Question 1

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 and the client has demanded its 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 and the client has demanded its return. D

Question 2

In which of the following instances would the independence of the CPA not be considered to be impaired? The CPA has been retained as the auditor of a

Accepted Answer

A)  Charitable organization in which an employee of the CPA serves as treasurer. 
B)  Municipality in which the CPA owns $25,000 of the $2,500,000 indebtedness of the municipality. 
C)  Restaurant where the CPA dines frequently. 
D)  Company in which the CPA's private investment club owns a one-tenth interest. 
A)  Charitable organization in which an employee of the CPA serves as treasurer. 
B)  Municipality in which the CPA owns $25,000 of the $2,500,000 indebtedness of the municipality. 
C)  Restaurant where the CPA dines frequently. 
D)  Company in which the CPA's private investment club owns a one-tenth interest. C

Question 3

As per the Conceptual Framework for AICPA Independence Standards made effective in 2006, a CPA is required to identify and assess the extent to which a threat to independence exists.

Accepted Answer

A) True 
 B)False  True

Question 4

According to the Code of Professional Conduct, which of the following individuals is not in a position to influence an attest engagement (i.e., not a covered member)?

Accepted Answer

A)  The office's managing partner who determines the compensation of the attest engagement partner. 
B)  The office's IT expert, who consulted with the engagement partner regarding the client's IT system. 
C)  The partner in another office in a nearby city who regularly plays golf with the engagement partner. 
D)  The office's partner who monitors quality control over the attest engagement. 
A)  The office's managing partner who determines the compensation of the attest engagement partner. 
B)  The office's IT expert, who consulted with the engagement partner regarding the client's IT system. 
C)  The partner in another office in a nearby city who regularly plays golf with the engagement partner. 
D)  The office's partner who monitors quality control over the attest engagement.

Question 5

A CPA's retention of client records as a means of enforcing payment of an overdue audit fee is an action that is

Accepted Answer

A)  Considered acceptable by the AICPA Code of Professional Conduct. 
B)  Ill-advised because it would impair the CPA's independence with respect to the client. 
C)  Considered discreditable to the profession. 
D)  A violation of generally accepted auditing standards. 
A)  Considered acceptable by the AICPA Code of Professional Conduct. 
B)  Ill-advised because it would impair the CPA's independence with respect to the client. 
C)  Considered discreditable to the profession. 
D)  A violation of generally accepted auditing standards.

Question 6

In which one of the following situations would a CPA be in violation of the AICPA Code of Professional Conduct in determining a fee?

Accepted Answer

A)  A fee based on whether the CPA's report on the client's financial statements results in the approval of a bank loan. 
B)  A fee based on an estimate of the number of hours needed to complete the engagement by auditors of various levels of experience. 
C)  A fee based on the nature of the service rendered and the CPA's particular expertise instead of the actual time spent on the engagement. 
D)  A fee based on the fee charged by the prior auditor. 
A)  A fee based on whether the CPA's report on the client's financial statements results in the approval of a bank loan. 
B)  A fee based on an estimate of the number of hours needed to complete the engagement by auditors of various levels of experience. 
C)  A fee based on the nature of the service rendered and the CPA's particular expertise instead of the actual time spent on the engagement. 
D)  A fee based on the fee charged by the prior auditor.

Question 7

The SEC has issued independence rules that differ from the AICPA's in all of the following areas except:

Accepted Answer

A)  Working paper documentation. 
B)  Provision of other professional services. 
C)  Human resource and compensation-related issues. 
D)  Required communication. 
A)  Working paper documentation. 
B)  Provision of other professional services. 
C)  Human resource and compensation-related issues. 
D)  Required communication.

Question 8

PCAOB rules require tax services provided by a public company auditor to be considered and approved by the company's audit committee.

Accepted Answer

A) True 
 B)False

Question 9

Why do professions establish codes of conduct that define ethical behaviors for members of the profession?

Accepted Answer

These rules are established so that user

Question 10

A violation of the profession's ethical standards would most likely have occurred when a CPA

Accepted Answer

A)  Purchased a bookkeeping firm's practice of monthly write-ups for a percentage of fees received over a three-year period. 
B)  Made arrangements with a bank to collect notes issued by a client in payment of fees due. 
C)  Named Smith formed a partnership with two other CPAs and used "Smith & Co." as the firm name. 
D)  Issued an unqualified opinion on the 2011 financial statements when fees for the 2010 audit were unpaid. 
A)  Purchased a bookkeeping firm's practice of monthly write-ups for a percentage of fees received over a three-year period. 
B)  Made arrangements with a bank to collect notes issued by a client in payment of fees due. 
C)  Named Smith formed a partnership with two other CPAs and used "Smith & Co." as the firm name. 
D)  Issued an unqualified opinion on the 2011 financial statements when fees for the 2010 audit were unpaid.

Question 11

Under which of the following circumstances would the independence of a CPA be considered impaired if the CPA, who also is an attorney, serves as auditor and provides legal services to the same client?

Accepted Answer

A)  When the CPA, as legal agent, consummates a business acquisition for the client. 
B)  When the CPA's audit fees and legal fees are not billed separately. 
C)  When the CPA uses legal expertise to research a question of income tax law. 
D)  When the legal services consist of an analysis of the terms of an existing lease agreement. 
A)  When the CPA, as legal agent, consummates a business acquisition for the client. 
B)  When the CPA's audit fees and legal fees are not billed separately. 
C)  When the CPA uses legal expertise to research a question of income tax law. 
D)  When the legal services consist of an analysis of the terms of an existing lease agreement.

Question 12

A CPA firm's personnel partner periodically studies the CPA firm's personnel advancement experience to ascertain whether the individuals who were assigned increased degrees of responsibility met predetermined criteria. This is evidence of the CPA firm's adherence to prescribed standards of

Accepted Answer

A)  Quality control. 
B)  Due professional care. 
C)  Supervision and review. 
D)  Fieldwork. 
A)  Quality control. 
B)  Due professional care. 
C)  Supervision and review. 
D)  Fieldwork.

Question 13

With respect to ethics, the rights-based approach

Accepted Answer

A)  Suggests that auditors should always verify ownership of a client's material tangible assets. 
B)  Is primarily concerned with equity and impartiality. 
C)  Suggests that an individual's actions should not violate the rights of any individual. 
D)  Recognizes that decisions involve trade-offs between costs and benefits. 
A)  Suggests that auditors should always verify ownership of a client's material tangible assets. 
B)  Is primarily concerned with equity and impartiality. 
C)  Suggests that an individual's actions should not violate the rights of any individual. 
D)  Recognizes that decisions involve trade-offs between costs and benefits.

Question 14

The independence standards issued by the PCAOB do not prohibit the provision of tax services to an attest client.

Accepted Answer

A) True 
 B)False

Question 15

An auditor is about to commence a recurring annual audit engagement. The continuing auditor's independence would ordinarily be considered to be impaired if the prior year's audit fee

Accepted Answer

A)  Was unusually large. 
B)  Has not been paid and will not be paid for at least twelve months. 
C)  Has not been paid and the client has filed a voluntary petition for bankruptcy. 
D)  Was renegotiated during the prior year audit based on the need for expanded testing. 
A)  Was unusually large. 
B)  Has not been paid and will not be paid for at least twelve months. 
C)  Has not been paid and the client has filed a voluntary petition for bankruptcy. 
D)  Was renegotiated during the prior year audit based on the need for expanded testing.

Question 16

Which of the following statements best describes why the profession of certified public accountants has deemed it essential to promulgate a code of conduct and to establish a mechanism for enforcing observance of the code?

Accepted Answer

A)  Ethical standards are established so that users of accounting services know what to expect, the professionals know what behaviors are acceptable, and overseers can take disciplinary action when appropriate. 
B)  A prerequisite to success is the establishment of an ethical code that stresses primarily the professional's responsibility to clients and colleagues. 
C)  A requirement of most state laws calls for the profession to establish a code of conduct. 
D)  An essential means of self-protection for the profession is the establishment of flexible ethical standards by the profession. 
A)  Ethical standards are established so that users of accounting services know what to expect, the professionals know what behaviors are acceptable, and overseers can take disciplinary action when appropriate. 
B)  A prerequisite to success is the establishment of an ethical code that stresses primarily the professional's responsibility to clients and colleagues. 
C)  A requirement of most state laws calls for the profession to establish a code of conduct. 
D)  An essential means of self-protection for the profession is the establishment of flexible ethical standards by the profession.

Question 17

The profession's ethical standards would most likely be considered to have been violated when the CPA represents that specific consulting services will be performed for a stated fee and it is apparent at the time of the representation that the

Accepted Answer

A)  CPA would not be independent. 
B)  Fee was a competitive bid. 
C)  Actual fee would be substantially higher. 
D)  Actual fee would be substantially lower than the fees charged by other CPAs for comparable services. 
A)  CPA would not be independent. 
B)  Fee was a competitive bid. 
C)  Actual fee would be substantially higher. 
D)  Actual fee would be substantially lower than the fees charged by other CPAs for comparable services.

Question 18

Listed below are definitions of the six Principles of Professional Conduct. For each, identify the principle being defined.
a. A member should observe the profession's technical and ethical standards, strive continually to improve competence and the quality of services, and discharge professional responsibility to the best of the member's ability.
b. Members should exercise sensitive professional and moral judgments in all their activities.
c. A member should be free of conflicts of interest in discharging professional responsibilities.
d. A member in public practice should observe the Principles of the Code of Professional Conduct in determining the type and extent of services to be provided.
e. Members should accept the obligation to act in a way that will honor the public trust and demonstrate commitment to professionalism.
f. To maintain and broaden public confidence, members should perform all professional responsibilities with the highest sense of _____________.

Accepted Answer

a. Due care.
b. Responsibiliti

Question 19

The term "ethics" refers to a person's propensity to follow the laws of the land.

Accepted Answer

A) True 
 B)False

Question 20

Mavis, CPA, has audited the financial statements of South Bay Sales Incorporated for several years and had always been paid promptly for services rendered. Last year's audit invoices have not been paid because South Bay is experiencing cash flow difficulties and the current year's audit is scheduled to commence in one week. With respect to the past due audit fees, Mavis should

Accepted Answer

A)  Perform the scheduled audit and allow South Bay to pay when the cash flow difficulties are alleviated. 
B)  Perform the scheduled audit only after arranging a definite payment schedule and securing notes signed by South Bay. 
C)  Inform South Bay's management that the past due audit fees are considered an impairment of auditor independence. 
D)  Inform South Bay's management that the past due audit fees may be considered a loan on which interest must be imputed for financial statement purposes. 
A)  Perform the scheduled audit and allow South Bay to pay when the cash flow difficulties are alleviated. 
B)  Perform the scheduled audit only after arranging a definite payment schedule and securing notes signed by South Bay. 
C)  Inform South Bay's management that the past due audit fees are considered an impairment of auditor independence. 
D)  Inform South Bay's management that the past due audit fees may be considered a loan on which interest must be imputed for financial statement purposes.

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

In which of the following instances would the independence of the CPA not be considered to be impaired? The CPA has been retained as the auditor of a

As per the Conceptual Framework for AICPA Independence Standards made effective in 2006, a CPA is required to identify and assess the extent to which a threat to independence exists.

According to the Code of Professional Conduct, which of the following individuals is not in a position to influence an attest engagement (i.e., not a covered member)?

A CPA's retention of client records as a means of enforcing payment of an overdue audit fee is an action that is

In which one of the following situations would a CPA be in violation of the AICPA Code of Professional Conduct in determining a fee?

The SEC has issued independence rules that differ from the AICPA's in all of the following areas except:

PCAOB rules require tax services provided by a public company auditor to be considered and approved by the company's audit committee.

Why do professions establish codes of conduct that define ethical behaviors for members of the profession?

A violation of the profession's ethical standards would most likely have occurred when a CPA

Under which of the following circumstances would the independence of a CPA be considered impaired if the CPA, who also is an attorney, serves as auditor and provides legal services to the same client?

A CPA firm's personnel partner periodically studies the CPA firm's personnel advancement experience to ascertain whether the individuals who were assigned increased degrees of responsibility met predetermined criteria. This is evidence of the CPA firm's adherence to prescribed standards of

With respect to ethics, the rights-based approach

The independence standards issued by the PCAOB do not prohibit the provision of tax services to an attest client.

An auditor is about to commence a recurring annual audit engagement. The continuing auditor's independence would ordinarily be considered to be impaired if the prior year's audit fee

Which of the following statements best describes why the profession of certified public accountants has deemed it essential to promulgate a code of conduct and to establish a mechanism for enforcing observance of the code?

The profession's ethical standards would most likely be considered to have been violated when the CPA represents that specific consulting services will be performed for a stated fee and it is apparent at the time of the representation that the

The term "ethics" refers to a person's propensity to follow the laws of the land.

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Auditing the Inventory Management Process

Auditing the Financing Investing Process: Prepaid Expenses Intangible Assets and Property Plant and Equipment

Auditing the Financing Investing Process: Long-Term Liabilities Stockholders Equity and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Legal Liability

Assurance, Attestation, and Internal Auditing Services

Filters

Exam 19: Professional Conduct, Independence, and Quality Control

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

In which of the following instances would the independence of the CPA not be considered to be impaired? The CPA has been retained as the auditor of a

As per the Conceptual Framework for AICPA Independence Standards made effective in 2006, a CPA is required to identify and assess the extent to which a threat to independence exists.

According to the Code of Professional Conduct, which of the following individuals is not in a position to influence an attest engagement (i.e., not a covered member)?

A CPA's retention of client records as a means of enforcing payment of an overdue audit fee is an action that is

In which one of the following situations would a CPA be in violation of the AICPA Code of Professional Conduct in determining a fee?

The SEC has issued independence rules that differ from the AICPA's in all of the following areas except:

PCAOB rules require tax services provided by a public company auditor to be considered and approved by the company's audit committee.

Why do professions establish codes of conduct that define ethical behaviors for members of the profession?

A violation of the profession's ethical standards would most likely have occurred when a CPA

Under which of the following circumstances would the independence of a CPA be considered impaired if the CPA, who also is an attorney, serves as auditor and provides legal services to the same client?

A CPA firm's personnel partner periodically studies the CPA firm's personnel advancement experience to ascertain whether the individuals who were assigned increased degrees of responsibility met predetermined criteria. This is evidence of the CPA firm's adherence to prescribed standards of

With respect to ethics, the rights-based approach

The independence standards issued by the PCAOB do not prohibit the provision of tax services to an attest client.

An auditor is about to commence a recurring annual audit engagement. The continuing auditor's independence would ordinarily be considered to be impaired if the prior year's audit fee

Which of the following statements best describes why the profession of certified public accountants has deemed it essential to promulgate a code of conduct and to establish a mechanism for enforcing observance of the code?

The profession's ethical standards would most likely be considered to have been violated when the CPA represents that specific consulting services will be performed for a stated fee and it is apparent at the time of the representation that the

The term "ethics" refers to a person's propensity to follow the laws of the land.

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Auditing the Inventory Management Process

Auditing the Financing Investing Process: Prepaid Expenses Intangible Assets and Property Plant and Equipment

Auditing the Financing Investing Process: Long-Term Liabilities Stockholders Equity and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Legal Liability

Assurance, Attestation, and Internal Auditing Services

Filters