Deck 6: Professional Accounting in the Public Interest

Question 1

The recommendation of appointment and review of external auditors by the audit committee is an example of

A) safeguards reducing the risk of conflict of interest created by the profession, legislation, or regulation.
B) safeguards reducing the risk of conflict of interest between an auditor and management.
C) safeguards reducing the risk of conflict of interest within a professional accounting firm's own systems and procedures.
D) safeguards reducing the risk of conflict of interest created by the profession, legislation, or regulation, and safeguards reducing the risk of conflict of interest within a professional accounting firm's own systems and procedures.
E) All of these are correct.

Answer 1

safeguards reducing the risk of conflict of interest between an auditor and management.

Question 2

Professional accountants, in their fiduciary role, owe primary loyalty to

A) the accounting profession.
B) the client.
C) the public interest.
D) government regulations.
E) All of these are correct.

Answer 2

the public interest.

Question 3

According to Kohlberg, fear of punishment and authorities is a motive for doing right at which stage of moral reasoning?

A) pre-conventional
B) conventional
C) post-conventional
D) autonomous
E) principled

Answer 3

pre-conventional

Question 4

If a professional accountant is auditing a public company and she receives company shares as payment for her audit services, she will be violating which of the following fundamental principles?

A) integrity
B) objectivity
C) professional due care
D) confidentiality
E) All of these are correct.

Question 5

A professional accounting firm has several audit and tax clients; however, a single client represents 40% of the firm's revenue. This situation could result in which of the following threats to professional independence?

A) self-review
B) intimidation
C) advocacy
D) familiarity
E) self-interest

Question 6

Which organization is developing an international code of conduct for professional accountants?

A) International Accounting Standards Board
B) European Federation of Accountants
C) Financial Accounting Standards Board
D) Public Accounting Oversight Board
E) International Federation of Accountants

Question 7

Which organization issues auditing standards, carries out inspections of public accounting firms auditing U.S. public clients, and imposes sanctions when applicable?

A) CPAB
B) PCAOB
C) SEC
D) FASB
E) AICPA

Question 8

A professional accountant is auditing client A and providing consulting services to client B. Both clients are in the same industry. If the professional accountant uses specific information from client A's audit to prepare a business plan for client B, he will be violating which of the following fundamental principles?

A) integrity
B) objectivity
C) professional due care
D) confidentiality
E) All of these are correct.

Question 9

A new audit client was taken on by a professional accountant's firm. The fee for this client's audit engagement is significantly lower than that charged by the prior accountants. This situation could result in which of the following threats to professional independence?

A) self-review
B) intimidation
C) advocacy
D) familiarity
E) None of these are correct.

Question 10

A professional accountant has been the partner in charge of a particular audit client for the past eight years. This situation could result in which of the following threats to professional independence?

A) self-review
B) intimidation
C) advocacy
D) familiarity
E) None of these are correct.

Question 11

Which of the following elements are essential features of a profession?

A) extensive training, license or certification, and provision of important services to society
B) extensive training, license or certification, and provision of important services to society.
C) extensive training, provision of important services to society, and primarily intellectual skills
D) license or certification, representation by professional organizations, and autonomy
E) license or certification, autonomy, and provision of important services to society

Question 12

If a professional accountant is billing an audit client for more hours than those actually worked, he will be violating which of the following fundamental principles?

A) objectivity
B) professional due care
C) integrity
D) confidentiality
E) All of these are correct.

Question 13

Which of the following values is NOT necessary for an accounting professional?

A) honesty
B) integrity
C) objectivity
D) a primary commitment to self-interest
E) All of these are necessary.

Question 14

Which of the following is NOT a fundamental principle in codes of conduct for professional accountants?

A) act in the client's best interest
B) objectivity and independence
C) maintain the good reputation of the profession
D) maintain confidentiality
E) not to be associated with misleading information

Question 15

Using partners who do not report to audit partners for the provision of non-assurance services to an assurance client would be an example of

A) safeguards reducing the risk of conflict of interest created by the profession, legislation, or regulation.
B) safeguards reducing the risk of conflict of interest within a client.
C) safeguards reducing the risk of conflict of interest within a professional accounting firm.
D) safeguards reducing the risk of conflict of interest created by the profession, legislation, or regulation, and safeguards reducing the risk of conflict of interest within a professional accounting firm.
E) All of these are correct.

Question 16

According to Kohlberg, adherence to moral codes or to codes of law and order is a motive for doing right at which stage of moral reasoning?

A) pre-conventional
B) conventional
C) post-conventional
D) autonomous
E) principled

Question 17

The adoption of which of following measures would reduce the expectations gap and lessen public misunderstanding of the auditor's role?

A) publishing a statement of management responsibility
B) the auditor reporting annually to the audit committee
C) expanding the audit report to clarify the auditor's role and the level of assurance
D) publishing a statement of management responsibility, and the auditor reporting annually to the audit committee
E) publishing a statement of management responsibility, and expanding the audit report to clarify the auditor's role and the level of assurance

Question 18

Which of following duties is essential to maintaining a fiduciary relationship in the accounting profession?

A) development and maintenance of required knowledge and skills
B) maintenance of trust
C) maintenance of an acceptable personal reputation
D) development and maintenance of required knowledge and skills, and maintenance of trust
E) All of these are correct.

Question 19

Which organization can issue auditing standards in the United States?

A) AICPA
B) FASB
C) SEC
D) PCAOB
E) All of these are correct.

Question 20

The external review of an audit firm's quality control system is an example of

A) safeguards reducing the risk of conflict of interest within the audit profession.
B) safeguards reducing the risk of conflict of interest within a client.
C) safeguards reducing the risk of conflict of interest within a professional accounting firm.
D) safeguards reducing the risk of conflict of interest within the audit profession and within a professional accounting firm.
E) All of these are correct.