Question 1

What is "discounting," as that term is used in the context of conflicts of interest?

Accepted Answer

"Discounting," in the context of conflicts of interest, refers to the cognitive bias where individuals undervalue or dismiss the significance, relevance, or credibility of an opposing viewpoint or conflicting information because of a perceived conflict of interest. This can occur when someone believes that the person presenting an argument or information has a vested interest that could potentially compromise their objectivity or credibility.

For example, if a scientist presents research findings that support the safety of a new drug, but it is known that the scientist is employed by the pharmaceutical company that manufactures the drug, others might "discount" the findings. They might assume that the scientist's employment with the company has biased the research results, even if the research was conducted with rigorous scientific standards.

Discounting can lead to a form of bias where the information is not evaluated on its own merits but is instead accepted or rejected based on assumptions about the source's motivations or interests. This can be problematic as it may result in the dismissal of valid information or the acceptance of less credible information that aligns with one's own interests or beliefs. In conflicts of interest, it is important to critically assess information and consider the potential for bias without automatically discounting evidence that may be reliable and valid despite the source's potential conflicts.

Question 2

A CPA has been asked by an engaged couple to help them budget the amount that they can afford to spend on their upcoming wedding.Both the groom and the bride approached the CPA together and met with him together.The CPA has no prior relationship with either of these individuals.The groom and the bride each have agreed to pay one-half of the CPA's fees.The CPA:

Accepted Answer

A)  Currently does not have an accountant-client conflict of interest, but must be alert to the possibility that one will arise 
B)  Currently does not have a dual-client conflict of interest, but must be alert to the possibility that one will arise 
C)  Currently has a conflict of interest and should not accept this professional engagement 
D)  Currently has a conflict of interest, and should agree to render professional services to this couple only if they give their specific consent to waive this conflict of interest 
A)  Currently does not have an accountant-client conflict of interest, but must be alert to the possibility that one will arise 
B)  Currently does not have a dual-client conflict of interest, but must be alert to the possibility that one will arise 
C)  Currently has a conflict of interest and should not accept this professional engagement 
D)  Currently has a conflict of interest, and should agree to render professional services to this couple only if they give their specific consent to waive this conflict of interest B

Question 3

In the "Fund of Funds" case,the plaintiff contended that:

Accepted Answer

A)  The defendant CPA firm owed it due care in performing professional services and failed to do so 
B)  The defendant CPA firm violated the Integrity and Objectivity Rule 
C)  The defendant CPA firm pursued its own self-interest over the public interest 
D)  The defendant CPA firm had a duty to utilize all available information in performing professional services for the plaintiff 
A)  The defendant CPA firm owed it due care in performing professional services and failed to do so 
B)  The defendant CPA firm violated the Integrity and Objectivity Rule 
C)  The defendant CPA firm pursued its own self-interest over the public interest 
D)  The defendant CPA firm had a duty to utilize all available information in performing professional services for the plaintiff D

Question 4

Refer to the above question.After learning that one of the three shareholders has a need for increased dividend cash flow immediately,the CPA should:

Accepted Answer

A)  Share this fact with all three shareholders to see if they can accommodate this particular shareholder's needs 
B)  Shift her cash flow allocation plan in favor of distributing increased levels of dividends 
C)  Reach the same conclusion that the CPA would have reached prior to learning of this particular shareholder's need for increased dividend cash flow 
D)  Consider withdrawing from the professional engagement 
A)  Share this fact with all three shareholders to see if they can accommodate this particular shareholder's needs 
B)  Shift her cash flow allocation plan in favor of distributing increased levels of dividends 
C)  Reach the same conclusion that the CPA would have reached prior to learning of this particular shareholder's need for increased dividend cash flow 
D)  Consider withdrawing from the professional engagement

Question 5

What is "implied consent," in the context of conflicts of interest?

Accepted Answer

"Implied consent," in the context of con

Question 6

When can a CPA provide services to all partners in a client partnership? When can it not provide services to all client partners without obtaining their consent?

Accepted Answer

A Certified Public Accountant (CPA) can

Question 7

An Oregon CPA provides management advisory services to a large public utility that provides natural gas throughout Oregon and is the only supplier of electricity to residential users in Oregon.The CPA has been asked to prepare a request for a utility rate increase that will be submitted to state regulators for their approval.
a. Does the CPA have a conflict of interest?
b. Would you expect this conflict of interest to impair the CPA's objectivity?
c. Does the CPA have a duty to disclose this conflict of interest?

Accepted Answer

a. Yes, the CPA does have a conflict of

Question 8

A CPA provides professional services to several businesses in its community.One such client is Primetime Bank,the largest bank in town,and another client is Aeropenetics,Inc.,a large aerospace manufacturer.Aeropenetics,Inc.has a large outstanding loan balance owed to Primetime Bank,and it lately has been experiencing severe liquidity problems.Aeropenetics is a privately-held company and its liquidity problems are not generally known to the public or to Primetime Bank.
In preparing the Allowance for Uncollectible Loans account for Primetime Bank,the CPA must decide whether or not to take into account Aeropenetics' liquidity problems.It learned of these liquidity problems during the course of preparing cash flow budgets for Aeropenetics.
a. What ethical principles are relevant to the CPA's decision?
b. What court cases are relevant to the CPA's decision?
c. What decision should the CPA reach?

Accepted Answer

a. The ethical principles relevant to th

Question 9

A CPA has to focus on whether a conflict of interest exists:

Accepted Answer

A)  Only at the outset of a professional relationship 
B)  Only after a professional relationship has commenced 
C)  Both at the outset of a professional relationship and throughout the conduct of a professional relationship 
D)  In all professional relationships other than the provision of voluntary services to a charitable, civic, or religious organization 
A)  Only at the outset of a professional relationship 
B)  Only after a professional relationship has commenced 
C)  Both at the outset of a professional relationship and throughout the conduct of a professional relationship 
D)  In all professional relationships other than the provision of voluntary services to a charitable, civic, or religious organization

Question 10

In deciding whether a conflict of interest exists,the relevant standard to be applied is whether:

Accepted Answer

A)  The CPA subjectively believes that a conflict of interest exists 
B)  A reasonable observer, with reasonable knowledge of the relevant circumstances, would conclude that a conflict of interest exists 
C)  In an accountant-client conflict of interest situation, at least one of the clients believes, reasonably or unreasonably, that a conflict of interest exists 
D)  In a dual-client conflict of interest situation, both of the clients themselves believe, reasonably or unreasonably, that a conflict of interest exists 
A)  The CPA subjectively believes that a conflict of interest exists 
B)  A reasonable observer, with reasonable knowledge of the relevant circumstances, would conclude that a conflict of interest exists 
C)  In an accountant-client conflict of interest situation, at least one of the clients believes, reasonably or unreasonably, that a conflict of interest exists 
D)  In a dual-client conflict of interest situation, both of the clients themselves believe, reasonably or unreasonably, that a conflict of interest exists

Question 11

Due to the conflict of interest rules,a CPA may:

Accepted Answer

A)  Not provide professional services to two companies in the same industry 
B)  Not provide professional services to two companies who do business with one another 
C)  Not provide professional services to two companies who do business with one another if the sales or services are material in amount to one of the parties 
D)  Generally provide professional services to two companies who do business with one another, even if the sales or services are material in amount to one or both parties 
A)  Not provide professional services to two companies in the same industry 
B)  Not provide professional services to two companies who do business with one another 
C)  Not provide professional services to two companies who do business with one another if the sales or services are material in amount to one of the parties 
D)  Generally provide professional services to two companies who do business with one another, even if the sales or services are material in amount to one or both parties

Question 12

A CPA agreed to render professional services to all three of the shareholders in a corporation.All three shareholders asked the CPA to determine the amount of corporate earnings that should be distributed as dividends and the amount that should be maintained as Retained Earnings to spur the future growth of the corporation.All three told the CPA that they want to "allocate cash flow to maximize everyone's after-tax wealth." Two weeks after the CPA began this assignment,one of the shareholders told the CPA privately that she "desperately needed immediate cash flow from dividends because her mother recently had a stroke and needs to be able to afford to give her mother proper medical care.This shareholder asked that her mother's medical condition be kept confidential,to respect her mother's wishes.The CPA:

Accepted Answer

A)  Acted properly at the outset of this professional engagement 
B)  Acted improperly at the outset of this professional engagement because representation of fellow shareholders automatically creates a dual-client conflict of interest 
C)  Acted improperly at the outset of this professional engagement, but now has a duty to complete the engagement to minimize further harm to her clients 
D)  Acted improperly at the outset of this professional engagement and has a duty to inform the accountancy licensing board about this misconduct 
A)  Acted properly at the outset of this professional engagement 
B)  Acted improperly at the outset of this professional engagement because representation of fellow shareholders automatically creates a dual-client conflict of interest 
C)  Acted improperly at the outset of this professional engagement, but now has a duty to complete the engagement to minimize further harm to her clients 
D)  Acted improperly at the outset of this professional engagement and has a duty to inform the accountancy licensing board about this misconduct

Question 13

An Oklahoma CPA provides management advisory services to a large public utility that provides electrical power throughout Oklahoma and is the only supplier of electricity to residential users in Oklahoma.The CPA has been asked to prepare a request for a utility rate increase that will be submitted to state regulators for their approval.The CPA:

Accepted Answer

A)  Has a conflict of interest that should be disclosed to his client 
B)  Does not have to be concerned about conflicts of interest because the CPA only provides management advisory services 
C)  Does not have to be concerned about conflicts of interest because utility rates ultimately will be set by independent state regulators 
D)  Does not have a material conflict of interest because the requested rate increase will apply to all Oklahoma citizens who use this utility's electricity services 
A)  Has a conflict of interest that should be disclosed to his client 
B)  Does not have to be concerned about conflicts of interest because the CPA only provides management advisory services 
C)  Does not have to be concerned about conflicts of interest because utility rates ultimately will be set by independent state regulators 
D)  Does not have a material conflict of interest because the requested rate increase will apply to all Oklahoma citizens who use this utility's electricity services

Question 14

An accountant and a prospective client are contemplating entering into a professional relationship in which the accountant will provide monthly bookkeeping services and annual tax return preparation services for this client's hair salon.The accountant's teenage daughter told this prospective client that her father is "an amazing accountant," which facilitated the professional introduction.The accountant's daughter works for this prospective client as a receptionist.In all likelihood,the accountant:

Accepted Answer

A)  May not provide services to this prospective client 
B)  May provide only tax preparation services to this prospective client because a conflict of interest presently exists 
C)  May provide only bookkeeping services to this prospective client because a conflict of interest presently exists 
D)  May provide all requested services because a conflict of interest does not currently exist and is not reasonably foreseeable 
A)  May not provide services to this prospective client 
B)  May provide only tax preparation services to this prospective client because a conflict of interest presently exists 
C)  May provide only bookkeeping services to this prospective client because a conflict of interest presently exists 
D)  May provide all requested services because a conflict of interest does not currently exist and is not reasonably foreseeable

Question 15

If a CPA leaves a job in public accounting to commence work as a member of a company's internal accounting staff,this CPA:

Accepted Answer

A)  No longer has to be concerned about conflicts of interest 
B)  Still has to be concerned about conflicts of interest involving former clients as well as conflicts of interest arising at her new workplace 
C)  Only has to be concerned about conflicts of interest involving her former clients because industry accountants are not subject to the AICPA's conflict of interest rules 
D)  Does not have to be concerned about conflicts of interest that may arise between loyalty to her new employer and loyalty to her former employer 
A)  No longer has to be concerned about conflicts of interest 
B)  Still has to be concerned about conflicts of interest involving former clients as well as conflicts of interest arising at her new workplace 
C)  Only has to be concerned about conflicts of interest involving her former clients because industry accountants are not subject to the AICPA's conflict of interest rules 
D)  Does not have to be concerned about conflicts of interest that may arise between loyalty to her new employer and loyalty to her former employer

Question 16

An accountant recent met with the CFO of a major corporation.The accountant and this prospective client are contemplating entering into a professional relationship.The prospective corporate client has a history of violating the Foreign Corrupt Practices Act's provisions concerning bribery of foreign government officials.The accountant's job is to ensure that the company fully complies with this law.To accomplish this,the accountant will perform unannounced reviews of the company's accounting records and internal controls from time to time. The accountant's daughter told the CFO that her father is "an amazing accountant," which facilitated the professional introduction.The accountant's daughter recently was promoted to serve as this corporation's Director of International Sales-Asia Division.In all likelihood,the accountant:

Accepted Answer

A)  Should not agree to provide these services to this prospective client 
B)  May provide services to this client, as long as the accountant's daughter does not also participate directly in the corporation's presentation of corporate financial transactions in the form of financial statements 
C)  May provide all requested services because a conflict of interest does not currently exist and is not reasonably foreseeable 
D)  May provide services to this client because safeguards against conflicts of interest readily are available 
A)  Should not agree to provide these services to this prospective client 
B)  May provide services to this client, as long as the accountant's daughter does not also participate directly in the corporation's presentation of corporate financial transactions in the form of financial statements 
C)  May provide all requested services because a conflict of interest does not currently exist and is not reasonably foreseeable 
D)  May provide services to this client because safeguards against conflicts of interest readily are available

Question 17

The "Fund of Funds" court decision stands for the proposition that:

Accepted Answer

A)  Auditors inherently have conflicts of interest with their clients 
B)  Segregating one team of auditors at a CPA firm from another team does not necessarily prevent conflict of interest issues from affecting the firm's ethical obligations 
C)  The duty of loyalty to one client sometimes has to override the duty of confidentiality owed to a different client 
D)  The duty of loyalty to a client sometimes has to override the duty of confidentiality owed to that same client 
A)  Auditors inherently have conflicts of interest with their clients 
B)  Segregating one team of auditors at a CPA firm from another team does not necessarily prevent conflict of interest issues from affecting the firm's ethical obligations 
C)  The duty of loyalty to one client sometimes has to override the duty of confidentiality owed to a different client 
D)  The duty of loyalty to a client sometimes has to override the duty of confidentiality owed to that same client

Question 18

A CPA's duty to be free of conflicts of interest is most closely related to the AICPA Code of Professional Conduct's Principle of:

Accepted Answer

A)  Due care 
B)  Objectivity 
C)  Professional skepticism 
D)  Nonsubordination of professional judgment 
A)  Due care 
B)  Objectivity 
C)  Professional skepticism 
D)  Nonsubordination of professional judgment

Question 19

When a CPA leaves her job working as an IRS Revenue Agent to accept a job in the Tax Department of a public accounting firm,she primarily:

Accepted Answer

A)  Has to be concerned about conflicts of interest between her new employer and its competitors 
B)  Has to be concerned about conflicts of interest between her new employer and other employers whose job offers she rejected 
C)  Has to be concerned about conflicts of interest arising between one of her clients and her former employer 
D)  Does not have to be concerned about using information learned at the IRS in assisting new clients because a CPA has a duty to use all of her knowledge to best serve her clients 
A)  Has to be concerned about conflicts of interest between her new employer and its competitors 
B)  Has to be concerned about conflicts of interest between her new employer and other employers whose job offers she rejected 
C)  Has to be concerned about conflicts of interest arising between one of her clients and her former employer 
D)  Does not have to be concerned about using information learned at the IRS in assisting new clients because a CPA has a duty to use all of her knowledge to best serve her clients

Question 20

If a conflict of interest arises during the course of providing professional services,a professional accountant:

Accepted Answer

A)  Must consider withdrawing from the professional engagement 
B)  Is required to withdraw from the professional engagement, but does not have to refund fees previously paid by its client 
C)  Is required to withdraw from the professional engagement and is required to refund fees previously paid by the client 
D)  Is not required to withdraw from the professional engagement if the conflict of interest did not exist at the inception of the relationship and it was not reasonably foreseeable at that time 
A)  Must consider withdrawing from the professional engagement 
B)  Is required to withdraw from the professional engagement, but does not have to refund fees previously paid by its client 
C)  Is required to withdraw from the professional engagement and is required to refund fees previously paid by the client 
D)  Is not required to withdraw from the professional engagement if the conflict of interest did not exist at the inception of the relationship and it was not reasonably foreseeable at that time

What is "discounting," as that term is used in the context of conflicts of interest?

In the "Fund of Funds" case,the plaintiff contended that:

Refer to the above question.After learning that one of the three shareholders has a need for increased dividend cash flow immediately,the CPA should:

What is "implied consent," in the context of conflicts of interest?

When can a CPA provide services to all partners in a client partnership? When can it not provide services to all client partners without obtaining their consent?

A CPA has to focus on whether a conflict of interest exists:

In deciding whether a conflict of interest exists,the relevant standard to be applied is whether:

Due to the conflict of interest rules,a CPA may:

If a CPA leaves a job in public accounting to commence work as a member of a company's internal accounting staff,this CPA:

The "Fund of Funds" court decision stands for the proposition that:

A CPA's duty to be free of conflicts of interest is most closely related to the AICPA Code of Professional Conduct's Principle of:

When a CPA leaves her job working as an IRS Revenue Agent to accept a job in the Tax Department of a public accounting firm,she primarily:

If a conflict of interest arises during the course of providing professional services,a professional accountant:

Introduction to Ethics

Ethical Principles and Reasoning

The Core Philosophies

Virtue,justice,and Social Responsibility

Why We Cheat

Greed,corruption,and Collusion

Fraud and Earnings Management

Discreditable Acts: Discrimination,deceit,and Disclosure

Confidentiality

Independence and Moral Seduction

Duties As a Whistleblower

Duties of Public-Company Auditors: the Sarbanesoxley Act

Duties of Tax Professionals

Duties of Fiduciaries: Financial Planners,trustees,and Executors

Duties in the Accounting Workplace Online Only

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Exam 11: Conflicts of Interest

What is "discounting," as that term is used in the context of conflicts of interest?

In the "Fund of Funds" case,the plaintiff contended that:

Refer to the above question.After learning that one of the three shareholders has a need for increased dividend cash flow immediately,the CPA should:

What is "implied consent," in the context of conflicts of interest?

When can a CPA provide services to all partners in a client partnership? When can it not provide services to all client partners without obtaining their consent?

A CPA has to focus on whether a conflict of interest exists:

In deciding whether a conflict of interest exists,the relevant standard to be applied is whether:

Due to the conflict of interest rules,a CPA may:

If a CPA leaves a job in public accounting to commence work as a member of a company's internal accounting staff,this CPA:

The "Fund of Funds" court decision stands for the proposition that:

A CPA's duty to be free of conflicts of interest is most closely related to the AICPA Code of Professional Conduct's Principle of:

When a CPA leaves her job working as an IRS Revenue Agent to accept a job in the Tax Department of a public accounting firm,she primarily:

If a conflict of interest arises during the course of providing professional services,a professional accountant:

Introduction to Ethics

Ethical Principles and Reasoning

The Core Philosophies

Virtue,justice,and Social Responsibility

Why We Cheat

Greed,corruption,and Collusion

Fraud and Earnings Management

Discreditable Acts: Discrimination,deceit,and Disclosure

Confidentiality

Independence and Moral Seduction

Duties As a Whistleblower

Duties of Public-Company Auditors: the Sarbanesoxley Act

Duties of Tax Professionals

Duties of Fiduciaries: Financial Planners,trustees,and Executors

Duties in the Accounting Workplace Online Only

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