Question 1

Which of the following situations best describes a familiarity threat?

Accepted Answer

A)  design and implementation of a new payroll system 
B)  preparation and entry of bookkeeping transactions 
C)  completion of corporate transactions for subsidiary companies 
D)  PA has been working with this client for ten years, first as a manager, now as a partner 
A)  design and implementation of a new payroll system 
B)  preparation and entry of bookkeeping transactions 
C)  completion of corporate transactions for subsidiary companies 
D)  PA has been working with this client for ten years, first as a manager, now as a partner

Question 2

Which of the following situations would be an example of a self-interest threat that would prevent a PA from auditing the client?

Accepted Answer

A)  The PA's uncle owns the business that the PA is auditing. 
B)  For the last two years, the client could not pay their fees, so the PA created a loan agreement covering the fees, with the client paying 10% interest on the fees. 
C)  The PA has a small bank loan at normal business interest rates with the bank that his firm is auditing. 
D)  The PA has purchased a used car from one of the employees of the client. 
A)  The PA's uncle owns the business that the PA is auditing. 
B)  For the last two years, the client could not pay their fees, so the PA created a loan agreement covering the fees, with the client paying 10% interest on the fees. 
C)  The PA has a small bank loan at normal business interest rates with the bank that his firm is auditing. 
D)  The PA has purchased a used car from one of the employees of the client.

Question 3

What are the qualities of professional skepticism?

Accepted Answer

Following are the six qualities of profe

Question 4

Each of the following situations involves a possible violation of the provincial institutes Rules of Professional Conduct. For each situation, (1) decide whether or not the Rules have been violated, and (2) briefly explain how the situation violates (or does not violate) the Rules.
A) Johnny Line has a successful dentistry practice in Calgary. Johnny has recommended one of his patients to Leslie King, public accountant. To show gratitude for the referral, Leslie has agreed to pay Johnny 5% of the fee for audit services rendered by Leslie to Johnny's patient. Leslie discloses the payment agreement to her new client.
Violation? Yes No

Accepted Answer

A)Violation.A public accountant may not

Question 5

Identify and describe each of the three parts to the Code of Professional Conduct. Also discuss which parts are officially enforceable and which are not.

Accepted Answer

The three parts to the Code are:
•Princi

Question 6

Frank has discovered that his employer is part of a group of banks that is manipulating interest rates. He would like to stop this practice at his employer but is not sure how best to talk to his boss. He has heard of the GVV (Giving Voice to Values) approach and thinks he may be able to use it successfully because his company has recently implemented new initiatives to empower employees to speak of improvements to business practices. Frank has crafted a useful, powerful response that he could use, taking into account multiple options. He has conducted research to make him more informed on the issue, and has consulted a friend who is expert in this area. What is the next thing he should do before talking to his boss?

Accepted Answer

A)  review the values underpinning the different positions in the value conflict 
B)  further develop and practice his response (scripting) and get help (coaching) 
C)  review the different possibilities for action to make sure that he has considered enough 
D)  check his stakeholder analysis to make sure that it is thorough and complete 
A)  review the values underpinning the different positions in the value conflict 
B)  further develop and practice his response (scripting) and get help (coaching) 
C)  review the different possibilities for action to make sure that he has considered enough 
D)  check his stakeholder analysis to make sure that it is thorough and complete

Question 7

List the components of the auditor's professional judgment framework.

Accepted Answer

Following are the five components of aud

Question 8

For which of the following engagements is a contingent fee permitted?

Accepted Answer

A)  an audit engagement of a large listed corporation 
B)  a tax consulting assignment assessing the excise tax payment processes 
C)  a review engagement of a small manufacturing corporation 
D)  an assurance engagement of leasehold payments for a rental agreement 
A)  an audit engagement of a large listed corporation 
B)  a tax consulting assignment assessing the excise tax payment processes 
C)  a review engagement of a small manufacturing corporation 
D)  an assurance engagement of leasehold payments for a rental agreement

Question 9

Ethical dilemmas occur when

Accepted Answer

A)  you know what you want to do but the rules say otherwise. 
B)  businesses disregard the laws and engage in illegal behaviour. 
C)  a person chooses to act in his/her own interest. 
D)  a choice must be taken about appropriate behaviour. 
A)  you know what you want to do but the rules say otherwise. 
B)  businesses disregard the laws and engage in illegal behaviour. 
C)  a person chooses to act in his/her own interest. 
D)  a choice must be taken about appropriate behaviour.

Question 10

Generally, all of the rules of professional conduct for CPAs apply to

Accepted Answer

A)  students in public practice. 
B)  students and members. 
C)  all members. 
D)  members in public practice. 
A)  students in public practice. 
B)  students and members. 
C)  all members. 
D)  members in public practice.

Question 11

You are the senior in charge of the accounts receivable section of the audit of a large clothing manufacturer downtown in the clothing district. The client sells to local clothing stores as well as to other retailers in the province.
Accounts receivables seem to be deteriorating, with many more accounts in the over 90 days column than in the past. You sent out twenty accounts receivable confirmations, but only six were returned. Of these six, only three confirmed the balance as in agreement with the client, while the others indicated that they kept their records on an open item basis (rather than a balance forward basis) and were unable to respond to the confirmation request. When you looked at the prior year's file, it seemed that the same thing had happened last year.
When you phoned the supervisor in charge of the audit engagement, she told you to not bother with follow up, as the engagement was already over budget and costs need to be kept down. You were concerned that you would be unable to state a conclusion with respect to the fairness of the accounts receivable balance and she was really angry with you, saying that she would have to sign off for you then.
Required:
Discuss the ethical and quality issues raised by this audit engagement.

Accepted Answer

The engagement indicates a lack of plann

Question 12

Formal frameworks have been developed to help people resolve ethical dilemmas. After obtaining the relevant facts and identifying the ethical issues from the facts, what is the next step in the five-step ethical framework described in the chapter?

Accepted Answer

A)  Decide on the appropriate action to be taken in resolving the ethical dilemma. 
B)  Identify the likely consequences of actions that will be taken. 
C)  Identify who is affected and how each is affected. 
D)  Identify the alternatives available to the person who must resolve the dilemma. 
A)  Decide on the appropriate action to be taken in resolving the ethical dilemma. 
B)  Identify the likely consequences of actions that will be taken. 
C)  Identify who is affected and how each is affected. 
D)  Identify the alternatives available to the person who must resolve the dilemma.

Question 13

If a PA firm provided corporate finance services to a company during the year, which of the following engagements could the PA firm accept to provide to the same company?

Accepted Answer

A)  non-assurance services 
B)  audit of listed entity 
C)  audit of non-listed entity 
D)  other assurance engagement 
A)  non-assurance services 
B)  audit of listed entity 
C)  audit of non-listed entity 
D)  other assurance engagement

Question 14

Professional skepticism during the financial statement audit requires an appropriate state of mind: being impartial and objective and continuing to be throughout the whole audit engagement. Which of the following illustrates an appropriate state of mind?

Accepted Answer

A)  not having any ownership in the client's shares or being a debt-holder 
B)  carefully assessing documents and not being the company's advocate 
C)  matching documents to make sure that they are accurate and fair 
D)  being aware that there could be material misstatements in the financial statements 
A)  not having any ownership in the client's shares or being a debt-holder 
B)  carefully assessing documents and not being the company's advocate 
C)  matching documents to make sure that they are accurate and fair 
D)  being aware that there could be material misstatements in the financial statements

Question 15

One difference between auditors and other professionals is that most professionals

Accepted Answer

A)  need not be concerned about maintaining independence. 
B)  don't have requirements for continuing education beyond university. 
C)  don't have to pass a rigorous examination. 
D)  aren't expected to act in the public interest. 
A)  need not be concerned about maintaining independence. 
B)  don't have requirements for continuing education beyond university. 
C)  don't have to pass a rigorous examination. 
D)  aren't expected to act in the public interest.

Question 16

A code of professional conduct typically includes principles, rules of conduct, and interpretations or examples. What is the purpose of the principles?

Accepted Answer

A)  to state what a practitioner must do for each audit engagement conducted 
B)  to provide discussions of the rules of conduct and how they relate to practical situations 
C)  to provide minimum standards of ethical conduct stated specifically 
D)  to provide ideal standards of ethical conduct stated in philosophical terms 
A)  to state what a practitioner must do for each audit engagement conducted 
B)  to provide discussions of the rules of conduct and how they relate to practical situations 
C)  to provide minimum standards of ethical conduct stated specifically 
D)  to provide ideal standards of ethical conduct stated in philosophical terms

Question 17

When public accountants are able to maintain an independent attitude in fulfilling their responsibility, 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.

Question 18

A familiarity threat at an audit engagement occurs when

Accepted Answer

A)  the member has a financial interest in the client. 
B)  it is difficult to behave with professional skepticism. 
C)  PA promotes the client's position to third parties. 
D)  the member discloses financial information about the client. 
A)  the member has a financial interest in the client. 
B)  it is difficult to behave with professional skepticism. 
C)  PA promotes the client's position to third parties. 
D)  the member discloses financial information about the client.

Question 19

The confidential relationship will be violated if, without the client's permission, the public accountant provides working papers about a client to

Accepted Answer

A)  a court of law which subpoenas them. 
B)  the relevant provincial institute as part of a practice inspection. 
C)  another public accounting firm which has just purchased the public accountant's entire practice. 
D)  an investigative or disciplinary body of the relevant provincial institute which is conducting a review of the public accountant's practice. 
A)  a court of law which subpoenas them. 
B)  the relevant provincial institute as part of a practice inspection. 
C)  another public accounting firm which has just purchased the public accountant's entire practice. 
D)  an investigative or disciplinary body of the relevant provincial institute which is conducting a review of the public accountant's practice.

Question 20

It is not practical for users to evaluate the quality of the performance of most professional services because of their

Accepted Answer

A)  complexity. 
B)  legal standing. 
C)  veracity. 
D)  salaries and working conditions. 
A)  complexity. 
B)  legal standing. 
C)  veracity. 
D)  salaries and working conditions.

Which of the following situations best describes a familiarity threat?

Which of the following situations would be an example of a self-interest threat that would prevent a PA from auditing the client?

What are the qualities of professional skepticism?

Identify and describe each of the three parts to the Code of Professional Conduct. Also discuss which parts are officially enforceable and which are not.

List the components of the auditor's professional judgment framework.

For which of the following engagements is a contingent fee permitted?

Ethical dilemmas occur when

Generally, all of the rules of professional conduct for CPAs apply to

Formal frameworks have been developed to help people resolve ethical dilemmas. After obtaining the relevant facts and identifying the ethical issues from the facts, what is the next step in the five-step ethical framework described in the chapter?

If a PA firm provided corporate finance services to a company during the year, which of the following engagements could the PA firm accept to provide to the same company?

Professional skepticism during the financial statement audit requires an appropriate state of mind: being impartial and objective and continuing to be throughout the whole audit engagement. Which of the following illustrates an appropriate state of mind?

One difference between auditors and other professionals is that most professionals

A code of professional conduct typically includes principles, rules of conduct, and interpretations or examples. What is the purpose of the principles?

When public accountants are able to maintain an independent attitude in fulfilling their responsibility, it is referred to as independence in

A familiarity threat at an audit engagement occurs when

The confidential relationship will be violated if, without the client's permission, the public accountant provides working papers about a client to

It is not practical for users to evaluate the quality of the performance of most professional services because of their

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

Which of the following situations best describes a familiarity threat?

Which of the following situations would be an example of a self-interest threat that would prevent a PA from auditing the client?

What are the qualities of professional skepticism?

Identify and describe each of the three parts to the Code of Professional Conduct. Also discuss which parts are officially enforceable and which are not.

List the components of the auditor's professional judgment framework.

For which of the following engagements is a contingent fee permitted?

Ethical dilemmas occur when

Generally, all of the rules of professional conduct for CPAs apply to

Formal frameworks have been developed to help people resolve ethical dilemmas. After obtaining the relevant facts and identifying the ethical issues from the facts, what is the next step in the five-step ethical framework described in the chapter?

If a PA firm provided corporate finance services to a company during the year, which of the following engagements could the PA firm accept to provide to the same company?

Professional skepticism during the financial statement audit requires an appropriate state of mind: being impartial and objective and continuing to be throughout the whole audit engagement. Which of the following illustrates an appropriate state of mind?

One difference between auditors and other professionals is that most professionals

A code of professional conduct typically includes principles, rules of conduct, and interpretations or examples. What is the purpose of the principles?

When public accountants are able to maintain an independent attitude in fulfilling their responsibility, it is referred to as independence in

A familiarity threat at an audit engagement occurs when

The confidential relationship will be violated if, without the client's permission, the public accountant provides working papers about a client to

It is not practical for users to evaluate the quality of the performance of most professional services because of their

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