Question 1

From whom should a CPA not accept a commission for recommending a product or service?

Accepted Answer

A)  A tax client. 
B)  An audit client. 
C)  A financial-planning client. 
D)  A management-services client. 
E)  Any of the above. 
A)  A tax client. 
B)  An audit client. 
C)  A financial-planning client. 
D)  A management-services client. 
E)  Any of the above.

Question 2

Independence is required for which of the following types of services?

Accepted Answer

A)  Audit work. 
B)  Tax work. 
C)  Consulting. 
D)  Independence is always required of the CPA. 
A)  Audit work. 
B)  Tax work. 
C)  Consulting. 
D)  Independence is always required of the CPA.

Question 3

Which is the best definition of scienter?

Accepted Answer

A)  Fraudulent conduct in the purchase of a security. 
B)  A causal connection between a misstatement and a material loss. 
C)  A material omission of facts. 
D)  A wrongful state of mind when making a misrepresentation. 
A)  Fraudulent conduct in the purchase of a security. 
B)  A causal connection between a misstatement and a material loss. 
C)  A material omission of facts. 
D)  A wrongful state of mind when making a misrepresentation.

Question 4

Julie Webb, CPA takes out an automobile loan with First National Bank of Wellville (FNBW) while attending the University of Wellville. Julie graduates one year later and is hired as an auditor by Best and Driftwood, LLP. Her first assigned audit engagement is with First National Bank of Wellville, a client of Best and Driftwood. As a new audit assistant, Julie continues to pay her automobile loan payments each month. Which of the following best describes Julie's independence status?

Accepted Answer

A)  Impaired because Julie has a direct financial interest in FNBW. 
B)  Impaired because Julie has a material indirect financial interest in FNBW. 
C)  Not impaired because Julie has an immaterial indirect financial interest in FNBW. 
D)  Not impaired because Julie is permitted to take normal loans from FNBW. 
A)  Impaired because Julie has a direct financial interest in FNBW. 
B)  Impaired because Julie has a material indirect financial interest in FNBW. 
C)  Not impaired because Julie has an immaterial indirect financial interest in FNBW. 
D)  Not impaired because Julie is permitted to take normal loans from FNBW.

Question 5

Public confidence is mostly maintained by the public accounting profession through integrity based on personal moral standards and it is reinforced by codes of conduct.

Accepted Answer

A) True 
 B)False

Question 6

Which of following is not part of the ethical framework derived from utilitarianism and rights theories?

Accepted Answer

A)  Identification of the legal issues. 
B)  Determination of affected parties and their rights. 
C)  Determination of the most important rights. 
D)  Development of alternative courses of action. 
A)  Identification of the legal issues. 
B)  Determination of affected parties and their rights. 
C)  Determination of the most important rights. 
D)  Development of alternative courses of action.

Question 7

Which of the following is a principle of the Code of Ethics of the International Ethics Standards Board for Accountants but not a principle found in the AICPA Professional Code of Conduct?

Accepted Answer

A)  Integrity 
B)  Professional Behavior 
C)  Confidentiality 
D)  Objectivity 
A)  Integrity 
B)  Professional Behavior 
C)  Confidentiality 
D)  Objectivity

Question 8

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

Accepted Answer

A)  A CPA has obtained an auto loan from a banking client. 
B)  A CPA has obtained a 90-day signature loan from a client. 
C)  A CPA has obtained a loan for investment purposes from a client. 
D)  A CPA has obtained an interest-free loan from a banking client. 
A)  A CPA has obtained an auto loan from a banking client. 
B)  A CPA has obtained a 90-day signature loan from a client. 
C)  A CPA has obtained a loan for investment purposes from a client. 
D)  A CPA has obtained an interest-free loan from a banking client.

Question 9

According to the framework for professional decision making, the first step in decision-making is to structure the audit problem

Accepted Answer

A) True 
 B)False

Question 10

What is information about a client that cannot be subpoenaed by a court of law called?

Accepted Answer

A)  Confidential information. 
B)  Privileged communication. 
C)  Contingent information. 
D)  Audit communication. 
A)  Confidential information. 
B)  Privileged communication. 
C)  Contingent information. 
D)  Audit communication.

Question 11

Confidentiality is the cornerstone of the auditing profession.

Accepted Answer

A) True 
 B)False

Question 12

AICPA Code of Professional Conduct, Rule 101.
Livingston and Associates is a audit firm in Las Vegas, Nevada and it performs the financial statement audit for Smith Plastics, Inc. For each non-related situation below, determine if each individual represented is independent of Smith Plastics and if Livingston and Associates (the Firm) is independent of Smith Plastics:
A.Sam Livingston, an audit partner, meets Jill Warner, CFO of Smith Plastics after the engagement begins and they fall in love. Sam and Jill marry in Lake Tahoe, California a short time later. Sam Livingston will not be on the audit engagement team of Smith Plastics.
B.The Firm hires Billy Messer as a staff auditor. Billy is aware that his father has a material investment in Smith Plastics. Billy will not work on the Smith Plastics audit.
C.Lucy Brown is an audit manager at the Firm. Bob, her high school aged son, owns 1% of the equity of Smith Plastics. The investment is not material to Bob or Lucy's net worth. Lucy is assigned as the audit manager for the Smith Plastics engagement.
D.Smith Plastics has paid all but $5,000 of the previous years audit fees.
E.Julie Simpson, tax partner at the Firm has a 401k plan with multiple securities making up the balance. One of the securities in the plan is that of Smith Plastics which comprises .05% of the total balance of Julie's 401k. Julie does not have a significant portion of her retirement or savings in this particular plan.

Accepted Answer

A. Sam's newly found family relationship

Question 13

Under common law, which standard may a client sue an auditor for failure to demonstrate due care?

Accepted Answer

A)  Negligence 
B)  Gross Negligence 
C)  Fraud 
D)  All of the above. 
A)  Negligence 
B)  Gross Negligence 
C)  Fraud 
D)  All of the above.

Question 14

Commissions and referral fees are not permitted for which types of services?

Accepted Answer

A)  Tax. 
B)  Reviews. 
C)  Audits. 
D)  Both B and C. 
A)  Tax. 
B)  Reviews. 
C)  Audits. 
D)  Both B and C.

Question 15

A CPA firm may include the name of only one past owner in the firm name.

Accepted Answer

A) True 
 B)False

Question 16

Mark Pulley is an auditor at Pulley and Hurst, LLC. If Pulley's five-year-old daughter owns shares of stock in McBurgers Corporation, then what is Pulley considered to have?

Accepted Answer

A)  An immaterial indirect financial interest in McBurgers Corporation. 
B)  A material indirect financial interest in the McBurgers Corporation. 
C)  A loophole for claiming independence from McBurgers Corporation. 
D)  An direct financial interest in McBurgers Corporation. 
A)  An immaterial indirect financial interest in McBurgers Corporation. 
B)  A material indirect financial interest in the McBurgers Corporation. 
C)  A loophole for claiming independence from McBurgers Corporation. 
D)  An direct financial interest in McBurgers Corporation.

Question 17

Gross negligence is a failure to use even minimal care or evidence of activities that show a recklessness or careless disregard for the truth.

Accepted Answer

A) True 
 B)False

Question 18

According to the framework for ethical decision making, which of the following should the decision maker consider?

Accepted Answer

A)  All possible alternative courses of action. 
B)  The consequences associated with possible actions. 
C)  Whether the rights framework would cause any course of action to be added. 
D)  All of the above. 
A)  All possible alternative courses of action. 
B)  The consequences associated with possible actions. 
C)  Whether the rights framework would cause any course of action to be added. 
D)  All of the above.

Question 19

Negligence is the failure to exercise minimal care.

Accepted Answer

A) True 
 B)False

Question 20

Loans between the auditor and the client are permitted in some circumstances.

Accepted Answer

A) True 
 B)False

From whom should a CPA not accept a commission for recommending a product or service?

Independence is required for which of the following types of services?

Which is the best definition of scienter?

Public confidence is mostly maintained by the public accounting profession through integrity based on personal moral standards and it is reinforced by codes of conduct.

Which of following is not part of the ethical framework derived from utilitarianism and rights theories?

Which of the following is a principle of the Code of Ethics of the International Ethics Standards Board for Accountants but not a principle found in the AICPA Professional Code of Conduct?

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

According to the framework for professional decision making, the first step in decision-making is to structure the audit problem

What is information about a client that cannot be subpoenaed by a court of law called?

Confidentiality is the cornerstone of the auditing profession.

Under common law, which standard may a client sue an auditor for failure to demonstrate due care?

Commissions and referral fees are not permitted for which types of services?

A CPA firm may include the name of only one past owner in the firm name.

Mark Pulley is an auditor at Pulley and Hurst, LLC. If Pulley's five-year-old daughter owns shares of stock in McBurgers Corporation, then what is Pulley considered to have?

Gross negligence is a failure to use even minimal care or evidence of activities that show a recklessness or careless disregard for the truth.

According to the framework for ethical decision making, which of the following should the decision maker consider?

Negligence is the failure to exercise minimal care.

Loans between the auditor and the client are permitted in some circumstances.

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

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

From whom should a CPA not accept a commission for recommending a product or service?

Independence is required for which of the following types of services?

Which is the best definition of scienter?

Public confidence is mostly maintained by the public accounting profession through integrity based on personal moral standards and it is reinforced by codes of conduct.

Which of following is not part of the ethical framework derived from utilitarianism and rights theories?

Which of the following is a principle of the Code of Ethics of the International Ethics Standards Board for Accountants but not a principle found in the AICPA Professional Code of Conduct?

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

According to the framework for professional decision making, the first step in decision-making is to structure the audit problem

What is information about a client that cannot be subpoenaed by a court of law called?

Confidentiality is the cornerstone of the auditing profession.

Under common law, which standard may a client sue an auditor for failure to demonstrate due care?

Commissions and referral fees are not permitted for which types of services?

A CPA firm may include the name of only one past owner in the firm name.

Mark Pulley is an auditor at Pulley and Hurst, LLC. If Pulley's five-year-old daughter owns shares of stock in McBurgers Corporation, then what is Pulley considered to have?

Gross negligence is a failure to use even minimal care or evidence of activities that show a recklessness or careless disregard for the truth.

According to the framework for ethical decision making, which of the following should the decision maker consider?

Negligence is the failure to exercise minimal care.

Loans between the auditor and the client are permitted in some circumstances.

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