Question 1

Class action lawsuits are designed to encourage multiple lawsuits arising from the same claim.

Accepted Answer

A) True 
 B)False  False

Question 2

Keeping client information confidential.
The rule on confidentiality is intended to protect the client's information. The rule, however, does not apply in certain circumstances.
A.Explain the rule on confidentiality.
B.Identify the circumstances in which the rule of confidentiality does not apply.

Accepted Answer

A) The rule on confidentiality exists to ensure a free flow and sharing of information between the client and the auditor. The client must be assured that the auditor will not communicate confidential information to outside parties.
B) The rule shall not be consTrued (1) to relieve members of their professional obligations to make disclosures required by GAAP, (2) to affect members' obligation to comply with subpoenas or summonses, (3) to prohibit review of a member's professional practice under AICPA or state CPA society authorization, or (4) to preclude members from initiating a complaint or responding to any inquiry made by a recognized investigative or regulatory body.

Question 3

Commissions and referral fees are allowed to audit firms as long as the audit client is informed of the fees.

Accepted Answer

A) True 
 B)False  False

Question 4

On an audit, only CPAs are required to comply with the AICPA's independence rules.

Accepted Answer

A) True 
 B)False

Question 5

Which term best describes a situation in which an individual is morally or ethically required to do something that conflicts with his or her immediate self-interest?

Accepted Answer

A)  An ethical dilemma. 
B)  An ethical problem. 
C)  An ethical theory. 
D)  None of the above. 
A)  An ethical dilemma. 
B)  An ethical problem. 
C)  An ethical theory. 
D)  None of the above.

Question 6

What does utilitarian theory hold?

Accepted Answer

A)  There is a decision that exists that is optimal for all people. 
B)  What is ethical is the action that achieves the least bad for the greatest number of people. 
C)  What is ethical is the action that achieves the greatest good for the greatest number of people. 
D)  What is ethical is the action that achieves the greatest good for all people. 
A)  There is a decision that exists that is optimal for all people. 
B)  What is ethical is the action that achieves the least bad for the greatest number of people. 
C)  What is ethical is the action that achieves the greatest good for the greatest number of people. 
D)  What is ethical is the action that achieves the greatest good for all people.

Question 7

Which of following is not an action required by Utilitarian Theory?

Accepted Answer

A)  Identify the potential problem. 
B)  Identify the potential impact of actions on each affected party. 
C)  Identify the rights of the affected parties. 
D)  Identify the desirability of each action. 
A)  Identify the potential problem. 
B)  Identify the potential impact of actions on each affected party. 
C)  Identify the rights of the affected parties. 
D)  Identify the desirability of each action.

Question 8

According to the Sarbanes-Oxley Act, which of the following services may an auditor perform without impairing their independence?

Accepted Answer

A)  Actuarial services. 
B)  Appraisal services. 
C)  Internal audit services. 
D)  Tax Services 
A)  Actuarial services. 
B)  Appraisal services. 
C)  Internal audit services. 
D)  Tax Services

Question 9

Which of the following may an auditor use as a defense under the Securities Act of 1933?

Accepted Answer

A)  Contributory Negligence 
B)  Scienter 
C)  Due Care 
D)  Immaterial loss 
A)  Contributory Negligence 
B)  Scienter 
C)  Due Care 
D)  Immaterial loss

Question 10

The AICPA may revoke a member's CPA license for violations of its Code of Professional Conduct.

Accepted Answer

A) True 
 B)False

Question 11

The AICPA's Code of Professional Conduct defines an indirect financial interest as an investment of one percent or less of a client's organization, and because the amount is so small it is considered immaterial

Accepted Answer

A) True 
 B)False

Question 12

In which of the following situations would a CPA be considered independent?

Accepted Answer

A)  A CPA's brother is the Vice-President of Sales at the CPA's audit client. 
B)  A CPA's father was a salesman at the CPA's audit client and now a major portion of the father's pension fund is invested in the audit client. 
C)  A CPA's cousin works as a web-site designer at the audit client. 
D)  A CPA's son works summers at the audit client and has earned 10 shares of stock in the audit client. 
A)  A CPA's brother is the Vice-President of Sales at the CPA's audit client. 
B)  A CPA's father was a salesman at the CPA's audit client and now a major portion of the father's pension fund is invested in the audit client. 
C)  A CPA's cousin works as a web-site designer at the audit client. 
D)  A CPA's son works summers at the audit client and has earned 10 shares of stock in the audit client.

Question 13

The deep pocket theory represents a misunderstanding whereby shareholders mistakenly believe that they are entitled to recover losses on investments for which the auditor provided an unqualified opinion on the financial statements.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following employment positions could an auditor's spouse hold in a client without violating the independence requirements?

Accepted Answer

A)  Controller. 
B)  Treasurer. 
C)  Order entry staff. 
D)  Internal audit director. 
A)  Controller. 
B)  Treasurer. 
C)  Order entry staff. 
D)  Internal audit director.

Question 15

A covered member under the AICPA's rules includes individuals on the engagement team, any individual in a position to influence the engagement team, and all professional staff in the office of the engagement.

Accepted Answer

A) True 
 B)False

Question 16

The concept of the Third-Party Beneficiary Test was established by which court case?

Accepted Answer

A)  Credit Alliance Corp. v. Arthur Andersen & Co. 
B)  Ultramares Corp. v. Touche. 
C)  Citizens State Bank v. Timm, Schmidt, & Co. 
D)  Rosenblum v. Adler. 
A)  Credit Alliance Corp. v. Arthur Andersen & Co. 
B)  Ultramares Corp. v. Touche. 
C)  Citizens State Bank v. Timm, Schmidt, & Co. 
D)  Rosenblum v. Adler.

Question 17

An individual does not need to agree to uphold the code of professional conduct in order to become licensed as a CPA.

Accepted Answer

A) True 
 B)False

Question 18

An ethical dilemma occurs in a situation in which moral duties or obligations conflict.

Accepted Answer

A) True 
 B)False

Question 19

There is a hierarchy of rights to consider when applying rights theory.

Accepted Answer

A) True 
 B)False

Question 20

For which of the following engagements are members of the AICPA required to act with integrity and objectivity?

Accepted Answer

A)  Tax preparation. 
B)  Financial statement review services. 
C)  Financial statement audits. 
D)  All engagements. 
A)  Tax preparation. 
B)  Financial statement review services. 
C)  Financial statement audits. 
D)  All engagements.

Class action lawsuits are designed to encourage multiple lawsuits arising from the same claim.

Keeping client information confidential. The rule on confidentiality is intended to protect the client's information. The rule, however, does not apply in certain circumstances. A.Explain the rule on confidentiality. B.Identify the circumstances in which the rule of confidentiality does not apply.

Commissions and referral fees are allowed to audit firms as long as the audit client is informed of the fees.

On an audit, only CPAs are required to comply with the AICPA's independence rules.

Which term best describes a situation in which an individual is morally or ethically required to do something that conflicts with his or her immediate self-interest?

What does utilitarian theory hold?

Which of following is not an action required by Utilitarian Theory?

According to the Sarbanes-Oxley Act, which of the following services may an auditor perform without impairing their independence?

Which of the following may an auditor use as a defense under the Securities Act of 1933?

The AICPA may revoke a member's CPA license for violations of its Code of Professional Conduct.

The AICPA's Code of Professional Conduct defines an indirect financial interest as an investment of one percent or less of a client's organization, and because the amount is so small it is considered immaterial

In which of the following situations would a CPA be considered independent?

The deep pocket theory represents a misunderstanding whereby shareholders mistakenly believe that they are entitled to recover losses on investments for which the auditor provided an unqualified opinion on the financial statements.

Which of the following employment positions could an auditor's spouse hold in a client without violating the independence requirements?

A covered member under the AICPA's rules includes individuals on the engagement team, any individual in a position to influence the engagement team, and all professional staff in the office of the engagement.

The concept of the Third-Party Beneficiary Test was established by which court case?

An individual does not need to agree to uphold the code of professional conduct in order to become licensed as a CPA.

An ethical dilemma occurs in a situation in which moral duties or obligations conflict.

There is a hierarchy of rights to consider when applying rights theory.

For which of the following engagements are members of the AICPA required to act with integrity and objectivity?

Auditing: Integral to the Economy

The Auditors Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditors

Professional Auditing Standards and the Audit Opinion Formulation Process

A Framework for Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Cash and Marketable Securities

Auditing Inventory, Goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Lived Assets: Acquisition, Use, Impairment, and Disposal

Auditing Debt Obligations and Stockholders Equity Transactions

Activities Required in Completing a Quality Audit

Audit Reports on Financial Statements

Advanced Topics Concerning Complex Auditing Judgments

Other Services Provided by Audit Firms

Filters

Exam 4: Professional Liability, Auditor Judgment Frameworks, and Professional Responsibilities

Class action lawsuits are designed to encourage multiple lawsuits arising from the same claim.

Keeping client information confidential. The rule on confidentiality is intended to protect the client's information. The rule, however, does not apply in certain circumstances. A.Explain the rule on confidentiality. B.Identify the circumstances in which the rule of confidentiality does not apply.

Commissions and referral fees are allowed to audit firms as long as the audit client is informed of the fees.

On an audit, only CPAs are required to comply with the AICPA's independence rules.

Which term best describes a situation in which an individual is morally or ethically required to do something that conflicts with his or her immediate self-interest?

What does utilitarian theory hold?

Which of following is not an action required by Utilitarian Theory?

According to the Sarbanes-Oxley Act, which of the following services may an auditor perform without impairing their independence?

Which of the following may an auditor use as a defense under the Securities Act of 1933?

The AICPA may revoke a member's CPA license for violations of its Code of Professional Conduct.

The AICPA's Code of Professional Conduct defines an indirect financial interest as an investment of one percent or less of a client's organization, and because the amount is so small it is considered immaterial

In which of the following situations would a CPA be considered independent?

The deep pocket theory represents a misunderstanding whereby shareholders mistakenly believe that they are entitled to recover losses on investments for which the auditor provided an unqualified opinion on the financial statements.

Which of the following employment positions could an auditor's spouse hold in a client without violating the independence requirements?

A covered member under the AICPA's rules includes individuals on the engagement team, any individual in a position to influence the engagement team, and all professional staff in the office of the engagement.

The concept of the Third-Party Beneficiary Test was established by which court case?

An individual does not need to agree to uphold the code of professional conduct in order to become licensed as a CPA.

An ethical dilemma occurs in a situation in which moral duties or obligations conflict.

There is a hierarchy of rights to consider when applying rights theory.

For which of the following engagements are members of the AICPA required to act with integrity and objectivity?

Auditing: Integral to the Economy

The Auditors Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditors

Professional Auditing Standards and the Audit Opinion Formulation Process

A Framework for Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Cash and Marketable Securities

Auditing Inventory, Goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Lived Assets: Acquisition, Use, Impairment, and Disposal

Auditing Debt Obligations and Stockholders Equity Transactions

Activities Required in Completing a Quality Audit

Audit Reports on Financial Statements

Advanced Topics Concerning Complex Auditing Judgments

Other Services Provided by Audit Firms

Filters