Question 1

According to the profession's ethical standards,a CPA would be considered independent in which of the following instances?

Accepted Answer

A)  A client leases part of an office building from the CPA, resulting in a material indirect financial interest to the CPA. 
B)  The CPA has a material direct financial interest in a client, but transfers the interest into a blind trust. 
C)  The CPA owns an office building and the mortgage on the building is guaranteed by a client. 
D)  The CPA belongs to a country club client in which membership requires an annual fee. 
A)  A client leases part of an office building from the CPA, resulting in a material indirect financial interest to the CPA. 
B)  The CPA has a material direct financial interest in a client, but transfers the interest into a blind trust. 
C)  The CPA owns an office building and the mortgage on the building is guaranteed by a client. 
D)  The CPA belongs to a country club client in which membership requires an annual fee.

Question 2

Which professional and regulatory bodies establish the ethical and professional rules for auditors of:
 (1)public companies and (2)private companies?

Accepted Answer

(1)The principles,rules and regulations

Question 3

Ms.Lembke is a partner for DTS,a CPA firm.She is the lead partner for the firm's largest client,The Grey Elephant.Ms.Zadina,who works in the same office as Ms.Lembke,has a sister who is the controller for The Grey Elephant.Because of potential independence issues,Ms.Zadina does no work for The Grey Elephant.Ms.Zadina is being considered for promotion to partner.What independence issues should Ms.Lembke consider before promoting Ms.Zadina?

Accepted Answer

Interpretation 101-1 of the AICPA Rules

Question 4

The Principles of Professional Conduct set forth the minimum standards.

Accepted Answer

A) True 
 B)False

Question 5

The AICPA Code of Professional Conduct deals mainly with behavior and actions of individual auditors.

Accepted Answer

A) True 
 B)False

Question 6

A CPA firm evaluates its personnel advancement experience to ascertain whether individuals assigned to increased degrees of responsibility meet predetermined criteria.This policy is evidence of the firm's adherence to which of the following prescribed standards?

Accepted Answer

A)  Professional ethics. 
B)  Supervision and review. 
C)  Accounting and review services. 
D)  Quality control. 
A)  Professional ethics. 
B)  Supervision and review. 
C)  Accounting and review services. 
D)  Quality control.

Question 7

Rules of Conduct are enforceable.

Accepted Answer

A) True 
 B)False

Question 8

In which of the following circumstances would a CPA be bound by ethics to refrain from disclosing any confidential information obtained during the course of a professional engagement?

Accepted Answer

A)  The CPA is issued a summons enforceable by a court order that orders the CPA to present confidential information. 
B)  A major stockholder of a client company seeks accounting information from the CPA after management declined to disclose the requested information. 
C)  Confidential client information is requested as part of a quality review of the CPA's practice by a review team authorized by the AICPA. 
D)  An inquiry by a disciplinary body of a state CPA society requests confidential client information. 
A)  The CPA is issued a summons enforceable by a court order that orders the CPA to present confidential information. 
B)  A major stockholder of a client company seeks accounting information from the CPA after management declined to disclose the requested information. 
C)  Confidential client information is requested as part of a quality review of the CPA's practice by a review team authorized by the AICPA. 
D)  An inquiry by a disciplinary body of a state CPA society requests confidential client information.

Question 9

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

Question 10

Which of the following is required for a firm to designate itself as a "Member of the American Institute of Certified Public Accountants" on its letterhead?

Accepted Answer

A)  At least one of the partners must be a member. 
B)  The partners whose names appear in the firm name must be members. 
C)  All partners must be members. 
D)  The firm must be a dues-paying member. 
A)  At least one of the partners must be a member. 
B)  The partners whose names appear in the firm name must be members. 
C)  All partners must be members. 
D)  The firm must be a dues-paying member.

Question 11

Within the context of quality control,the primary purpose of continuing professional education and training activities is to enable a CPA firm to provide personnel within the firm with

Accepted Answer

A)  Technical training that ensures proficiency as an auditor. 
B)  Opportunities for career advancement outside the accounting firm. 
C)  Knowledge required to fulfill assigned responsibilities. 
D)  Knowledge required to perform a peer review. 
A)  Technical training that ensures proficiency as an auditor. 
B)  Opportunities for career advancement outside the accounting firm. 
C)  Knowledge required to fulfill assigned responsibilities. 
D)  Knowledge required to perform a peer review.

Question 12

When auditing a public company,which of the following impairs an auditor's independence?

Accepted Answer

A)  Offering audit services as well as preparing the tax return for the same client. 
B)  The auditor's spouse works in the assembly line of an audit client. 
C)  Lack of fee disclosure in the client's annual report. 
D)  The auditor has been a partner on the engagement for ten years. 
A)  Offering audit services as well as preparing the tax return for the same client. 
B)  The auditor's spouse works in the assembly line of an audit client. 
C)  Lack of fee disclosure in the client's annual report. 
D)  The auditor has been a partner on the engagement for ten years.

Question 13

A CPA firm would be reasonably assured of meeting its overall responsibility to provide services that conform with professional standards by

Accepted Answer

A)  Adhering to generally accepted accounting principles. 
B)  Implementing an appropriate system of quality control. 
C)  Joining professional societies that enforce ethical conduct. 
D)  Maintaining an attitude of independence in its engagements. 
A)  Adhering to generally accepted accounting principles. 
B)  Implementing an appropriate system of quality control. 
C)  Joining professional societies that enforce ethical conduct. 
D)  Maintaining an attitude of independence in its engagements.

Question 14

Ethical rulings are enforceable.

Accepted Answer

A) True 
 B)False

Question 15

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 16

In determining estimates of fees,an auditor may take into account each of the following,except the:

Accepted Answer

A)  Value of the service to the client. 
B)  Degree of responsibility assumed by undertaking the engagement. 
C)  Skills required to perform the service. 
D)  Attainment of specific findings. 
A)  Value of the service to the client. 
B)  Degree of responsibility assumed by undertaking the engagement. 
C)  Skills required to perform the service. 
D)  Attainment of specific findings.

Question 17

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.

Question 18

The primary purpose of establishing quality control policies and procedures for deciding whether to accept a new client is to

Accepted Answer

A)  Enable the CPA firm to attest to the reliability of the client. 
B)  Satisfy the CPA firm's duty to the public concerning the acceptance of new clients. 
C)  Minimize the likelihood of association with clients whose management lacks integrity. 
D)  Anticipate before performing any fieldwork whether an unqualified opinion can be expressed. 
A)  Enable the CPA firm to attest to the reliability of the client. 
B)  Satisfy the CPA firm's duty to the public concerning the acceptance of new clients. 
C)  Minimize the likelihood of association with clients whose management lacks integrity. 
D)  Anticipate before performing any fieldwork whether an unqualified opinion can be expressed.

Question 19

When auditing a public company,a CPA must follow the auditing standards and Code of Professional Conduct of the PCAOB.

Accepted Answer

A) True 
 B)False

Question 20

Match each term below with its definition as provided by the AICPA Rules of Conduct.

Accepted Answer

The answer of Match each term below with its definition...

According to the profession's ethical standards,a CPA would be considered independent in which of the following instances?

Which professional and regulatory bodies establish the ethical and professional rules for auditors of: (1)public companies and (2)private companies?

The Principles of Professional Conduct set forth the minimum standards.

The AICPA Code of Professional Conduct deals mainly with behavior and actions of individual auditors.

A CPA firm evaluates its personnel advancement experience to ascertain whether individuals assigned to increased degrees of responsibility meet predetermined criteria.This policy is evidence of the firm's adherence to which of the following prescribed standards?

Rules of Conduct are enforceable.

In which of the following circumstances would a CPA be bound by ethics to refrain from disclosing any confidential information obtained during the course of a professional engagement?

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.

Which of the following is required for a firm to designate itself as a "Member of the American Institute of Certified Public Accountants" on its letterhead?

Within the context of quality control,the primary purpose of continuing professional education and training activities is to enable a CPA firm to provide personnel within the firm with

When auditing a public company,which of the following impairs an auditor's independence?

A CPA firm would be reasonably assured of meeting its overall responsibility to provide services that conform with professional standards by

Ethical rulings are enforceable.

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

In determining estimates of fees,an auditor may take into account each of the following,except the:

The primary purpose of establishing quality control policies and procedures for deciding whether to accept a new client is to

When auditing a public company,a CPA must follow the auditing standards and Code of Professional Conduct of the PCAOB.

Match each term below with its definition as provided by the AICPA Rules of Conduct.

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

Exam 19: Professional Conduct,Independence,and Quality Control

According to the profession's ethical standards,a CPA would be considered independent in which of the following instances?

Which professional and regulatory bodies establish the ethical and professional rules for auditors of: (1)public companies and (2)private companies?

The Principles of Professional Conduct set forth the minimum standards.

The AICPA Code of Professional Conduct deals mainly with behavior and actions of individual auditors.

A CPA firm evaluates its personnel advancement experience to ascertain whether individuals assigned to increased degrees of responsibility meet predetermined criteria.This policy is evidence of the firm's adherence to which of the following prescribed standards?

Rules of Conduct are enforceable.

In which of the following circumstances would a CPA be bound by ethics to refrain from disclosing any confidential information obtained during the course of a professional engagement?

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.

Which of the following is required for a firm to designate itself as a "Member of the American Institute of Certified Public Accountants" on its letterhead?

Within the context of quality control,the primary purpose of continuing professional education and training activities is to enable a CPA firm to provide personnel within the firm with

When auditing a public company,which of the following impairs an auditor's independence?

A CPA firm would be reasonably assured of meeting its overall responsibility to provide services that conform with professional standards by

Ethical rulings are enforceable.

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

In determining estimates of fees,an auditor may take into account each of the following,except the:

The primary purpose of establishing quality control policies and procedures for deciding whether to accept a new client is to

When auditing a public company,a CPA must follow the auditing standards and Code of Professional Conduct of the PCAOB.

Match each term below with its definition as provided by the AICPA Rules of Conduct.

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