Question 1

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 2

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 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.

Question 4

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. After identifying and clarifying the ethical issue, what should Frank do next?

Accepted Answer

A)  identify the stakeholders, what is at stake for them, and how to connect with them 
B)  identify the values underpinning the different positions in the conflict and the possibilities for action 
C)  consider his personal and professional purpose and choices in this situation 
D)  develop and practice a powerful response that he can use with his boss 
A)  identify the stakeholders, what is at stake for them, and how to connect with them 
B)  identify the values underpinning the different positions in the conflict and the possibilities for action 
C)  consider his personal and professional purpose and choices in this situation 
D)  develop and practice a powerful response that he can use with his boss

Question 5

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 6

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 7

Society has attached a special meaning to the term professional. A professional is

Accepted Answer

A)  someone who has passed a qualifying exam to enter the job market. 
B)  any person who receives pay for the services performed. 
C)  a person who is expected to conduct himself or herself at a higher level than the requirements of society's laws or regulations. 
D)  someone who has both an education in the trade and on-the-job experience received under an experienced supervisor. 
A)  someone who has passed a qualifying exam to enter the job market. 
B)  any person who receives pay for the services performed. 
C)  a person who is expected to conduct himself or herself at a higher level than the requirements of society's laws or regulations. 
D)  someone who has both an education in the trade and on-the-job experience received under an experienced supervisor.

Question 8

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 9

What are the common judgement traps and how can they be avoided?

Accepted Answer

1. Confirmation: make opposing case and

Question 10

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

Question 11

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 12

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 13

Xiao, PA, is the auditor of Minkle Credit Union, a medium-sized credit union. Xiao has prepared a management letter with several serious control weaknesses. Management agrees with the facts, but does not want to present the letter with the weaknesses to the audit committee or the board of directors. Management has implied that they will request a change of auditors if your firm presents the management letter to the board.
Required: Discuss the actions that Xiao should take. Justify your response.

Accepted Answer

Xiao is being faced with an intimidation

Question 14

When should a PA assess the five threats to independence with respect to an audit engagement?

Accepted Answer

A)  when deciding to accept a client or whether to continue an existing engagement 
B)  after signing the engagement letter and before commencing field work 
C)  after the completion of this year's audit, before starting the next engagement 
D)  after a discussion with the Board of Directors 
A)  when deciding to accept a client or whether to continue an existing engagement 
B)  after signing the engagement letter and before commencing field work 
C)  after the completion of this year's audit, before starting the next engagement 
D)  after a discussion with the Board of Directors

Question 15

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 identified who is affected, what is at stake for them, and how to connect with them. What is his next step, using the GVV analysis framework?

Accepted Answer

A)  list the values underpinning the different positions in the conflict 
B)  consider his personal and professional purpose and choice in this situation 
C)  practice what he is going to say with help from a mentor or coach 
D)  craft a useful, powerful response that he could use, taking into account multiple options 
A)  list the values underpinning the different positions in the conflict 
B)  consider his personal and professional purpose and choice in this situation 
C)  practice what he is going to say with help from a mentor or coach 
D)  craft a useful, powerful response that he could use, taking into account multiple options

Question 16

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 17

PA has been asked to accept the audit engagement of BarneyBlues Corporation. PA sent a letter to the predecessor auditor asking whether there was any reason why he should not accept the engagement. Assuming that the prior year audit went smoothly, what would be an appropriate response by the predecessor auditor?

Accepted Answer

A)  Provide a brief statement that there is no reason of which he or she is aware that would prevent accepting the engagement. 
B)  Send a copy of the entire working paper file to PA. 
C)  Telephone PA and say that PA should not take the engagement because the fee charged was too large. 
D)  Send a copy of the tax returns and tax assessments to PA. 
A)  Provide a brief statement that there is no reason of which he or she is aware that would prevent accepting the engagement. 
B)  Send a copy of the entire working paper file to PA. 
C)  Telephone PA and say that PA should not take the engagement because the fee charged was too large. 
D)  Send a copy of the tax returns and tax assessments to PA.

Question 18

"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 19

The underlying reason for a high level of professional conduct, such as exemplified in a code of conduct, for any profession is

Accepted Answer

A)  the need for public confidence in the quality of service of the profession. 
B)  that it provides a safeguard to keep unscrupulous people out. 
C)  that it is required by federal legislation. 
D)  that it allows licensing agencies to have a yardstick to measure deficient performance. 
A)  the need for public confidence in the quality of service of the profession. 
B)  that it provides a safeguard to keep unscrupulous people out. 
C)  that it is required by federal legislation. 
D)  that it allows licensing agencies to have a yardstick to measure deficient performance.

Question 20

A public accountant would be facing an ethical dilemma when deciding whether or not to

Accepted Answer

A)  overlook a material overstatement of revenues to maintain a good client relationship. 
B)  overlook a non-material error in the financial statements. 
C)  accept an invitation from the client to go golfing in order to maintain a good client relationship. 
D)  participate in a charitable activity organized by the client. 
A)  overlook a material overstatement of revenues to maintain a good client relationship. 
B)  overlook a non-material error in the financial statements. 
C)  accept an invitation from the client to go golfing in order to maintain a good client relationship. 
D)  participate in a charitable activity organized by the client.

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

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

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

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?

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?

Society has attached a special meaning to the term professional. A professional is

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?

What are the common judgement traps and how can they be avoided?

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?

Which of the following situations best describes a familiarity threat?

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?

When should a PA assess the five threats to independence with respect to an audit engagement?

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

"Independence" in auditing means

The underlying reason for a high level of professional conduct, such as exemplified in a code of conduct, for any profession is

A public accountant would be facing an ethical dilemma when deciding whether or not to

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

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

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

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

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?

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?

Society has attached a special meaning to the term professional. A professional is

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?

What are the common judgement traps and how can they be avoided?

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?

Which of the following situations best describes a familiarity threat?

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?

When should a PA assess the five threats to independence with respect to an audit engagement?

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

"Independence" in auditing means

The underlying reason for a high level of professional conduct, such as exemplified in a code of conduct, for any profession is

A public accountant would be facing an ethical dilemma when deciding whether or not to

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