Question 1

Based on Sarbanes-Oxley,who is ultimately responsible for the independence of the external auditor?

Accepted Answer

A)  The CPA firm's engagement partner 
B)  The CPA firm's quality control partner 
C)  The client's senior management 
D)  The audit committee 
A)  The CPA firm's engagement partner 
B)  The CPA firm's quality control partner 
C)  The client's senior management 
D)  The audit committee

Question 2

Which of the following is NOT a key element of the definition of ethics?

Accepted Answer

A)  Reflective choice 
B)  Moral principles 
C)  Definitive conclusions 
D)  Consequences of decisions 
A)  Reflective choice 
B)  Moral principles 
C)  Definitive conclusions 
D)  Consequences of decisions

Question 3

Which of the following is NOT included in Rule of Conduct 102,Integrity and Objectivity?

Accepted Answer

A)  Prudent assessment of facts 
B)  Free of conflict of interests 
C)  Not knowingly misrepresent facts 
D)  Not subordinate judgment to others 
A)  Prudent assessment of facts 
B)  Free of conflict of interests 
C)  Not knowingly misrepresent facts 
D)  Not subordinate judgment to others

Question 4

For each of the following cases indicate if the action by a member CPA is a violation of the AICPA Code of Professional Conduct and cite the relevant rule.
A. Was a trustee of client's profit-sharing trust.
B. Accepted referral fees from local attorneys for nonattest clients with the clients' knowledge.
C. Performed audit in accordance with GASB standards.
D. Advises client to have an insurance review from a local insurance company in which the CPA has a material financial interest.
E. Promoted tax service on local TV station.

Accepted Answer

The answer of For each of the following cases indicate...

Question 5

In which of the following circumstances would a CPA who audits XZ Corporation lack independence?

Accepted Answer

A)  The CPA and XZ's president are both on the Board of Directors of COD Corporation. 
B)  The CPA and XZ's president each own 25% of FOB Corporation, a closely held company. 
C)  The CPA has an automobile loan from XZ, a financial institution. The loan is collateralized by the automobile. 
D)  The CPA reduced XZ's usual audit fee by 40% prior to the audit because XZ's financial condition was unfavorable. 
A)  The CPA and XZ's president are both on the Board of Directors of COD Corporation. 
B)  The CPA and XZ's president each own 25% of FOB Corporation, a closely held company. 
C)  The CPA has an automobile loan from XZ, a financial institution. The loan is collateralized by the automobile. 
D)  The CPA reduced XZ's usual audit fee by 40% prior to the audit because XZ's financial condition was unfavorable.

Question 6

Which of the following philosophical theories places emphasis on following rules,rather than on the consequences of the decision?

Accepted Answer

A)  Imperative principle 
B)  Utilitarianism 
C)  Generalization principle 
D)  Virtue ethics 
A)  Imperative principle 
B)  Utilitarianism 
C)  Generalization principle 
D)  Virtue ethics

Question 7

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 302: Contingent Fees; no violation
F. Rule 302: Contingent Fees; violation
___ 1. Jackson, CPA, and one of his audit clients are considering investing in a business together. Jackson would own 25% of the business and the client would own 50%. Jackson's investment in the business is material to his net worth.
___ 2. Feller, CPA, is the corporate controller for Robert Corporation. Feller believes his employer may have committed an illegal act. After discussing the matter with his attorney, Feller decides to disclose the matter to the appropriate authorities.
___ 3. Brock, CPA, is an owner in the firm Louis and Brock, CPAs. Brock's husband is on the board of directors of Midland Corporation, an audit client of Louis and Brock. Brock does not participate on the audit engagement.
___ 4. Ruth, CPA, owns a building and leases a portion of the space to an audit client. The income from the lease is not material to Ruth.
___ 5. Maris, CPA, performs investment advisory services for an audit client and receives an annual fee based on a percentage of the value of the client's investment portfolio at the end of each year.

Accepted Answer

The answer of For each situation (1-5),identify the most applicable...

Question 8

According to Sarbanes-Oxley,the audit committee must pre-approve all audit and non-audit services.This can be done

Accepted Answer

A)  Case-by-case basis: Yes; Through established policies: No; Delegating the responsibility: Yes 
B)  Case-by-case basis: Yes; Through established policies: Yes; Delegating the responsibility: No 
C)  Case-by-case basis: No; Through established policies: Yes; Delegating the responsibility: No 
D)  Case-by-case basis: No; Through established policies: No; Delegating the responsibility: Yes 
A)  Case-by-case basis: Yes; Through established policies: No; Delegating the responsibility: Yes 
B)  Case-by-case basis: Yes; Through established policies: Yes; Delegating the responsibility: No 
C)  Case-by-case basis: No; Through established policies: Yes; Delegating the responsibility: No 
D)  Case-by-case basis: No; Through established policies: No; Delegating the responsibility: Yes

Question 9

According to the ethical standards of the profession,which of the following acts is generally prohibited?

Accepted Answer

A)  Purchasing a product from a third party and reselling it to a client 
B)  Writing a financial management newsletter promoted and sold by a publishing company 
C)  Accepting a commission for recommending a product to an audit client 
D)  Accepting engagements obtained through the efforts of third parties 
A)  Purchasing a product from a third party and reselling it to a client 
B)  Writing a financial management newsletter promoted and sold by a publishing company 
C)  Accepting a commission for recommending a product to an audit client 
D)  Accepting engagements obtained through the efforts of third parties

Question 10

CPA Krogstad is the executive in charge of the Omaha office of the audit firm.He is responsible for the practice in all areas of audit,tax,and consulting,but he does not serve as a field audit partner or a reviewer.CPA Ward is the partner in charge of the Dodger,Inc.audit (an SEC filing).The audit firm's independence is impaired if

Accepted Answer

A)  Krogstad owns Dodger common stock. 
B)  Krogstad's brother owns 10 shares of Dodger common stock. 
C)  Ward's sister-in-law is a sales representative with a territory in California. 
D)  Ward's fellow partner CPA Felix in the Omaha office has a wife who owns Dodger stock through a mutual fund held in her own employer's employee benefit plan. 
A)  Krogstad owns Dodger common stock. 
B)  Krogstad's brother owns 10 shares of Dodger common stock. 
C)  Ward's sister-in-law is a sales representative with a territory in California. 
D)  Ward's fellow partner CPA Felix in the Omaha office has a wife who owns Dodger stock through a mutual fund held in her own employer's employee benefit plan.

Question 11

What is the role of the PCAOB's Division of Enforcement and Investigation in dealing with independence violations involving accountants engaged to audit public companies?

Accepted Answer

The PCAOB's Division of Enforcement and

Question 12

According to the ethical standards of the profession,which of the following acts is generally prohibited?

Accepted Answer

A)  Issuing a modified report explaining a failure to follow a governmental regulatory agency's standards when conducting an attest service for a client 
B)  Revealing confidential client information during a quality review of a professional practice by a team from the state CPA society 
C)  Accepting a contingent fee for representing a client in an examination of the client's federal tax return by an IRS agent 
D)  Retaining client records after an engagement is terminated prior to completion and the client has demanded their return 
A)  Issuing a modified report explaining a failure to follow a governmental regulatory agency's standards when conducting an attest service for a client 
B)  Revealing confidential client information during a quality review of a professional practice by a team from the state CPA society 
C)  Accepting a contingent fee for representing a client in an examination of the client's federal tax return by an IRS agent 
D)  Retaining client records after an engagement is terminated prior to completion and the client has demanded their return

Question 13

Which of the following is true according to Government Independence Standards?

Accepted Answer

A)  Nonaudit services cannot be provided to a government entity that is an attest client. 
B)  Nonaudit services are allowed providing the audit organization does not perform management functions, make management decisions, or audit its own work. 
C)  Nonaudit services are allowed as long as the nature of the service is publicly disclosed including a statement that independence has not been compromised. 
D)  Nonaudit services are allowed if they have been approved by the executive body of the governing organization. 
A)  Nonaudit services cannot be provided to a government entity that is an attest client. 
B)  Nonaudit services are allowed providing the audit organization does not perform management functions, make management decisions, or audit its own work. 
C)  Nonaudit services are allowed as long as the nature of the service is publicly disclosed including a statement that independence has not been compromised. 
D)  Nonaudit services are allowed if they have been approved by the executive body of the governing organization.

Question 14

What agency has the ultimate authority in defining independence for public companies?

Accepted Answer

A)  AICPA 
B)  SEC 
C)  Department of Justice 
D)  Congress 
A)  AICPA 
B)  SEC 
C)  Department of Justice 
D)  Congress

Question 15

Rule 301 has been interpreted by the AICPA to explicitly allow a CPA to divulge confidential client information to

Accepted Answer

A)  the SEC. 
B)  the U.S. Department of Justice. 
C)  the AICPA Professional Ethics Division. 
D)  the Federal Trade Commission. 
A)  the SEC. 
B)  the U.S. Department of Justice. 
C)  the AICPA Professional Ethics Division. 
D)  the Federal Trade Commission.

Question 16

The AICPA Council has designated the following bodies to pronounce accounting principles under Rule 203,except the

Accepted Answer

A)  Financial Accounting Standards Board. 
B)  Auditing Procedures Board. 
C)  Opinions of the Accounting Principles Board. 
D)  Governmental Accounting Standards Board. 
A)  Financial Accounting Standards Board. 
B)  Auditing Procedures Board. 
C)  Opinions of the Accounting Principles Board. 
D)  Governmental Accounting Standards Board.

Question 17

Which of the following is NOT a restriction placed on audit partners by Sarbanes-Oxley?

Accepted Answer

A)  Limits engagement partners to a five-year term as the engagement partner. 
B)  Limits other partners associated with the engagement to a seven-year term. 
C)  Engagement partners must review nonaudit work to insure that independence has not been compromised. 
D)  Partners that engage in selling services, other than audit, review, and attestation services, to an audit client are not independent with respect to that client. 
A)  Limits engagement partners to a five-year term as the engagement partner. 
B)  Limits other partners associated with the engagement to a seven-year term. 
C)  Engagement partners must review nonaudit work to insure that independence has not been compromised. 
D)  Partners that engage in selling services, other than audit, review, and attestation services, to an audit client are not independent with respect to that client.

Question 18

To which group can a CPA provide audit documentation without being subpoenaed and without the client's consent?

Accepted Answer

A)  The IRS 
B)  The FASB 
C)  Another CPA firm performing a peer review 
D)  Another CPA firm considering the purchase of the auditing firm 
A)  The IRS 
B)  The FASB 
C)  Another CPA firm performing a peer review 
D)  Another CPA firm considering the purchase of the auditing firm

Question 19

Maralee has been approached by J.Fox Entertainment to perform an audit of her theatre company.Maralee has never audited a theatre company before.Maralee can

Accepted Answer

A)  not accept the engagement because she does not have the specialized industry knowledge. 
B)  recommend another auditor and receive a fee for the referral. 
C)  accept the engagement if she can obtain the required knowledge before the end of the engagement. 
D)  accept the engagement with the understanding that additional hours will be required for Maralee to learn and understand the nature of the business. 
A)  not accept the engagement because she does not have the specialized industry knowledge. 
B)  recommend another auditor and receive a fee for the referral. 
C)  accept the engagement if she can obtain the required knowledge before the end of the engagement. 
D)  accept the engagement with the understanding that additional hours will be required for Maralee to learn and understand the nature of the business.

Question 20

An audit client hires a member of the audit engagement team to be its new controller.Sarbanes-Oxley rules require that

Accepted Answer

A)  the new controller sever all relations with the CPA firm, including any retirement funds. 
B)  the new controller not take part in any discussions regarding the retention of the audit form. 
C)  the client find a new audit firm. 
D)  the client disclose the controller's relationship in the notes to the financial statements. 
A)  the new controller sever all relations with the CPA firm, including any retirement funds. 
B)  the new controller not take part in any discussions regarding the retention of the audit form. 
C)  the client find a new audit firm. 
D)  the client disclose the controller's relationship in the notes to the financial statements.

Based on Sarbanes-Oxley,who is ultimately responsible for the independence of the external auditor?

Which of the following is NOT a key element of the definition of ethics?

Which of the following is NOT included in Rule of Conduct 102,Integrity and Objectivity?

In which of the following circumstances would a CPA who audits XZ Corporation lack independence?

Which of the following philosophical theories places emphasis on following rules,rather than on the consequences of the decision?

According to Sarbanes-Oxley,the audit committee must pre-approve all audit and non-audit services.This can be done

According to the ethical standards of the profession,which of the following acts is generally prohibited?

What is the role of the PCAOB's Division of Enforcement and Investigation in dealing with independence violations involving accountants engaged to audit public companies?

According to the ethical standards of the profession,which of the following acts is generally prohibited?

Which of the following is true according to Government Independence Standards?

What agency has the ultimate authority in defining independence for public companies?

Rule 301 has been interpreted by the AICPA to explicitly allow a CPA to divulge confidential client information to

The AICPA Council has designated the following bodies to pronounce accounting principles under Rule 203,except the

Which of the following is NOT a restriction placed on audit partners by Sarbanes-Oxley?

To which group can a CPA provide audit documentation without being subpoenaed and without the client's consent?

Maralee has been approached by J.Fox Entertainment to perform an audit of her theatre company.Maralee has never audited a theatre company before.Maralee can

An audit client hires a member of the audit engagement team to be its new controller.Sarbanes-Oxley rules require that

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Legal Liability

Internal Audits governmental Audits and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

Filters

Exam 14: Professional Ethics

Based on Sarbanes-Oxley,who is ultimately responsible for the independence of the external auditor?

Which of the following is NOT a key element of the definition of ethics?

Which of the following is NOT included in Rule of Conduct 102,Integrity and Objectivity?

In which of the following circumstances would a CPA who audits XZ Corporation lack independence?

Which of the following philosophical theories places emphasis on following rules,rather than on the consequences of the decision?

According to Sarbanes-Oxley,the audit committee must pre-approve all audit and non-audit services.This can be done

According to the ethical standards of the profession,which of the following acts is generally prohibited?

What is the role of the PCAOB's Division of Enforcement and Investigation in dealing with independence violations involving accountants engaged to audit public companies?

According to the ethical standards of the profession,which of the following acts is generally prohibited?

Which of the following is true according to Government Independence Standards?

What agency has the ultimate authority in defining independence for public companies?

Rule 301 has been interpreted by the AICPA to explicitly allow a CPA to divulge confidential client information to

The AICPA Council has designated the following bodies to pronounce accounting principles under Rule 203,except the

Which of the following is NOT a restriction placed on audit partners by Sarbanes-Oxley?

To which group can a CPA provide audit documentation without being subpoenaed and without the client's consent?

Maralee has been approached by J.Fox Entertainment to perform an audit of her theatre company.Maralee has never audited a theatre company before.Maralee can

An audit client hires a member of the audit engagement team to be its new controller.Sarbanes-Oxley rules require that

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Legal Liability

Internal Audits governmental Audits and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

Filters