Question 1

A member of the AICPA must safeguard the confidentiality of client information.Which of the following is not a valid reason to disclose information to non-clients?

Accepted Answer

A) To discuss information relating to inadequate disclosure in an audit report. 
B) To comply with a validly issued and enforceable subpoena or summons. 
C) To accommodate the review of client audit work papers under AICPA,PCAOB,or State Board of Accountancy authority. 
D) To explain to members of the press whether a client is likely to miss payroll in the forthcoming periods.

Question 2

Among immediate family members,whose ownership of client's stock is not considered the same as the covered member's ownership?

Accepted Answer

A) Spouse. 
B) Dependent children. 
C) Non-dependent children. 
D) All are considered part of the covered members immediate family.

Question 3

There is a hierarchy of rights to consider when applying rights theory.

Accepted Answer

A) True 
 B)False

Question 4

Contingent fees are prohibited for tax professionals when preparing tax returns for clients

Accepted Answer

A) True 
 B)False

Question 5

Which of following is not part of the ethical framework derived from utilitarianism and rights theories?

Accepted Answer

A) Identification of the legal issues. 
B) Determination of affected parties and their rights. 
C) Determination of the most important rights. 
D) Development of alternative courses of action.

Question 6

What is information about a client that cannot be subpoenaed by a court of law called?

Accepted Answer

A) Confidential information. 
B) Privileged communication. 
C) Contingent information. 
D) Audit communication.

Question 7

An auditor who is professionally skeptical will do which of the following?

Accepted Answer

A) Critically question contradictory audit evidence..\ 
B) Carefully evaluate the reliability of audit evidence,especially in situations in which fraud risk is high. 
C) Reasonably question the authenticity of documentation,while accepting that documents are to be considered genuine unless there is reason to believe the contrary. 
D) All of the above.

Question 8

Which of the following represents a situation in which an auditor is independent of its client?

Accepted Answer

A) The auditor is paid by the client organization rather than the SEC. 
B) The auditor takes a personal loan from the president of the company. 
C) The auditor's dependent son holds 25 shares of the client's common stock. 
D) The auditor has not received payment for the previous audit services.

Question 9

An audit firm is not considered independent when it performs which of the following services for a publicly traded audit client?

Accepted Answer

A) Tax return preparation as approved by the board of directors. 
B) Basic accounting record keeping and financial statement preparation. 
C) Accounting information system design and implementation. 
D) Both B and C. 
E) None of the above.

Question 10

In which of the following situations would a CPA not be considered independent?

Accepted Answer

A) A CPA has obtained an auto loan from a banking client in a prior year. 
B) A CPA has obtained a home mortgage loan in 1988 from a client. 
C) A CPA has obtained a $4,500 cash advance from a banking client in the current year. 
D) A CPA has obtained a $6,500 cash advance from a client in the current year.

Question 11

Mark Pulley is an auditor at Pulley and Hurst,LLC.If Pulley's five-year-old daughter owns shares of stock in McBurgers Corporation,then what is Pulley considered to have?

Accepted Answer

A) An immaterial indirect financial interest in McBurgers Corporation. 
B) A material indirect financial interest in the McBurgers Corporation. 
C) A loophole for claiming independence from McBurgers Corporation. 
D) An direct financial interest in McBurgers Corporation.

Question 12

In which of the following situations would a CPA not be considered independent?

Accepted Answer

A) A CPA has obtained an auto loan from a banking client in the current year. 
B) A CPA has obtained an automobile lease term from a client in the current year. 
C) A CPA has obtained a $4,000 cash advance from a banking client in the current year. 
D) A CPA has obtained a home mortgage loan from a client in the current year.

Question 13

Among close relatives of the covered member,e.g.,brothers,sisters,mother,father,and cousins,when is ownership of the client's stock by them considered the same as ownership by the covered member?

Accepted Answer

A) When the relative holds a key financial position with the client. 
B) When it is an immaterial financial interest in the client with covered member's knowledge. 
C) When it is a material financial interest in the client without the covered member's knowledge. 
D) In all of the above scenarios.

Question 14

Gross negligence is a failure to use even minimal care or evidence of activities that show a recklessness or careless disregard for the truth.

Accepted Answer

A) True 
 B)False

Question 15

The Rules of Conduct govern the performance of CPAs in carrying out their public responsibilities.

Accepted Answer

A) True 
 B)False

Question 16

The SEC is concerned with situations between an auditor and a public company that allow the auditor to act as management of the client.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is a cause of action against the auditor for breach of contract?

Accepted Answer

A) Violating client confidentiality. 
B) Providing the audit report on time. 
C) Failing to discover an immaterial error or employee fraud. 
D) Withdrawing from an audit engagement with justification.

Question 18

Rule 201 deals with the General Standards that are applicable to all CPAs no matter the type of services that are rendered does not include which of the following factors?

Accepted Answer

A) Due professional care. 
B) Integrity and objectivity. 
C) Planning and supervision. 
D) Sufficient relevant data.

Question 19

Contingent fees are prohibited for any client for which the auditor performs audit services,but are otherwise permitted.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following employment positions could an auditor's spouse hold in a client without violating the independence requirements?

Accepted Answer

A) Controller. 
B) Treasurer. 
C) Order entry staff. 
D) Internal audit director.

Exam 4: Professional Liability and the Need for Quality Auditor Judgments and Ethical Decisions

A member of the AICPA must safeguard the confidentiality of client information.Which of the following is not a valid reason to disclose information to non-clients?

Among immediate family members,whose ownership of client's stock is not considered the same as the covered member's ownership?

There is a hierarchy of rights to consider when applying rights theory.

Contingent fees are prohibited for tax professionals when preparing tax returns for clients

Which of following is not part of the ethical framework derived from utilitarianism and rights theories?

What is information about a client that cannot be subpoenaed by a court of law called?

An auditor who is professionally skeptical will do which of the following?

Which of the following represents a situation in which an auditor is independent of its client?

An audit firm is not considered independent when it performs which of the following services for a publicly traded audit client?

In which of the following situations would a CPA not be considered independent?

Mark Pulley is an auditor at Pulley and Hurst,LLC.If Pulley's five-year-old daughter owns shares of stock in McBurgers Corporation,then what is Pulley considered to have?

In which of the following situations would a CPA not be considered independent?

Among close relatives of the covered member,e.g.,brothers,sisters,mother,father,and cousins,when is ownership of the client's stock by them considered the same as ownership by the covered member?

Gross negligence is a failure to use even minimal care or evidence of activities that show a recklessness or careless disregard for the truth.

The Rules of Conduct govern the performance of CPAs in carrying out their public responsibilities.

The SEC is concerned with situations between an auditor and a public company that allow the auditor to act as management of the client.

Which of the following is a cause of action against the auditor for breach of contract?

Rule 201 deals with the General Standards that are applicable to all CPAs no matter the type of services that are rendered does not include which of the following factors?

Contingent fees are prohibited for any client for which the auditor performs audit services,but are otherwise permitted.

Which of the following employment positions could an auditor's spouse hold in a client without violating the independence requirements?