Question 1

Maralee has been approached by J.Fox Entertainment to perform an audit of her theatre company.Maralee has never audited a theatre company before.Maralee can

Accepted Answer

A)  Decline the engagement because she does not have the specialized industry knowledge. 
B)  Recommend another auditor and receive a fee for the referral. 
C)  Accept the engagement if she can obtain the required knowledge before the end of the engagement. 
D)  Accept the engagement with the understanding that additional hours will be required to learn and understand the nature of the business. 
A)  Decline the engagement because she does not have the specialized industry knowledge. 
B)  Recommend another auditor and receive a fee for the referral. 
C)  Accept the engagement if she can obtain the required knowledge before the end of the engagement. 
D)  Accept the engagement with the understanding that additional hours will be required to learn and understand the nature of the business.

Question 2

AICPA members who work in industry and government must always uphold which of the following AICPA rules of conduct?

Accepted Answer

A)  Rule 101-Independence. 
B)  Rule 102-Integrity and Objectivity. 
C)  Rule 301-Confidential Client Information. 
D)  Rule 302-Contingent Fees. 
A)  Rule 101-Independence. 
B)  Rule 102-Integrity and Objectivity. 
C)  Rule 301-Confidential Client Information. 
D)  Rule 302-Contingent Fees.

Question 3

______________________________________ are fees a CPA receives for recommending another CPA's services.

Accepted Answer

The answer of ______________________________________ are fees a CPA receives for...

Question 4

The interpretation of Rule 101,Independence,allows members to

Accepted Answer

A)  Hold a material indirect interest in a client. 
B)  Have loans from a client that are collateralized by cash deposits held by the client. 
C)  Have home mortgages with a client even if they participate in the engagement. 
D)  Be a trustee of a client pension or profit sharing trust. 
A)  Hold a material indirect interest in a client. 
B)  Have loans from a client that are collateralized by cash deposits held by the client. 
C)  Have home mortgages with a client even if they participate in the engagement. 
D)  Be a trustee of a client pension or profit sharing trust.

Question 5

According to Rule 501,which of the following is not a "discreditable act"?

Accepted Answer

A)  Withholding a client's sales records. 
B)  Failing to file or remit tax payments. 
C)  Failing to follow requirements of the PCAOB during the audit of an SEC client. 
D)  Advertising that indicated the firm can reduce IRS penalties. 
A)  Withholding a client's sales records. 
B)  Failing to file or remit tax payments. 
C)  Failing to follow requirements of the PCAOB during the audit of an SEC client. 
D)  Advertising that indicated the firm can reduce IRS penalties.

Question 6

Rule 201 of the Rules of Conduct contains no requirement that members of the AICPA comply with which of the following standards and interpretations designated by the AICPA Council?

Accepted Answer

A)  Independence. 
B)  Due professional care. 
C)  Planning and supervision. 
D)  Professional competence. 
A)  Independence. 
B)  Due professional care. 
C)  Planning and supervision. 
D)  Professional competence.

Question 7

Which of the following would be permitted by the AICPA?

Accepted Answer

A)  John Smith, CPA owns 50 percent of the firm and Joan Jones, non-CPA, owns 50 percent. 
B)  Non-CPAs own 25 percent of the firm. The non-CPAs do not have a college degree. 
C)  Non-CPAs own 40 percent of the firm and follow all AICPA requirements. 
D)  Fred Smith, a non-CPA, owns 10 percent of the firm and has a full-time job separate from the firm and views the ownership purely as an investment. 
A)  John Smith, CPA owns 50 percent of the firm and Joan Jones, non-CPA, owns 50 percent. 
B)  Non-CPAs own 25 percent of the firm. The non-CPAs do not have a college degree. 
C)  Non-CPAs own 40 percent of the firm and follow all AICPA requirements. 
D)  Fred Smith, a non-CPA, owns 10 percent of the firm and has a full-time job separate from the firm and views the ownership purely as an investment.

Question 8

Which of the following forms of organization would not be allowed under Rule 505,Resolution Concerning Form of Organization and Name,of the Professional Code of Conduct?

Accepted Answer

A)  Limited liability partnership; all partners are CPAs. 
B)  Limited liability partnership; 70 percent of partners are CPAs. 
C)  Limited liability corporation; all shareholders are CPAs. 
D)  Partnership; 40 percent of partners are CPAs. 
A)  Limited liability partnership; all partners are CPAs. 
B)  Limited liability partnership; 70 percent of partners are CPAs. 
C)  Limited liability corporation; all shareholders are CPAs. 
D)  Partnership; 40 percent of partners are CPAs.

Question 9

Phil Greb has a thriving practice in which he assists attorneys in preparing litigation dealing with accounting and auditing matters.Phil is "practicing public accounting" if he

Accepted Answer

A)  Uses his CPA designation on his letterhead and business card. 
B)  Is in partnership with another CPA. 
C)  Practices in a professional corporation with other CPAs. 
D)  Never lets his clients know that he is a CPA. 
A)  Uses his CPA designation on his letterhead and business card. 
B)  Is in partnership with another CPA. 
C)  Practices in a professional corporation with other CPAs. 
D)  Never lets his clients know that he is a CPA.

Question 10

Perry Pinkney,CPA,is one of the general partners in a partnership,which in turn invested 70 percent of its assets in the common stock of Pinkney's audit client (Darby Corporation).According to the AICPA Code of Professional Conduct,Pinkney is considered to have

Accepted Answer

A)  An indirect financial interest in Darby. 
B)  A direct financial interest in Darby. 
C)  No financial interest in Darby. 
D)  A partial financial interest in Darby. 
A)  An indirect financial interest in Darby. 
B)  A direct financial interest in Darby. 
C)  No financial interest in Darby. 
D)  A partial financial interest in Darby.

Question 11

A CPA's legal license to practice public accounting can be revoked by the

Accepted Answer

A)  American Institute of Certified Public Accountants. 
B)  State society of CPAs. 
C)  Auditing Standard Board. 
D)  State board of accountancy. 
A)  American Institute of Certified Public Accountants. 
B)  State society of CPAs. 
C)  Auditing Standard Board. 
D)  State board of accountancy.

Question 12

What agency has the ultimate authority for defining independence for public companies?

Accepted Answer

A)  AICPA. 
B)  SEC. 
C)  Department of Justice. 
D)  Congress. 
A)  AICPA. 
B)  SEC. 
C)  Department of Justice. 
D)  Congress.

Question 13

A CPA firm's independence will be impaired if a retired partner is a director of a non-SEC client and

Accepted Answer

A)  Has fixed retirement benefits. 
B)  Retains only office privileges with the firm. 
C)  Is no longer active in the firm. 
D)  Is no longer associated with the firm. 
A)  Has fixed retirement benefits. 
B)  Retains only office privileges with the firm. 
C)  Is no longer active in the firm. 
D)  Is no longer associated with the firm.

Question 14

Compliance with standards,Rule 202,requires adherence to duly promulgated technical standards in all areas of professional service.

Accepted Answer

A) True 
 B)False

Question 15

A trial board can admonish,suspend,expel,or fine a CPA who has violated the Code of Conduct.

Accepted Answer

A) True 
 B)False

Question 16

For each situation (1-5),identify the most applicable AICPA rule of conduct and indicate whether there is a violation or no violation of the rule (A-F).One or more letters may not be used.
A.Rule 101: Independence; no violation
B.Rule 101: Independence; violation
C.Rule 102: Integrity and Objectivity; no violation
D.Rule 102: Integrity and Objectivity; violation
E.Rule 203: Accounting Principles; no violation
F.Rule 203: Accounting Principles; violation
____ 1.Sterling Stevens,CPA,was auditing Global Services Company.Global Services used an accounting principle that was not in conformity with GAAP.Nevertheless,Stevens rendered a standard unqualified audit report.
____ 2.Christina Hall,CPA,provided expert testimony for a plaintiff.The defendant in the case was a client of Hall's.
____ 3.Sam Miller,CPA,owned 100 shares of Johnson Drilling,Inc.,his audit client.
____ 4.Dewey Wise,CPA,obtained a loan from an insurance company using the cash value of the insurance policy as collateral.The loan is for less money than the cash value of the policy.
____ 5.Stella Steinbeck,CPA,was auditing Good Services Company,which used an accounting principle that was not in conformity with GAAP.Good Services believed and Steinbeck concurred that using a generally accepted method would cause the financial statements to be misleading.Therefore,Steinbeck rendered a standard unqualified audit report.

Accepted Answer

1.F; 2.C;

Question 17

Which of the following statements included in the advertising of a CPA firm is permissible according to Rule 502,Advertising and Other Forms of Solicitation?

Accepted Answer

A)  "Bob Bullet, CEO of A-One Corp, states that we are the best auditors his company has ever used." 
B)  "We provide the best audit coverage of any firm in the state." 
C)  "We audit the five largest manufacturing companies in the state." 
D)  "We have several tax partners who work closely with judges and IRS attorneys on high-profile legal issues." 
A)  "Bob Bullet, CEO of A-One Corp, states that we are the best auditors his company has ever used." 
B)  "We provide the best audit coverage of any firm in the state." 
C)  "We audit the five largest manufacturing companies in the state." 
D)  "We have several tax partners who work closely with judges and IRS attorneys on high-profile legal issues."

Question 18

Which of the following is allowed under the Government Auditing Standards?

Accepted Answer

A)  Personnel who provide nonaudit services are prohibited from planning, conducting, or reviewing audit work related to the nonaudit service. 
B)  The audit organization must never reduce the scope of the audit because of nonaudit services it performed. 
C)  The government entity must have established policies to ensure that the nonaudit services will not affect the audit firm's ability to perform the audit. 
D)  CPAs who perform nonaudit services are prohibited from being a member of the audit team. 
A)  Personnel who provide nonaudit services are prohibited from planning, conducting, or reviewing audit work related to the nonaudit service. 
B)  The audit organization must never reduce the scope of the audit because of nonaudit services it performed. 
C)  The government entity must have established policies to ensure that the nonaudit services will not affect the audit firm's ability to perform the audit. 
D)  CPAs who perform nonaudit services are prohibited from being a member of the audit team.

Question 19

According to the ethical standards of the profession,which of the following acts is generally prohibited?

Accepted Answer

A)  Issuing a modified report explaining a failure to follow a governmental regulatory agency's standards when conducting an attest service for a client. 
B)  Revealing confidential client information during a quality review of a professional practice by a team from the state CPA society. 
C)  Accepting a contingent fee for representing a client in an examination of the client's federal tax return by an IRS agent. 
D)  Retaining client records after an engagement is terminated prior to completion when the client demands their return. 
A)  Issuing a modified report explaining a failure to follow a governmental regulatory agency's standards when conducting an attest service for a client. 
B)  Revealing confidential client information during a quality review of a professional practice by a team from the state CPA society. 
C)  Accepting a contingent fee for representing a client in an examination of the client's federal tax return by an IRS agent. 
D)  Retaining client records after an engagement is terminated prior to completion when the client demands their return.

Question 20

Which of the following would not be considered confidential information obtained in the course of an engagement for which the client's consent would be needed for disclosure?

Accepted Answer

A)  Information about whether a consulting client has paid the CPA's fees on time. 
B)  The actuarial assumptions used by a tax client in calculating pension expense. 
C)  Management's strategic plan for next year's labor negotiations. 
D)  Information about material contingent liabilities relevant for audited financial statements. 
A)  Information about whether a consulting client has paid the CPA's fees on time. 
B)  The actuarial assumptions used by a tax client in calculating pension expense. 
C)  Management's strategic plan for next year's labor negotiations. 
D)  Information about material contingent liabilities relevant for audited financial statements.

Maralee has been approached by J.Fox Entertainment to perform an audit of her theatre company.Maralee has never audited a theatre company before.Maralee can

AICPA members who work in industry and government must always uphold which of the following AICPA rules of conduct?

______________________________________ are fees a CPA receives for recommending another CPA's services.

The interpretation of Rule 101,Independence,allows members to

According to Rule 501,which of the following is not a "discreditable act"?

Rule 201 of the Rules of Conduct contains no requirement that members of the AICPA comply with which of the following standards and interpretations designated by the AICPA Council?

Which of the following would be permitted by the AICPA?

Which of the following forms of organization would not be allowed under Rule 505,Resolution Concerning Form of Organization and Name,of the Professional Code of Conduct?

Phil Greb has a thriving practice in which he assists attorneys in preparing litigation dealing with accounting and auditing matters.Phil is "practicing public accounting" if he

Perry Pinkney,CPA,is one of the general partners in a partnership,which in turn invested 70 percent of its assets in the common stock of Pinkney's audit client (Darby Corporation).According to the AICPA Code of Professional Conduct,Pinkney is considered to have

A CPA's legal license to practice public accounting can be revoked by the

What agency has the ultimate authority for defining independence for public companies?

A CPA firm's independence will be impaired if a retired partner is a director of a non-SEC client and

Compliance with standards,Rule 202,requires adherence to duly promulgated technical standards in all areas of professional service.

A trial board can admonish,suspend,expel,or fine a CPA who has violated the Code of Conduct.

Which of the following statements included in the advertising of a CPA firm is permissible according to Rule 502,Advertising and Other Forms of Solicitation?

Which of the following is allowed under the Government Auditing Standards?

According to the ethical standards of the profession,which of the following acts is generally prohibited?

Which of the following would not be considered confidential information obtained in the course of an engagement for which the client's consent would be needed for disclosure?

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Legal Liability

Internal Governmental and Fraud Audits

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing in a Computerized Environment

Filters

Exam 14: Professional Ethics

Maralee has been approached by J.Fox Entertainment to perform an audit of her theatre company.Maralee has never audited a theatre company before.Maralee can

AICPA members who work in industry and government must always uphold which of the following AICPA rules of conduct?

______________________________________ are fees a CPA receives for recommending another CPA's services.

The interpretation of Rule 101,Independence,allows members to

According to Rule 501,which of the following is not a "discreditable act"?

Rule 201 of the Rules of Conduct contains no requirement that members of the AICPA comply with which of the following standards and interpretations designated by the AICPA Council?

Which of the following would be permitted by the AICPA?

Which of the following forms of organization would not be allowed under Rule 505,Resolution Concerning Form of Organization and Name,of the Professional Code of Conduct?

Phil Greb has a thriving practice in which he assists attorneys in preparing litigation dealing with accounting and auditing matters.Phil is "practicing public accounting" if he

Perry Pinkney,CPA,is one of the general partners in a partnership,which in turn invested 70 percent of its assets in the common stock of Pinkney's audit client (Darby Corporation).According to the AICPA Code of Professional Conduct,Pinkney is considered to have

A CPA's legal license to practice public accounting can be revoked by the

What agency has the ultimate authority for defining independence for public companies?

A CPA firm's independence will be impaired if a retired partner is a director of a non-SEC client and

Compliance with standards,Rule 202,requires adherence to duly promulgated technical standards in all areas of professional service.

A trial board can admonish,suspend,expel,or fine a CPA who has violated the Code of Conduct.

Which of the following statements included in the advertising of a CPA firm is permissible according to Rule 502,Advertising and Other Forms of Solicitation?

Which of the following is allowed under the Government Auditing Standards?

According to the ethical standards of the profession,which of the following acts is generally prohibited?

Which of the following would not be considered confidential information obtained in the course of an engagement for which the client's consent would be needed for disclosure?

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Legal Liability

Internal Governmental and Fraud Audits

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing in a Computerized Environment

Filters