Question 1

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 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 brokerage firm

Accepted Answer

A)  Which owes the CPA audit fees for more than one year. 
B)  In which the CPA has a large active margin account. 
C)  In which the CPA's brother is the controller. 
D)  Which owes the CPA audit fees for current year services and has just filed a petition for bankruptcy. 
A)  Which owes the CPA audit fees for more than one year. 
B)  In which the CPA has a large active margin account. 
C)  In which the CPA's brother is the controller. 
D)  Which owes the CPA audit fees for current year services and has just filed a petition for bankruptcy.

Question 3

A CPA,while performing an audit,strives to achieve independence in appearance in order to

Accepted Answer

A)  Reduce risk and liability. 
B)  Comply with the generally accepted standards of fieldwork. 
C)  Become independent in fact. 
D)  Maintain public confidence in the profession. 
A)  Reduce risk and liability. 
B)  Comply with the generally accepted standards of fieldwork. 
C)  Become independent in fact. 
D)  Maintain public confidence in the profession.

Question 4

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 5

A financial interest is "beneficially owned" when an individual or entity is NOT the recorded owner of the interest but has a right to some or all of the underlying benefits of ownership.

Accepted Answer

A) True 
 B)False

Question 6

The quality control standards are concerned primarily with

Accepted Answer

A)  Actions of individual auditors. 
B)  A firm's monitoring of its practice. 
C)  Disciplinary actions against individual auditors. 
D)  Preventing legal action. 
A)  Actions of individual auditors. 
B)  A firm's monitoring of its practice. 
C)  Disciplinary actions against individual auditors. 
D)  Preventing legal action.

Question 7

Following the issuance of a PCAOB draft report,how many days does the CPA firm have to respond to accusations?

Accepted Answer

A)  10 days. 
B)  30 days. 
C)  50 days. 
D)  90 days. 
A)  10 days. 
B)  30 days. 
C)  50 days. 
D)  90 days.

Question 8

Which of the following is an element of a CPA firm's quality control system that should be considered in establishing its quality control policies and procedures?

Accepted Answer

A)  Using the audit risk model. 
B)  Using statistical sampling techniques. 
C)  Assigning personnel to engagements. 
D)  Considering audit risk and materiality. 
A)  Using the audit risk model. 
B)  Using statistical sampling techniques. 
C)  Assigning personnel to engagements. 
D)  Considering audit risk and materiality.

Question 9

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 10

In connection with a lawsuit,a third party attempts to gain access to the auditor's working papers.The client's defense of privileged communication will be successful only to the extent it is protected by the

Accepted Answer

A)  Auditor's acquiescence in use of this defense. 
B)  Common law. 
C)  AICPA Code of Professional Conduct. 
D)  State law. 
A)  Auditor's acquiescence in use of this defense. 
B)  Common law. 
C)  AICPA Code of Professional Conduct. 
D)  State law.

Question 11

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

Accepted Answer

A)  Purchasing a product from a third party and reselling it to a client. 
B)  Writing a financial management newsletter promoted and sold by a publishing company. 
C)  Accepting a commission for recommending a product to an audit client. 
D)  Accepting engagements obtained through the efforts of third parties. 
A)  Purchasing a product from a third party and reselling it to a client. 
B)  Writing a financial management newsletter promoted and sold by a publishing company. 
C)  Accepting a commission for recommending a product to an audit client. 
D)  Accepting engagements obtained through the efforts of third parties.

Question 12

Which of the following is not an element of quality control as defined by Statement of Quality Control Standards No.8?

Accepted Answer

A)  Monitoring. 
B)  Independence. 
C)  Human resources. 
D)  Relevant ethical requirements. 
A)  Monitoring. 
B)  Independence. 
C)  Human resources. 
D)  Relevant ethical requirements.

Question 13

A violation of the profession's ethical standards would most likely occur when a CPA who

Accepted Answer

A)  Is also admitted to the Bar represents on letterhead to be both an attorney and a CPA. 
B)  Writes a newsletter on financial management also permits a publishing company to solicit subscriptions by direct mail. 
C)  Is controller of a bank permits the bank to use the controller's CPA title in the listing of officers in its publications. 
D)  Refused to hire a new employee does so because the CPA deemed the candidate to be "too old." 
A)  Is also admitted to the Bar represents on letterhead to be both an attorney and a CPA. 
B)  Writes a newsletter on financial management also permits a publishing company to solicit subscriptions by direct mail. 
C)  Is controller of a bank permits the bank to use the controller's CPA title in the listing of officers in its publications. 
D)  Refused to hire a new employee does so because the CPA deemed the candidate to be "too old."

Question 14

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.

Question 15

What is the primary purpose of the acceptance and continuance of client relationships and specific engagements element of quality control?

Accepted Answer

A)  Guarantee that firms do not associate with clients whose management lacks integrity. 
B)  Provide reasonable assurance that firms do not associate with clients whose management lacks integrity. 
C)  Guarantee that firms will not be sued as a result of association with a client. 
D)  Provide reasonable assurance that firms will not be sued as a result of association with a client. 
A)  Guarantee that firms do not associate with clients whose management lacks integrity. 
B)  Provide reasonable assurance that firms do not associate with clients whose management lacks integrity. 
C)  Guarantee that firms will not be sued as a result of association with a client. 
D)  Provide reasonable assurance that firms will not be sued as a result of association with a client.

Question 16

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 17

Which of the following is allowable for a CPA?

Accepted Answer

A)  A used car loan from a banking client where the client has a lien on the car. 
B)  An uncollateralized signature loan from a client. 
C)  Owning more than five percent of the outstanding shares of client stock in a retirement account. 
D)  The audit engagement partner serves on the client's audit committee. 
A)  A used car loan from a banking client where the client has a lien on the car. 
B)  An uncollateralized signature loan from a client. 
C)  Owning more than five percent of the outstanding shares of client stock in a retirement account. 
D)  The audit engagement partner serves on the client's audit committee.

Question 18

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 19

A basic objective of a CPA firm is to provide professional services that conform to professional standards.Reasonable assurance of achieving this basic objective is provided through

Accepted Answer

A)  Compliance with generally accepted reporting standards. 
B)  A system of quality control. 
C)  A system of peer review. 
D)  Continuing professional education. 
A)  Compliance with generally accepted reporting standards. 
B)  A system of quality control. 
C)  A system of peer review. 
D)  Continuing professional education.

Question 20

If an auditor is not independent of the client,it is unlikely that a user of financial statements will place much reliance on the CPA's work.

Accepted Answer

A) True 
 B)False

Exam 19: Professional Conduct,Independence,and Quality Control

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 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 brokerage firm

A CPA,while performing an audit,strives to achieve independence in appearance in order to

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

A financial interest is "beneficially owned" when an individual or entity is NOT the recorded owner of the interest but has a right to some or all of the underlying benefits of ownership.

The quality control standards are concerned primarily with

Following the issuance of a PCAOB draft report,how many days does the CPA firm have to respond to accusations?

Which of the following is an element of a CPA firm's quality control system that should be considered in establishing its quality control policies and procedures?

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

In connection with a lawsuit,a third party attempts to gain access to the auditor's working papers.The client's defense of privileged communication will be successful only to the extent it is protected by the

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

Which of the following is not an element of quality control as defined by Statement of Quality Control Standards No.8?

A violation of the profession's ethical standards would most likely occur when a CPA who

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

What is the primary purpose of the acceptance and continuance of client relationships and specific engagements element of quality control?

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

Which of the following is allowable for a CPA?

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

A basic objective of a CPA firm is to provide professional services that conform to professional standards.Reasonable assurance of achieving this basic objective is provided through

If an auditor is not independent of the client,it is unlikely that a user of financial statements will place much reliance on the CPA's work.

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

Assurance,Attestation,and Internal Auditing Services

Auditing the Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting 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