Exam 14: Professional Ethics

Which of the following is the responsibility of the Professional Ethics Executive Committee?

Which of the following defines the imperative principle of ethics?

Susan Small,CPA has Medium Corporation as an audit client.Medium has asked Small to create and install a new computerized payroll system.Because Small does not have the appropriate level of expertise,she referred Medium to Compusystems,Inc.,a local software consulting company.Small has an arrangement where she is paid ten percent of any fee received by Compusystems from her referrals.Small has disclosed this to her client. Required: The situation above involves a possible violation of the AICPA's Code of Professional Conduct.State the rule in question and explain why or why not there is a violation of the code.You need not refer to the rule number,but should clearly describe the rule in question.

Which of the following is allowed under the Government Independence Standards?

Red and Green,CPAs are the external auditors for Blue Corporation,a publicly-held company.Blue Corporation has outsourced its internal audit function to Red and Green.Which of the following statements is true?

Ben Big is a partner in the Cleveland office of the national accounting firm of Price Brickhouse.He owns 1,000 shares of common stock in Public,Inc.,an audit client of the firm.This amount is not material to his personal investments.The Public,Inc.audit is done out of the New York office.Ben Big has not informed the firm that he owns the shares because he is not on the audit and it is not done out of the Cleveland office. Required: The situation above involves a possible violation of the AICPA's Code of Professional Conduct.State the rule in question and explain why or why not there is a violation of the code.You need not refer to the rule number,but should clearly describe the rule in question.

According to Rule 203,Accounting Principles,requires the auditor to adhere to official pronouncements except when

Rule 201,General Standards,requires a member to comply with standards and interpretations.Which of the following is NOT a standard covered by Rule 201?

Violet,CPA,audits Big Bank,a local financial institution.Which of the following would most likely impair Violet's independence with regard to Big Bank?

The interpretation of Rule 501,Acts Discreditable to the Profession,would not include

Which of the following philosophical principles in ethics places emphasis on the consequences of action,rather than on following the rules?

The interpretation of Independence Rule 101 allows members to

Julie and Lisa are sisters.Julie is a CPA auditing the company where Lisa works.Julie's independence is impaired if

Which of the following is NOT one of the AICPA Principles of Professional Conduct?

Which of the following forms of organization would NOT be allowed under Rule 505 of the Professional Code of Conduct?

For each situation (1-5),identify the most applicable AICPA rule of conduct and whether there is a violation or no violation of the rule (A-F).One or more letters may not be used. A. Rule 101: Independence; no violation B. Rule 101: Independence; violation C. Rule 301: Confidential Client Information; no violation D. Rule 301: Confidential Client Information; violation E. Rule 503: Commissions and Referrals; no violation F. Rule 503: Commissions and Referrals; violation ___ 1. Brandon Frisby, CPA, found out that his client, Uptonogood, Inc., had failed to properly account for several leases. Frisby informed Uptonogood's management that he must issue a qualified audit report and disclose the lease problem in the report. Uptonogood's management indicated that such a disclosure would constitute a disclosure of confidential information. Nevertheless, Frisby rendered the qualified audit report, including an explanatory paragraph about the inadequate lease accounting. ___ 2. Priscilla Hudson, CPA, a partner in Hudson and Danhoffer, CPAs, holds the position of honorary director for the Friends of the Symphony Orchestra, a firm audit client. ___ 3. The wife of Gerald Skoch, CPA, is the controller of Fine Corporation. Skoch is an audit partner for Barnes and Bucknell, CPAs, in their Long Island office. The Long Island office of Barnes and Bucknell audits Fine Corporation, but Skoch is not part of the audit team and provides no other services to Fine Corporation. ___ 4. Johnny Beacon, CPA, is the auditor of Novak Wholesale, Inc. Beacon received a 10% commission from Computer Systems, Inc. for hardware sold to Novak Wholesale, Inc. The sale was made based on Beacon's recommendation to Novak Wholesale that the company needed a new accounting information system. Beacon disclosed the commission to Novak's management. Beacon also performs an annual audit for Novak. ___ 5. Cecilia Hart, CPA, provides tax services to Myers Company. Hart received a 10% commission from Computer Systems, Inc. for hardware sold to Myers Company. The sale was made based on Hart's recommendation to Myers Company that the company needed a new accounting information system. Hart disclosed the commission to Myers' management.

Which of the following philosophical theories places emphasis on the consideration of projecting the consequences of a choice in terms of this question: "What may be the consequences of similar persons making this choice in similar circumstances?"

What are (a)the AICPA Principles of Professional Conduct,(b)Rules of Conduct,and (c)Interpretation of Rules of Conduct?

Perry Pinkney,CPA,is one of the general partners in a partnership,which in turn invested 70% of its assets in the common stock of Pinkney's audit client (Darby Corporation).According to the AICPA Code of Professional Conduct,Pinkney is considered to have

Dara & Co.Audit Hill Corporation.Ellie is the engagement partner on the audit with an office in Buffalo Grove.Which of the following would NOT be considered a covered member?