Question 1

Of the four parts of the AICPA's Code of Professional Conduct, which part is enforceable?

Accepted Answer

A)  Ethical Rulings 
B)  Rules of Conduct 
C)  Principles 
D)  Interpretations 
A)  Ethical Rulings 
B)  Rules of Conduct 
C)  Principles 
D)  Interpretations

Question 2

Independence is required of a CPA when performing:

Accepted Answer

A)  external audits. 
B)  all attestation services. 
C)  all attestation and tax services. 
D)  all professional services. 
A)  external audits. 
B)  all attestation services. 
C)  all attestation and tax services. 
D)  all professional services.

Question 3

Describe the methods used by the AICPA and State Boards of Accountancy to enforce the rules of conduct.

Accepted Answer

The AICPA uses two levels of disciplinar

Question 4

Which of the following services are allowed by the SEC whenever a CPA also audits the company?

Accepted Answer

A)  Internal audit outsourcing. 
B)  Legal services unrelated to the audit. 
C)  Appraisal or valuation services. 
D)  Services related to assessing the effectiveness of internal control over financial reporting. 
A)  Internal audit outsourcing. 
B)  Legal services unrelated to the audit. 
C)  Appraisal or valuation services. 
D)  Services related to assessing the effectiveness of internal control over financial reporting.

Question 5

The CPA must not subordinate his or her professional judgment to that of others in any:

Accepted Answer

A)  engagement. 
B)  audit engagement. 
C)  engagement excluding tax services. 
A)  engagement. 
B)  audit engagement. 
C)  engagement excluding tax services.

Question 6

For which of the following professional services must CPAs be independent?

Accepted Answer

A)  Management advisory services. 
B)  Audits of financial statements. 
C)  Preparation of tax returns. 
D)  All three of the above. 
A)  Management advisory services. 
B)  Audits of financial statements. 
C)  Preparation of tax returns. 
D)  All three of the above.

Question 7

According to the Code of Professional Conduct which of the following is true with respect to records in a CPA's possession?

Accepted Answer

A)  Extensive analyses of inventory prepared by the client at the auditor's request are working papers that belong to the auditor and need not be furnished to the client upon request. 
B)  The auditor who returns client records must comply with any subsequent requests to again provide such information. 
C)  A corporation's consolidating worksheets of their multinational conglomerate belong to the auditor and need not be furnished to the client upon request. 
D)  An auditor may retain client records if fees due with respect to a completed engagement have not been paid. 
A)  Extensive analyses of inventory prepared by the client at the auditor's request are working papers that belong to the auditor and need not be furnished to the client upon request. 
B)  The auditor who returns client records must comply with any subsequent requests to again provide such information. 
C)  A corporation's consolidating worksheets of their multinational conglomerate belong to the auditor and need not be furnished to the client upon request. 
D)  An auditor may retain client records if fees due with respect to a completed engagement have not been paid.

Question 8

The audit committee of a private company need not approve all non-audit services provided by the company's financial statement auditor.

Accepted Answer

A) True 
 B)False

Question 9

The AICPA's Code of Professional Conduct states that a CPA should maintain integrity and objectivity. The term "objectivity" in the Code refers to a CPA's ability to:

Accepted Answer

A)  choose independently between alternate accounting principles and auditing standards. 
B)  distinguish between accounting practices that are acceptable and those that are not. 
C)  be unyielding in all matters dealing with auditing procedures. 
D)  maintain an impartial attitude on matters that come under the CPA's review. 
A)  choose independently between alternate accounting principles and auditing standards. 
B)  distinguish between accounting practices that are acceptable and those that are not. 
C)  be unyielding in all matters dealing with auditing procedures. 
D)  maintain an impartial attitude on matters that come under the CPA's review.

Question 10

If a nonpublic company asks an accountant to perform a review engagement, and the accountant has an immaterial direct financial interest in the company, the accountant is:

Accepted Answer

A)  independent because the financial interest is immaterial and, therefore, may issue a review report. 
B)  not independent and, therefore, may not issue a review report. 
C)  not independent and, therefore, may not be associated with the financial statements. 
D)  not independent and, therefore, may issue a review report, but may not issue an auditor's opinion. 
A)  independent because the financial interest is immaterial and, therefore, may issue a review report. 
B)  not independent and, therefore, may not issue a review report. 
C)  not independent and, therefore, may not be associated with the financial statements. 
D)  not independent and, therefore, may issue a review report, but may not issue an auditor's opinion.

Question 11

Information obtained by a CPA from a client is legally privileged in federal court.

Accepted Answer

A) True 
 B)False

Question 12

Rule 505 of the AICPA's Code of Professional Conduct permits CPA firms to organize as:

Accepted Answer

A)  proprietorships or partnerships only. 
B)  proprietorships, partnerships, or professional corporations. 
C)  proprietorships, general partnerships, general corporations, professional corporations, limited liability companies, and limited liability partnerships if permitted by state law. 
D)  single proprietorships, partnerships, professional corporations if permitted by state law, or regular corporations. 
A)  proprietorships or partnerships only. 
B)  proprietorships, partnerships, or professional corporations. 
C)  proprietorships, general partnerships, general corporations, professional corporations, limited liability companies, and limited liability partnerships if permitted by state law. 
D)  single proprietorships, partnerships, professional corporations if permitted by state law, or regular corporations.

Question 13

Companies are required to disclose in their proxy statement or annual filings with the SEC the total amount of audit and non-audit fees paid to the audit firm for the two most recent years. Which of the following is not one of the categories of fees that must be disclosed?

Accepted Answer

A)  tax fees 
B)  consulting fees 
C)  audit-related fees 
D)  all other fees 
A)  tax fees 
B)  consulting fees 
C)  audit-related fees 
D)  all other fees

Question 14

Which one of the following statements is false?

Accepted Answer

A)  Confidentiality is broken when an auditor is presented with a subpoena concerning an audit client. 
B)  Information that a CPA obtains from a client is generally not privileged. 
C)  When a CPA firm conducts an AICPA-authorized peer review of the quality controls of another CPA firm, permission of the client is not needed to examine audit documentation. 
D)  A CPA firm which observes substandard audit documentation of another firm during a peer review can initiate a complaint to the AICPA. 
A)  Confidentiality is broken when an auditor is presented with a subpoena concerning an audit client. 
B)  Information that a CPA obtains from a client is generally not privileged. 
C)  When a CPA firm conducts an AICPA-authorized peer review of the quality controls of another CPA firm, permission of the client is not needed to examine audit documentation. 
D)  A CPA firm which observes substandard audit documentation of another firm during a peer review can initiate a complaint to the AICPA.

Question 15

What are the six Ethical Principles stated in the Code of Professional Conduct? Briefly discuss each principle. Are these principles enforceable?

Accepted Answer

The six Ethical Principles of the Code o

Question 16

An auditor's independence is considered impaired if the auditor has:

Accepted Answer

A)  an immaterial, indirect financial interest in a client. 
B)  an outstanding $8,000 balance on a credit card issued by a client. 
C)  an automobile loan from a client bank, collateralized by the automobile. 
D)  a joint, closely held business investment with the client that is material to the auditor's net worth. 
A)  an immaterial, indirect financial interest in a client. 
B)  an outstanding $8,000 balance on a credit card issued by a client. 
C)  an automobile loan from a client bank, collateralized by the automobile. 
D)  a joint, closely held business investment with the client that is material to the auditor's net worth.

Question 17

Rule 101, Independence, prohibits a CPA from performing both audit services and bookkeeping services for the same public company in the same year.

Accepted Answer

A) True 
 B)False

Question 18

In some situations, the interpretations of the Rules of Conduct permit former partners to have relationships with a client of the firm without affecting the firm's independence. Which of the following situations would cause a loss of independence?
I. The former partner uses the CPA firm's office space and has significant influence over a client.
II. The former partner severs relations with the firm and accepts employment with the firm's client after having been retired for 18 months.
III. The former partner is held out as an associate of the firm and takes part in the firm's business activities.

Accepted Answer

A)  I and II 
B)  I and III 
C)  II and III 
D)  I, II and III 
A)  I and II 
B)  I and III 
C)  II and III 
D)  I, II and III

Question 19

Which of the following statements is true? The CPA firm will lose its independence if:

Accepted Answer

A)  a staff auditor providing audit services to the client acquires stock in that client. 
B)  a staff tax preparer who provides 15 hours of non-audit services to the client acquires stock in that client. 
C)  an audit manager in an office different than the office providing audit services has a direct, immaterial financial interest in the audit client. 
D)  a covered member has an indirect, immaterial financial interest in an audit client. 
A)  a staff auditor providing audit services to the client acquires stock in that client. 
B)  a staff tax preparer who provides 15 hours of non-audit services to the client acquires stock in that client. 
C)  an audit manager in an office different than the office providing audit services has a direct, immaterial financial interest in the audit client. 
D)  a covered member has an indirect, immaterial financial interest in an audit client.

Question 20

The Code of Conduct rule on independence indicates that materiality must be considered when:

Accepted Answer

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

Exam 4: Professional Ethics

Of the four parts of the AICPA's Code of Professional Conduct, which part is enforceable?

Independence is required of a CPA when performing:

Describe the methods used by the AICPA and State Boards of Accountancy to enforce the rules of conduct.

Which of the following services are allowed by the SEC whenever a CPA also audits the company?

The CPA must not subordinate his or her professional judgment to that of others in any:

For which of the following professional services must CPAs be independent?

According to the Code of Professional Conduct which of the following is true with respect to records in a CPA's possession?

The audit committee of a private company need not approve all non-audit services provided by the company's financial statement auditor.

The AICPA's Code of Professional Conduct states that a CPA should maintain integrity and objectivity. The term "objectivity" in the Code refers to a CPA's ability to:

If a nonpublic company asks an accountant to perform a review engagement, and the accountant has an immaterial direct financial interest in the company, the accountant is:

Information obtained by a CPA from a client is legally privileged in federal court.

Rule 505 of the AICPA's Code of Professional Conduct permits CPA firms to organize as:

Companies are required to disclose in their proxy statement or annual filings with the SEC the total amount of audit and non-audit fees paid to the audit firm for the two most recent years. Which of the following is not one of the categories of fees that must be disclosed?

Which one of the following statements is false?

What are the six Ethical Principles stated in the Code of Professional Conduct? Briefly discuss each principle. Are these principles enforceable?

An auditor's independence is considered impaired if the auditor has:

Rule 101, Independence, prohibits a CPA from performing both audit services and bookkeeping services for the same public company in the same year.

Which of the following statements is true? The CPA firm will lose its independence if:

The Code of Conduct rule on independence indicates that materiality must be considered when:

The Demand for Audit and Other Assurance Services

The CPA Profession

Audit Reports

Legal Liability

The CPA Profession

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Section 404 Audits of Internal Control and Control Risk

Fraud Auditing

The Impact of Information Technology on the Audit Process

Overall Audit Plan and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details and Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls and Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

Filters