Exam 5: Ethics and the Audit Profession

Which of the following circumstances impairs an auditor's independence? I.Litigation by a client against an audit firm claiming a deficiency in the previous audit II.Litigation by a client against an audit firm related to tax services III.Litigation by an audit firm against a client claiming management fraud or deceit

Which of the following instances would impair a CPA's independence when they have been retained as the auditor? I.A charitable organization where the CPA serves as treasurer II.A municipality where the CPA owns $250,000 of the $25 million outstanding bonds of the municipality III.A company that the CPA's investment club owns a 10% investment interest

A rationalization method that can easily result in unethical behavior is the argument that "everybody does it."

A direct financial interest violates independence in which of the following circumstances?

A six-step approach is often used to resolve an ethical dilemma.The first step in this process is to:

Companies are required to disclose in their proxy statement or annual filings with the SEC the total amount of audit and non-audit fees paid to the audit firm for the two most recent years.Which of the following is not one of the categories of fees that must be disclosed?

"Independence" in auditing means:

Which of the following represents all of the ways a CPA firm can be organized under Rule 505?

The members of a client's "audit committee" should be:

An advantage of the principles of professional conduct in the Code of Professional Conduct is that they are more easily enforced than are the specific rules of conduct.

When determining whether independence is impaired because of an ownership interest in a client company,materiality will affect ownership:

Which of the following is required for a firm to designate itself "Member of the American Institute of Certified Public Accountants" on its letterhead?

Which of the following fee arrangements is not a violation of the AICPA's Code of Professional Conduct?

Under the AICPA's Code of Professional Conduct,CPAs are prohibited from offering audit clients a discount for referring a prospective client even if they are disclosed.

A member in public practice shall neither receive from,nor pay to,a client a commission when the member or member's firm also performs certain services for that client.Are commissions allowed if the CPA performs:

________ means that a person acts according to conscience,regardless of the situation.

Rule 301 of the AICPA's Code of Professional Conduct requires CPAs to maintain the confidentiality of client information.This rule would be violated if a CPA disclosed information without a client's consent as a result of a:

Independence is required of a CPA when performing:

Which of the following services is not prohibited by the SEC whenever a CPA also audits the company?

The Sarbanes-Oxley Act requires a cooling off period of ________ before a member of an audit team can work for a client in a key management position?