2: Professional Responsibilities
Terms in this set (48)
Under the ethical standards of the profession, which of the following positions would be considered a position of significant influence in an audit client?
A policy-making position in the client's finance division.
According to the PCAOB, which of the following tax services may be provided jointly with the audit of an issuer's financial statements without impairing independence?
Reviewing a proposed transaction and informing the client of the tax consequences.
According to the profession's ethical standards, an auditor is considered independent in which of the following instances?
The auditor's checking account, which is fully insured by a federal agency, is held at a client financial institution.
Various situations create threats to auditor independence. Which type of threat most likely results from an auditor's financial interest in a client?
According to the AICPA Code of Professional Conduct, which of the following disclosures of client information by a member CPA to an outside party would normally require client consent?
Disclosure of confidential client information to a third-party service provider when the member does not enter into a confidentiality agreement with the provider.
Which of the following statements is (are) true regarding a CPA employee of a CPA firm taking copies of information contained in client files when the CPA leaves the firm?
Neither I nor II
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?
The auditor should not make management decisions for an audit client.
During the course of an audit, an auditor required additional research and consultation with others. This additional research and consultation is considered to be
An appropriate part of the professional conduct of the engagement.
An accounting firm's independence is most likely to be impaired when
The firm and the client have a material cooperative arrangement.
When a CPA is associated with financial statements that do not comply with promulgated GAAP because the statements would be misleading without the departure, the CPA is not required to disclose
The reason the departure does not have a material effect on the statements.
A member of the AICPA owns an interest in a separate business that performs tax services. If the member does not control the business, who must comply with the Code of Professional Conduct?
The member only.
Which of the following statements best explains why the CPA profession has found it essential to establish ethical standards and means for ensuring their observance?
A distinguishing mark of a profession is its acceptance of responsibility to the public
The AICPA Code of Professional Conduct is violated if a CPA accepts a fee for services and the fee is
Payable after a specified finding is attained in a review of financial statements
A CPA is permitted to disclose confidential client information without the consent of the client to
I. Another CPA firm if the information concerns suspected tax return irregularities
II. A state CPA society voluntary peer review board
Which of the following is a correct statement about the circumstances under which a CPA firm may or may not disclose the names of its clients without the clients' express permission?
A CPA firm may disclose this information unless disclosure would suggest that the client may be experiencing financial difficulties.
According to the AICPA Code of Professional Conduct, under which of the following circumstances may a CPA receive a contingent fee for services?
Representing a client in an IRS examination of the client's federal income tax return
According to the SEC, an auditor is not independent of its issuer audit client in which of the following situations?
The auditor has an investment in an entity that has the ability to exercise significant influence over the audit client.
Competence as an independent auditor includes all of the following except
Warranting the infallibility of the work performed.
According to the ethical standards of the profession, which of the following acts is generally prohibited for a member in public practice?
Accepting a commission for recommending a product to an audit client
According to the ethical standards of the profession, a CPA's independence would most likely be impaired if the CPA
Contracted with a client to supervise the client's office personnel.
According to the Sarbanes-Oxley Act of 2002, the PCAOB has the legal authority to perform each of the following, except
Prosecute suspected criminal violations by registered public accounting firms.
The AICPA Code of Professional Conduct
Expects the CPA to honor the public trust.
According to the standards of the profession, which of the following activities most likely does not impair a CPA's independence?
Providing extensive advisory services for a client.
According to the AICPA Code of Professional Conduct, in which of the following circumstances may a CPA serve on a company's board of directors?
The CPA does not audit the company and has no other business connection with the company.
The concept of materiality is least important to an auditor when considering the
Effects of a direct financial interest in the client on the CPA's independence.
A CPA who is not in public practice is obligated to follow which of the following rules of conduct?
Integrity and objectivity.
According to the AICPA Code of Professional Conduct, which of the following actions will impair independence?
Participating in the hiring or termination of a client's employees.
A CPA serving as a bank director should not be concerned with
The compatibility of serving as a bank director and the possibility of soliciting clients.
During an audit of the financial statements of a company, the CFO provides a spreadsheet to the audit team that contains a number of errors that are material to the financial statements. Under what circumstances would this situation be a violation of the rules of the Sarbanes-Oxley Act of 2002 on improper influence on the conduct of audits?
The audit team discovers the errors through alternate procedures when they discern that the spreadsheet was improperly manipulated by the CFO. This intentional conduct of the CFO does not succeed in affecting the audit.
Which of the following rules of the AICPA Code of Professional Conduct must be observed only by a member who is in public practice?
When a former partner of a registered public accounting firm who left the firm 2 years ago accepts a financial reporting oversight role at an issuer audit client, the independence of the registered public accounting firm is considered impaired unless which of the following is true?
The former partner has no remaining capital balance in the registered public accounting firm
Which of the following areas of professional responsibility should be observed by a CPA not in public practice?
The PCAOB has the power to
Inspect large firms annually.
According to the ethical standards of the profession, which of the following acts generally is prohibited?
Retaining client-provided records after the client has demanded their return.
According to the Code of Professional Conduct of the AICPA, for which type of service may a CPA receive a contingent fee?
Seeking a private letter ruling.
Richard, CPA, performs compilation services for Norton Corporation, a nonpublic entity. The compilation reports issued by Richard disclose lack of independence and are not used by third parties. Richard has accepted a commission from a software company for recommending its products to Norton. The commission agreement was disclosed to Norton. Richard also refers Norton to Cruz, CPA, who is more competent with respect to engagements involving the industry in which Norton operates. Cruz performs an audit of Norton's financial statements and subsequently remits to Richard a portion of the fee collected. The referral fee agreement was likewise disclosed to Norton. Richard accepts the fee. Who, if anyone, has violated the Code of Professional Conduct?
Neither Richard and Cruz.
A violation of the AICPA's ethical standards most likely would have occurred when a CPA
Received a fee for referring audit clients to a company that sells limited partnership interests.
According to the Integrity and Objectivity Rule, a member of the AICPA
Who has a difference of opinion with his or her supervisor about statement preparation has an obligation to act if a material misstatement would otherwise result.
On June 1, Year 1, a CPA obtained a $100,000 personal loan from a financial institution client for whom the CPA provided compilation services. The loan was fully secured and considered material to the CPA's net worth. The CPA paid the loan in full on December 31, Year 1. On April 3, Year 2, the client asked the CPA to audit the client's financial statements for the year ended December 31, Year 2. Is the CPA considered independent with respect to the audit of the client's December 31, Year 2, financial statements?
Yes, because the CPA was not required to be independent at the time the loan was granted.
According to the PCAOB, an accounting firm's independence is least likely to be impaired if the firm
Has an audit client that employs a former firm professional.
An auditor strives to achieve independence in appearance to
Maintain public confidence in the profession.
Which of the following acts by a CPA who is not in public practice is most likely to be a violation of the ethical standards of the profession?
Using the CPA designation without disclosing employment status in connection with financial statements issued for external use by the CPA's employer.
In which of the following circumstances would a CPA who audits XM Corporation lack independence?
The CPA and XM's president each owns 25% of FOB Corporation, a closely held company
Which of the following violates the AICPA's Code of Professional Conduct?
A member shares offices with another member. Their joint letterhead implies that a partnership exists when each member is in fact practicing individually.
The Sarbanes-Oxley Act limits the nonaudit services that an audit firm can provide to issuer audit clients. Which of the following services is still an allowable service that an auditor may provide to an issuer client?
Tax compliance services.
A CPA's retention of client-provided records as a means of enforcing payment of an overdue audit fee is an action that is
Prohibited under the AICPA Code of Professional Conduct.
Adams is the executive partner of Adams & Co., CPAs. One of its smaller clients is a large nonprofit charitable organization. The organization has asked Adams to be on its board of directors, which consists of a large number of the community's leaders. Membership on the board is honorary. Adams & Co. would be considered to be independent
As long as Adams does not perform or give advice on management functions of the organization.
According to the standards of the profession, which of the following activities may be required in exercising due professional care?
Consulting w/ experts (yes)
Obtaining specialty accreditation (no)
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