Question 1

The disadvantage of general statements in codes of professional conduct is

Accepted Answer

A)  the emphasis on positive activities. 
B)  that they identify ideal conduct. 
C)  the difficulty of enforcing general ideals without minimum standards of behaviour. 
D)  that there are too many to remember. 
A)  the emphasis on positive activities. 
B)  that they identify ideal conduct. 
C)  the difficulty of enforcing general ideals without minimum standards of behaviour. 
D)  that there are too many to remember. C

Question 2

What should a PA do if approached by a client where he and his firm lack or do not have access to the technical knowledge required to complete the audit?

Accepted Answer

A)  subcontract the audit to another firm 
B)  indicate that they can do a review engagement, not an audit 
C)  decline the new audit engagement 
D)  conduct the engagement, but prepare a qualified audit report 
A)  subcontract the audit to another firm 
B)  indicate that they can do a review engagement, not an audit 
C)  decline the new audit engagement 
D)  conduct the engagement, but prepare a qualified audit report C

Question 3

When the users of financial statements have confidence in the independence of the public accountant, it is referred to as independence in

Accepted Answer

A)  fact. 
B)  appearance. 
C)  conduct. 
D)  total. 
A)  fact. 
B)  appearance. 
C)  conduct. 
D)  total. B

Question 4

Discuss the ways the accounting profession and society encourage public accountants to conduct themselves in a professional manner (i.e., the factors that influence the ethical conduct of audit practitioners).

Accepted Answer

There are many factors that encourage pu

Question 5

According to the profession's ethical standards, an auditor would be considered independent in which of the following instances? The

Accepted Answer

A)  auditor's chequing account, which is fully insured by CDIC, is held at a client financial institution. 
B)  client comprises 75% of the auditor's fees. 
C)  auditor does not have enough employees to meet the client's reporting deadline. 
D)  client owes the auditor fees for two consecutive annual audits. 
A)  auditor's chequing account, which is fully insured by CDIC, is held at a client financial institution. 
B)  client comprises 75% of the auditor's fees. 
C)  auditor does not have enough employees to meet the client's reporting deadline. 
D)  client owes the auditor fees for two consecutive annual audits.

Question 6

How is use of an applicable accounting framework enforced via legislation?

Accepted Answer

A)  The Canada Business Corporations Act and many provincial incorporating acts require that financial statements be prepared in accordance with GAAS as set out in the CPA Canada Handbook. 
B)  PAs who do not prepare financial statements in accordance with such frameworks are expelled from their professional association. 
C)  Tax authorities may sue corporations who do not prepare their financial statements in accordance with such frameworks. 
D)  Financial executives may be sued if the financial statements prepared by their company are not in conformance with such frameworks. 
A)  The Canada Business Corporations Act and many provincial incorporating acts require that financial statements be prepared in accordance with GAAS as set out in the CPA Canada Handbook. 
B)  PAs who do not prepare financial statements in accordance with such frameworks are expelled from their professional association. 
C)  Tax authorities may sue corporations who do not prepare their financial statements in accordance with such frameworks. 
D)  Financial executives may be sued if the financial statements prepared by their company are not in conformance with such frameworks.

Question 7

Kimora is a senior manager at a public accounting firm. Kimora was assigned to the audit of Toble Corp. Upon arriving at the client, Kimora met with the controller, Brad, who was a classmate in college, 20 years ago. She had not been in contact with Brad since college, but they realized that they still had many friends in common. Brad invited Kimora to go to the company box to watch a hockey game and catch up.
Discuss the issue of independence between Kimora and Toble Corp.

Accepted Answer

Kimora might not be independent in appea

Question 8

Independence is assessed in the eyes of external users and regulators. Which of the following is a tool that helps the auditor identify whether the auditor is independent for a particular audit engagement?

Accepted Answer

A)  completion of independence forms at time of employment 
B)  an independence threat analysis 
C)  an audit risk model assessment for each engagement 
D)  professional skepticism when assessing control risks 
A)  completion of independence forms at time of employment 
B)  an independence threat analysis 
C)  an audit risk model assessment for each engagement 
D)  professional skepticism when assessing control risks

Question 9

Which of the following situations best describes an advocacy threat? PA has been hired to

Accepted Answer

A)  consult with the corporate controller and the bank manager about the conditions for financing a loan. 
B)  manage the accounting department for three weeks while the corporate controller is on vacation. 
C)  complete the personal tax returns of all executive management. 
D)  prepare the year end journal entries for a subsidiary company. 
A)  consult with the corporate controller and the bank manager about the conditions for financing a loan. 
B)  manage the accounting department for three weeks while the corporate controller is on vacation. 
C)  complete the personal tax returns of all executive management. 
D)  prepare the year end journal entries for a subsidiary company.

Question 10

In applying professional judgment, the auditor must be able to justify a decision on the basis that it

Accepted Answer

A)  is carried out with truthfulness and forthrightness. 
B)  meets the underlying principles of only GAAS. 
C)  considers the impact on management's performance. 
D)  helps the company improve its profitability. 
A)  is carried out with truthfulness and forthrightness. 
B)  meets the underlying principles of only GAAS. 
C)  considers the impact on management's performance. 
D)  helps the company improve its profitability.

Question 11

You are having lunch with a former employee of your firm, a friend of yours. Gino had been laid off last year when he had failed to pass his professional examinations for the third year in a row. Gino told you that he managed to obtain a CPA designation in the past year, and has started his public practice.
He has been circulating flyers and electronic email announcements with fixed rates: $400 for a compilation engagement, $1000 for a review, and $5000 for an audit where revenues are less than $1 million, $15 000 for an audit for a client with revenues up to $5 million. He already has clients to keep him busy for the next three months. He even has some feelers for clients that he personally handled while he was working for your firm - there were a lot of contacts developed during the five years that he was working there! To help attract some of the larger clients, he is considering not charging any fee for the first ten hours spent on tax-related services.
Gino ended the conversation by asking you if you would like to join him in his new firm, because at this rate he'll need a second person real soon!
Required:
Identify the violations in the professional rules of conduct and explain why they are violations.

Accepted Answer

Gino is actively soliciting clients of o

Question 12

"Independence" in auditing means

Accepted Answer

A)  remaining aloof from the client. 
B)  not being financially dependent on the client. 
C)  impartiality in performing professional services. 
D)  being an advocate for the client. 
A)  remaining aloof from the client. 
B)  not being financially dependent on the client. 
C)  impartiality in performing professional services. 
D)  being an advocate for the client.

Question 13

Some independence rules apply to all assurance engagements, while others apply only to a listed entity. For the purposes of assessing the independence rules, a listed entity is defined as

Accepted Answer

A)  an organization with share capital exceeding $10 million that has public accountability. 
B)  an entity whose debt or shares is listed on a stock exchange, with market capitalization and total assets greater than $10 million. 
C)  any organization that has shares or debt listed on a stock exchange. 
D)  an organization that has shares or debt listed on a stock exchange, and that has redeemed shares. 
A)  an organization with share capital exceeding $10 million that has public accountability. 
B)  an entity whose debt or shares is listed on a stock exchange, with market capitalization and total assets greater than $10 million. 
C)  any organization that has shares or debt listed on a stock exchange. 
D)  an organization that has shares or debt listed on a stock exchange, and that has redeemed shares.

Question 14

Each of the following situations involves a possible violation of the independence requirements of the provincial institutes Rules of Professional Conduct. For each situation, (1) decide whether the Rules have been violated, and (2) briefly explain how the situation violates (or does not violate) the Rules.
A) Mike Lednicky, public accountant, is a partner in the Oshawa office of Arthur & Thompson, public accountants. Mike's brother is employed as an inventory warehouse supervisor (an audit-sensitive position) by Sweeny Appliances, a publicly-held company in Manitoba. Sweeny Appliances is one of Arthur & Thompson's audit clients. Neither Mike nor the Oshawa office of Arthur & Thompson is involved in the audit of Sweeny Appliances.
Violation? Yes No

Accepted Answer

A)No violation.Although partners in a pu

Question 15

Which of the following situations would be an example a of self-review threat? Prior to commencing the audit engagement, PA has completed

Accepted Answer

A)  personal and corporate tax returns. 
B)  audit of a company where the client owns a minority interest. 
C)  purchase price allocation calculation for a company that the client purchased during the year. 
D)  audit of the non-for profit organization of the client. 
A)  personal and corporate tax returns. 
B)  audit of a company where the client owns a minority interest. 
C)  purchase price allocation calculation for a company that the client purchased during the year. 
D)  audit of the non-for profit organization of the client.

Question 16

Raul, PA, received a call from his friend Cristobal Franco. He needed an audit urgently, because the bank might call his loan for his computer store CF Ltd. Since Cristobal had been his high school friend and they still played soccer together every two weeks, Raul agreed. Raul and Cristobal had a quick meeting, where Raul fixed the audit fee at $10 000. Cristobal stressed the importance of an unqualified opinion for the bank.
Raul sent two available junior staff to CF's offices. The junior staff were experienced in review engagements, and had been working for Raul for about six months. The two staff had a quick look around the store, noting the documents strewn everywhere. The accounting staff came in and chatted briefly after their smoke break. They were about a month behind on recording transactions, because Cristobal had laid off one sales person. The accounting staff also helped out with providing sales quotes and Cristobal did all of the technical work.
At the end of the day, the junior staff were each given a $250 gift certificate to be used in the computer store. This was great, because CF also sold MP3 players and supplies such as CDs and DVDs.
At dinner that night, the junior staff told their family that it would probably be a great idea to hold off on any computer supplies or equipment purchases that they needed, since CF would likely hold a sale in the next month or two to improve cash flow.
Required:
Identify and discuss the violations in the rules of conduct with respect to CF.

Accepted Answer

Raul is too familiar (familiarity threat

Question 17

PAs are members of a professional association that can impose sanctions for violations of the professional code of conduct. What is an example of a severe penalty that can be imposed by a professional association?

Accepted Answer

A)  publication of information about the offence in a newsletter 
B)  requirement of the completion of training courses 
C)  requirement to have another peer review conducted within one year 
D)  expulsion from the professional association 
A)  publication of information about the offence in a newsletter 
B)  requirement of the completion of training courses 
C)  requirement to have another peer review conducted within one year 
D)  expulsion from the professional association

Question 18

The requirement for an attitude of skepticism means that the auditor should

Accepted Answer

A)  not be blind to evidence that suggests the documents, books, or records have been altered or are incorrect. 
B)  plan and conduct the audit with an attitude of distrust in management. 
C)  perform additional tests of controls to increase the probability of discovering fraud or errors. 
D)  not consider management's explanation as evidence on any subject. 
A)  not be blind to evidence that suggests the documents, books, or records have been altered or are incorrect. 
B)  plan and conduct the audit with an attitude of distrust in management. 
C)  perform additional tests of controls to increase the probability of discovering fraud or errors. 
D)  not consider management's explanation as evidence on any subject.

Question 19

Financial statement users cannot be expected to evaluate audit performance because they will not have the time or the competence to do so. In such a situation, how is public confidence in the quality of professional services enhanced? When there are

Accepted Answer

A)  only business majors hired to work as auditing students with public accounting firms. 
B)  adequate controls at the public accounting firm to limit the amount of overtime worked. 
C)  high standards of performance and conduct on the part of all practitioners. 
D)  strict rules about the type of work that employees should complete on a daily basis. 
A)  only business majors hired to work as auditing students with public accounting firms. 
B)  adequate controls at the public accounting firm to limit the amount of overtime worked. 
C)  high standards of performance and conduct on the part of all practitioners. 
D)  strict rules about the type of work that employees should complete on a daily basis.

Question 20

The rules of accounting bodies in Canada require their members to behave in the best interest of the profession and the public. Identify the situation where the accountant is acting in the best interest of the profession. An accountant

Accepted Answer

A)  reports a fellow accountant after noticing that the accountant helped a client with tax evasion. 
B)  openly criticizes a fellow accountant's competencies after having lost a bid for a new client. 
C)  brags about his competence and professional title, and encourages clients to invest in a new venture he is starting. 
D)  refuses to cooperate with the new auditor after having lost a client. 
A)  reports a fellow accountant after noticing that the accountant helped a client with tax evasion. 
B)  openly criticizes a fellow accountant's competencies after having lost a bid for a new client. 
C)  brags about his competence and professional title, and encourages clients to invest in a new venture he is starting. 
D)  refuses to cooperate with the new auditor after having lost a client.

The disadvantage of general statements in codes of professional conduct is

What should a PA do if approached by a client where he and his firm lack or do not have access to the technical knowledge required to complete the audit?

When the users of financial statements have confidence in the independence of the public accountant, it is referred to as independence in

Discuss the ways the accounting profession and society encourage public accountants to conduct themselves in a professional manner (i.e., the factors that influence the ethical conduct of audit practitioners).

According to the profession's ethical standards, an auditor would be considered independent in which of the following instances? The

How is use of an applicable accounting framework enforced via legislation?

Independence is assessed in the eyes of external users and regulators. Which of the following is a tool that helps the auditor identify whether the auditor is independent for a particular audit engagement?

Which of the following situations best describes an advocacy threat? PA has been hired to

In applying professional judgment, the auditor must be able to justify a decision on the basis that it

"Independence" in auditing means

Some independence rules apply to all assurance engagements, while others apply only to a listed entity. For the purposes of assessing the independence rules, a listed entity is defined as

Which of the following situations would be an example a of self-review threat? Prior to commencing the audit engagement, PA has completed

PAs are members of a professional association that can impose sanctions for violations of the professional code of conduct. What is an example of a severe penalty that can be imposed by a professional association?

The requirement for an attitude of skepticism means that the auditor should

Financial statement users cannot be expected to evaluate audit performance because they will not have the time or the competence to do so. In such a situation, how is public confidence in the quality of professional services enhanced? When there are

The rules of accounting bodies in Canada require their members to behave in the best interest of the profession and the public. Identify the situation where the accountant is acting in the best interest of the profession. An accountant

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Legal Liability

Audit Responsibilities and Objectives

Client Acceptance and Planning the Audit

Materiality and Risk

Internal Controls and Control Risk

Audit Evidence

Audit Strategy and Audit Program

Audit Sampling Concepts

Audit of the Revenue Cycle

Audit of the Acquisition and Payment Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Human Resources and Payroll Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Completing the Audit

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

Filters

Exam 4: Professional Judgment and Ethics

The disadvantage of general statements in codes of professional conduct is

What should a PA do if approached by a client where he and his firm lack or do not have access to the technical knowledge required to complete the audit?

When the users of financial statements have confidence in the independence of the public accountant, it is referred to as independence in

Discuss the ways the accounting profession and society encourage public accountants to conduct themselves in a professional manner (i.e., the factors that influence the ethical conduct of audit practitioners).

According to the profession's ethical standards, an auditor would be considered independent in which of the following instances? The

How is use of an applicable accounting framework enforced via legislation?

Independence is assessed in the eyes of external users and regulators. Which of the following is a tool that helps the auditor identify whether the auditor is independent for a particular audit engagement?

Which of the following situations best describes an advocacy threat? PA has been hired to

In applying professional judgment, the auditor must be able to justify a decision on the basis that it

"Independence" in auditing means

Some independence rules apply to all assurance engagements, while others apply only to a listed entity. For the purposes of assessing the independence rules, a listed entity is defined as

Which of the following situations would be an example a of self-review threat? Prior to commencing the audit engagement, PA has completed

PAs are members of a professional association that can impose sanctions for violations of the professional code of conduct. What is an example of a severe penalty that can be imposed by a professional association?

The requirement for an attitude of skepticism means that the auditor should

Financial statement users cannot be expected to evaluate audit performance because they will not have the time or the competence to do so. In such a situation, how is public confidence in the quality of professional services enhanced? When there are

The rules of accounting bodies in Canada require their members to behave in the best interest of the profession and the public. Identify the situation where the accountant is acting in the best interest of the profession. An accountant

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Legal Liability

Audit Responsibilities and Objectives

Client Acceptance and Planning the Audit

Materiality and Risk

Internal Controls and Control Risk

Audit Evidence

Audit Strategy and Audit Program

Audit Sampling Concepts

Audit of the Revenue Cycle

Audit of the Acquisition and Payment Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Human Resources and Payroll Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Completing the Audit

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

Filters