Question 1

The communications between CPAs and their clients are privileged under federal law.

Accepted Answer

A) True 
 B)False

Question 2

Statements on Accounting and Review Services are enforceable under the AICPA Code of Professional Conduct.

Accepted Answer

A) True 
 B)False

Question 3

AICPA independence requirements suggest that a CPA should evaluate whether a particular threat to independence would lead a reasonable person,aware of all the relevant facts,to conclude that:

Accepted Answer

A) A questioning mind reveals doubt as to independence. 
B) An unacceptable risk of non-independence exists. 
C) The accountant is definitely not independent. 
D) There is substantial cause for a legal finding of non-independence. 
A) A questioning mind reveals doubt as to independence. 
B) An unacceptable risk of non-independence exists. 
C) The accountant is definitely not independent. 
D) There is substantial cause for a legal finding of non-independence.

Question 4

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

Accepted Answer

A) A distinguishing mark of a profession is its acceptance of responsibility to the public. 
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 ethics. 
D) An essential means of self-protection for the profession is the establishment of flexible ethical standards by the professions. 
A) A distinguishing mark of a profession is its acceptance of responsibility to the public. 
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 ethics. 
D) An essential means of self-protection for the profession is the establishment of flexible ethical standards by the professions.

Question 5

Jones & Company CPAs has one office.Which of the following is least likely to impair independence with respect to an audit client?

Accepted Answer

A) The client owes the firm for two prior years' audit fees. 
B) A partner in the CPA firm is the son of the president of the client. 
C) The wife of a partner in the firm has a small direct financial interest in the client. 
D) A partner in the firm has an investment in a mutual fund that has a direct interest in the client. 
A) The client owes the firm for two prior years' audit fees. 
B) A partner in the CPA firm is the son of the president of the client. 
C) The wife of a partner in the firm has a small direct financial interest in the client. 
D) A partner in the firm has an investment in a mutual fund that has a direct interest in the client.

Question 6

Which of the following family relationships is most likely to impair a CPA's independence with respect to a particular audit client on which the CPA works as a "covered member"?

Accepted Answer

A) A close relative has a material investment in that client of which the CPA is not aware. 
B) A cousin has an immaterial investment in the client of which the CPA is aware. 
C) The CPA's father is president of the audit client. 
D) The CPA's spouse participates in a savings plan sponsored by the client. 
A) A close relative has a material investment in that client of which the CPA is not aware. 
B) A cousin has an immaterial investment in the client of which the CPA is aware. 
C) The CPA's father is president of the audit client. 
D) The CPA's spouse participates in a savings plan sponsored by the client.

Question 7

Which of the following acts by a CPA would not necessarily be considered an act discreditable to the profession under Rule 501 of the AICPA Code of Professional Conduct?

Accepted Answer

A) Prohibiting a client's new CPA firm from reviewing the audit working papers after the client has requested the CPA to do so. 
B) Engaging in discriminatory employment practices. 
C) Robbing a convenience store. 
D) Knowingly signing a false tax return. 
A) Prohibiting a client's new CPA firm from reviewing the audit working papers after the client has requested the CPA to do so. 
B) Engaging in discriminatory employment practices. 
C) Robbing a convenience store. 
D) Knowingly signing a false tax return.

Question 8

A CPA should maintain objectivity and be free of conflicts of interest when performing:

Accepted Answer

A) Audits, but not any other professional services. 
B) All attestation services, but not other professional services. 
C) All attestation and tax services, but not other professional services. 
D) All professional services. 
A) Audits, but not any other professional services. 
B) All attestation services, but not other professional services. 
C) All attestation and tax services, but not other professional services. 
D) All professional services.

Question 9

An audit independence issue might be raised by the auditor's participation in consulting services engagements.Which of the following statements is most consistent with the profession's attitude toward this issue?

Accepted Answer

A) Information obtained as a result of a consulting services engagement is confidential to that specific engagement and should not influence performance of the attest function. 
B) The decision as to loss of independence must be made by the client based on the facts of the particular case. 
C) The auditor should not make management decisions for an audit client. 
D) The auditor who is asked to review management decisions, is also competent to make these decisions and can do so without loss of independence. 
A) Information obtained as a result of a consulting services engagement is confidential to that specific engagement and should not influence performance of the attest function. 
B) The decision as to loss of independence must be made by the client based on the facts of the particular case. 
C) The auditor should not make management decisions for an audit client. 
D) The auditor who is asked to review management decisions, is also competent to make these decisions and can do so without loss of independence.

Question 10

When a threat to independence arises an auditor should consider

Accepted Answer

A) Alternative threats to a lack of independence. 
B) Available safeguards to independence. 
C) Global independence rules. 
D) Required lack of independence approaches. 
A) Alternative threats to a lack of independence. 
B) Available safeguards to independence. 
C) Global independence rules. 
D) Required lack of independence approaches.

Question 11

A small CPA firm provides audit services to a large local company.Almost eighty percent of the CPA firm's revenues come from this client.Which statement is most likely to be true?

Accepted Answer

A) Appearance of independence may be lacking. 
B) The small CPA firm does not have the proficiency to perform a larger audit. 
C) The situation is satisfactory if the auditor exercises due skeptical negative assurance care in the audit. 
D) The auditor should provide an "emphasis of a matter paragraph" to his/her audit report adequately disclosing this information and then it may issue an unqualified opinion. 
A) Appearance of independence may be lacking. 
B) The small CPA firm does not have the proficiency to perform a larger audit. 
C) The situation is satisfactory if the auditor exercises due skeptical negative assurance care in the audit. 
D) The auditor should provide an "emphasis of a matter paragraph" to his/her audit report adequately disclosing this information and then it may issue an unqualified opinion.

Question 12

CPAs may not advertise as to any special expertise other than in accounting,auditing,and tax.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is not a broad category of threat to auditor independence?

Accepted Answer

A) Familiarity. 
B) Safeguards implemented by the client. 
C) Financial self interest. 
D) Undue Influence. 
A) Familiarity. 
B) Safeguards implemented by the client. 
C) Financial self interest. 
D) Undue Influence.

Question 14

Independence of a CPA with respect to a client is not impaired if:

Accepted Answer

A) The CPA has a loan to an officer of the client. 
B) The CPA has an immaterial direct interest in the client. 
C) The CPA is trustee for the client's pension plan. 
D) The CPA has an immaterial joint, closely held business investment with the client. 
A) The CPA has a loan to an officer of the client. 
B) The CPA has an immaterial direct interest in the client. 
C) The CPA is trustee for the client's pension plan. 
D) The CPA has an immaterial joint, closely held business investment with the client.

Question 15

The concept of materiality would be least important to an auditor when considering the:

Accepted Answer

A) Decision whether to use positive or negative confirmations of accounts receivable. 
B) Adequacy of disclosure of a client's illegal act. 
C) Discovery of weaknesses in a client's internal control. 
D) Effects of a direct financial interest in the client upon the CPA's independence. 
A) Decision whether to use positive or negative confirmations of accounts receivable. 
B) Adequacy of disclosure of a client's illegal act. 
C) Discovery of weaknesses in a client's internal control. 
D) Effects of a direct financial interest in the client upon the CPA's independence.

Question 16

An accounting association established a code of ethics for all members.The most likely primary purpose for establishing the code of ethics was to:

Accepted Answer

A) Outline criteria for professional behavior to maintain standards of competence, morality, honesty, and dignity within the association. 
B) Establish standards to follow for effective accounting practice. 
C) Provide a framework within which accounting policies could be effectively developed and executed. 
D) Outline criteria that can be utilized in conducting interviews of potential new accountants. 
A) Outline criteria for professional behavior to maintain standards of competence, morality, honesty, and dignity within the association. 
B) Establish standards to follow for effective accounting practice. 
C) Provide a framework within which accounting policies could be effectively developed and executed. 
D) Outline criteria that can be utilized in conducting interviews of potential new accountants.

Question 17

The AICPA Code of Professional Conduct will ordinarily 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) Actual fee would be substantially higher. 
B) Actual fee would be substantially lower than the fees charged by other CPAs for comparable services. 
C) Fee was a competitive bid. 
D) CPA would not be independent. 
A) Actual fee would be substantially higher. 
B) Actual fee would be substantially lower than the fees charged by other CPAs for comparable services. 
C) Fee was a competitive bid. 
D) CPA would not be independent.

Question 18

While performing an audit an audit of a public company,the auditors discovered material illegal acts and resigned due to the client's refusal to disclose them.The auditors' reason for resignation should be disclosed through: $$\begin{array}{l}

\begin{array} { c} 
\text {  } & \text { CPA Direct Communication } & \text { The Process of Filing } \
\text { Item } & \text { With Shareholders } & \text { a Form 8-K } \
\text { A) } & \text { Yes } & \text { Yes } \
\text { B) } & \text { Yes } & \text { No } \
\text { C) } & \text { No } & \text { Yes } \
\text { D) } & \text { No } & \text { No }
\end{array}
\end{array}$$

Accepted Answer

A) Option A 
B) Option B 
C) Option C 
D) Option D 
A) Option A 
B) Option B 
C) Option C 
D) Option D

Question 19

Which of the following are not enforceable under the AICPA Code of Professional Conduct?

Accepted Answer

A) Statements on Auditing Standards. 
B) Statements on Standards for Accounting and Review Services. 
C) Statements on Responsibilities in Tax Practice. 
D) Statements of Standards for Consulting Services. 
A) Statements on Auditing Standards. 
B) Statements on Standards for Accounting and Review Services. 
C) Statements on Responsibilities in Tax Practice. 
D) Statements of Standards for Consulting Services.

Question 20

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 since 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 since 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.

Exam 3: Professional Ethics

The communications between CPAs and their clients are privileged under federal law.

Statements on Accounting and Review Services are enforceable under the AICPA Code of Professional Conduct.

AICPA independence requirements suggest that a CPA should evaluate whether a particular threat to independence would lead a reasonable person,aware of all the relevant facts,to conclude that:

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

Jones & Company CPAs has one office.Which of the following is least likely to impair independence with respect to an audit client?

Which of the following family relationships is most likely to impair a CPA's independence with respect to a particular audit client on which the CPA works as a "covered member"?

Which of the following acts by a CPA would not necessarily be considered an act discreditable to the profession under Rule 501 of the AICPA Code of Professional Conduct?

A CPA should maintain objectivity and be free of conflicts of interest when performing:

An audit independence issue might be raised by the auditor's participation in consulting services engagements.Which of the following statements is most consistent with the profession's attitude toward this issue?

When a threat to independence arises an auditor should consider

A small CPA firm provides audit services to a large local company.Almost eighty percent of the CPA firm's revenues come from this client.Which statement is most likely to be true?

CPAs may not advertise as to any special expertise other than in accounting,auditing,and tax.

Which of the following is not a broad category of threat to auditor independence?

Independence of a CPA with respect to a client is not impaired if:

The concept of materiality would be least important to an auditor when considering the:

An accounting association established a code of ethics for all members.The most likely primary purpose for establishing the code of ethics was to:

The AICPA Code of Professional Conduct will ordinarily 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:

Which of the following are not enforceable under the AICPA Code of Professional Conduct?

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

The Role of the Public Accountant in the American Economy

Professional Standards

Legal Liability of CPAS

Audit Evidence and Documentation

Audit Planning, understanding the Client, assessing Risks, and Responding

Internal Control

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, Notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Property Plant and Equipment: Depreciation and Depletion

Accounts Payable and Other Liabilities

Debt and Equity Capital

Auditing Operations and Completing the Audit

Auditors Report

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, Operational, and Compliance Auditing

Probability-Proportion-To-Size Sampling

Filters