Exam 11: Conflicts of Interest

The determination of whether an American CPA has,or does not have,a conflict of interest is resolved by:

The IFAC code of conduct recognizes the concept of "implied consent." Implied consent,in the context of conflicts of interest,means that:

The concept of "discounting," in the context of accountant conflicts of interest,means that:

A CPA firm knows that clients find it difficult to change auditors after a professional relationship has been in place for several years because the termination of an auditor often makes investors concerned about the trustworthiness of a company's financial statements.To take advantage of this fact,this CPA firm routinely bids on new audit engagements at a fee that is likely to be 25 percent lower than the fees bid by its competitors.The CPA firm plans to recoup this fee differential by steadily raising its fees to above-market rates in subsequent years.The CPA firm's policy creates:

An employee at an information systems consulting firm recently asked a partner at the firm for a 20% pay raise.The partner said that this request was excessive.To resolve this issue amicably,the employee and the partner agreed that the firm's managing partner,who is well-respected,would mediate this issue and determine the fair amount of the pay raise.All parties agreed to this arrangement.The managing partner who is deciding this issue is a CPA.She:

According to the IFAC Code of Conduct,the determination of whether a professional accountant has,or does not have,a conflict of interest is resolved by:

An accountant's conflict of interest:

What is an apparent conflict of interest? Provide an example.

An auditing firm has a standard fee policy that it maintains internally and uses in bidding on auditing projects.However,in preparing bids,it increases its audit fee by up to 20% for corporate audit clients that have December 31 fiscal year-ends and lowers its audit fees by up to 30% for government entities that have fiscal years that end during the summer months.The auditing firm justifies this pricing practice by noting that its personnel are overwhelmed with work during the end-of-year "busy season," but often are idle during the summer months.This auditor:

A CPA provides services to two clients in the same industry.Both clients have been informed of this fact and have acknowledged their approval in writing.As a result:

The concept of "moral licensing," in the context of conflicts of interest,relates to:

The materiality of a conflict of interest should be evaluated from the perspective of:

Two CPAs are good friends as well as partners together in a CPA firm.They recently invested their money together to buy an apartment building.One of the tenants in the apartment building is an employee of their CPA firm,and another tenant is the father of one of the two CPAs.The father's lease terminates soon and the father wishes to renew the lease at the same rental amount that he currently is paying.Under the AICPA's Code of Professional Conduct:

A CPA performs tax advisory services,but it does not provide tax return preparation services.For this CPA,the most significant conflict of interest that is likely to arise is between:

A CPA usually charges $3,000 to prepare a corporate income tax return,including all supplemental schedules.This CPA has agreed to charge the CFO of a mid-size corporation only $10 to prepare the CPA's personal tax return and $5,000 to prepare the corporation's tax return.This CPA:

Many companies adopt policies that preclude key employees from owning stock in company suppliers.Companies establish this type of policy to:

For a CPA who performs auditing services,the most significant conflict of interest that is likely to arise is between:

A CPA's conflicts of interest are determined by: