) True 
 B)False

Question 7

Professionals are expected to conduct themselves at a higher level than most other members of society.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following services is not prohibited by the SEC whenever a CPA also audits the company?

Accepted Answer

A)  actuarial services 
B)  assisting the company in preparing certain SEC registration statements (e.g., 10-Q, 10-K) 
C)  investment banker services 
D)  bookkeeping services 
A)  actuarial services 
B)  assisting the company in preparing certain SEC registration statements (e.g., 10-Q, 10-K) 
C)  investment banker services 
D)  bookkeeping services

Question 9

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.

The CPA firm will lose its independence if

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

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

In the AICPA's Code of Professional Conduct, the sixth principle of professional conduct, entitled "Scope and Nature of Services," applies to members of the AICPA who work in public practice, business, government, or education.

It is a violation of the rules of conduct if someone does something on behalf of a member that is a violation if the member does it.

Professionals are expected to conduct themselves at a higher level than most other members of society.

Which of the following services is not prohibited 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?

The Demand for Audit and Other Assurance Services

The CPA Profession

Audit Reports

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Materiality

Assessing the Risk of Material Misstatement

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, 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

Filters

Exam 4: Professional Ethics

The CPA firm will lose its independence if

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

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

In the AICPA's Code of Professional Conduct, the sixth principle of professional conduct, entitled "Scope and Nature of Services," applies to members of the AICPA who work in public practice, business, government, or education.

It is a violation of the rules of conduct if someone does something on behalf of a member that is a violation if the member does it.

Professionals are expected to conduct themselves at a higher level than most other members of society.

Which of the following services is not prohibited 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?

The Demand for Audit and Other Assurance Services

The CPA Profession

Audit Reports

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Materiality

Assessing the Risk of Material Misstatement

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, 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

Filters