Deck 3: Judgemental and Ethical Decision-Making Frameworks and Associated Professional Standards

Question 1

The Australian Professional Accounting Standards Board (APESB) issues the accounting profession's code of conduct.

Answer 1

True

Question 2

It is not necessary for an individual to uphold the code of professional conduct in order to become a professional accounting body member.

Answer 2

False

Question 3

The CLERP 9 Act 2004 amended the Corporations Act 2001 to enhance the auditor independence requirements.

Answer 3

True

Question 4

APES 110 permits an auditor to perform internal audit outsourcing services for a client because such services may overlap with external audit functions.

Question 5

APES 110 is concerned with situations between an auditor and a client that allow the auditor to act as management of the client.

Question 6

The APES 110 was adopted by the professional accounting bodies membership to provide guidance and rules but only to its members in public practice.

Question 7

The APES 110 Code of Ethics for Professional Accountants governs the performance of members of the three professional accounting bodies in carrying out their public responsibilities.

Question 8

A Public Interest entity for which the audit is required by regulation or legislation to be conducted must comply with the same independence requirements as a listed company.

Question 9

The APES 110 independence principle is violated by the auditor having any direct or material indirect ownership interest in a client.

Question 10

A public accounting firm can remain as auditor when a key partner joins a public interest entity (PIE) audit client as a director.

Question 11

Direct ownership in a client's business must be material to the practitioner's investment portfolio in order to violate the APES 110 independence requirements.

Question 12

Unless the value is trivial and inconsequential, gifts or hospitality cannot be accepted from an audit client.

Question 13

The fundamental principle, integrity, requires a professional accountant to be straightforward and honest in performing professional services.

Question 14

After CLERP 9, audit firms are no longer able to practise as a sole proprietorship.

Question 15

Only covered members as defined by the APES 110 are required to comply with its independence rules.

Question 16

A covered member under the APES 110's rules includes individuals on the engagement team, any individual in a position to influence the engagement team and all professional staff in the office of the engagement.

Question 17

Under the APES 110 Code of Ethics for Professional Accountants, there are six primary categories of threats to independence.

Question 18

To meet the objective of independence in appearance, the auditor must be perceived by knowledgeable users of financial reports to be independent.

Question 19

The APES 110 may fine, suspend or cancel registration as a company auditor for violations of its code of professional conduct.

Question 20

If a member owns several shares of stock of a company during the first few months of the fiscal year under audit and then sells the shares before accepting the engagement, the firm does not violate the independence rules of the APES 110.

Question 21

The CLERP 9 Act requires management to pre-approve any non-audit service by the auditor, including tax services not specifically prohibited.

Question 22

The audit firm is required to provide a declaration for inclusion in the annual report in relation to the firm's independence from this client.

Question 23

In the absence of an audit committee, the board of directors is responsible for the oversight of the financial reporting for the entity, including selection of the nominated auditor to be voted on by shareholders at a general meeting.

Question 24

Members of the professional accounting bodies are required to act with integrity and objectivity for which of the following engagements?

A) tax preparation
B) financial statement review services
C) financial statement audits
D) all engagements

Question 25

Which of the following is not an aspect of the requirements of the professional bodies for membership?

A) A member must not take on an engagement that is beyond the member's professional competence.
B) A member must exercise duties prudently and professionally.
C) A member must adequately plan and supervise the performance of professional services.
D) A member firm must not advertise services to competing clients.

Question 26

Professional competence is best demonstrated by:

A) sufficient collegiate and continuing professional education
B) accepting only those engagements that the firm's members can competently perform
C) adequate planning and supervision of professional performance
D) being straightforward and honest

Question 27

A professional accountant cannot practice public accounting in which of the following forms?

A) a partnership
B) an incorporated entity
C) a sole proprietorship
D) joint venture

Question 28

Which of the following is included in the APES 110 Code of Ethics for Professional Accountants?

A) principles, rules of conduct and rulings
B) rules of conduct, interpretations and principles
C) principles, rules of Conduct and rulings
D) principles and examples

Question 29

The principles embodied in APES 110 Code of Ethics for Professional Accountants include:

A) public interest, objectivity and independence
B) due professional care and supervision
C) scope and nature of services and adequate training
D) supervision, scope and nature of services

Question 30

Which of the following principles would a major threat to the auditor's independence?

A) compensation schemes to attract and retain clients
B) the engagement partner conducting the same audit for two years
C) a successful high tender bid
D) separating consulting activities from audit activities

Question 31

Which of the following non-assurance services to an audit client would not be considered a threat to independence?

A) making significant decisions regarding an acquisition
B) controlling physical and intangible resources
C) routine bookkeeping services
D) leading and directing the client operations

Question 32

Under the APES 110 definition, who among the following would not be considered a covered member?

A) an individual on the attest engagement team
B) an individual in a the audit firm able to influence the attest engagement
C) a partner in the office of the lead engagement partner
D) all would be considered covered members

Question 33

The APES 110 sets out principles that permeate all of the other standards except for

A) professional competence and due care
B) integrity and objectivity
C) confidentiality
D) unprofessional behaviour

Question 34

Commissions and referral fees are permitted in which types of situations?

A) tax
B) reviews
C) audits
D) attestations

Question 35

All members of the professional accounting bodies are required to adhere to fundamental principles. They include all of the following except:

A) professional competency and due care
B) integrity and subjectivity
C) confidentiality
D) professional behaviour

Question 36

According to APES 110 all of the following are threats to independence except:

A) the evaluation of results performed by another individual within the audit firm
B) long-standing relationships with management that could be used as a basis to trust the information they provide
C) a material financial interest between the engagement partner and the client
D) the purchase of goods and services from the client in the normal course of business

Question 37

Non-audit services prohibited or permitted under Sarbanes-Oxley
Harry Rawlins Public Accountants are engaged by DK, a public company to perform the year-end audit.
A. Discuss the types of services that Harry Rawlins will not be able to perform for DK under APES 110 Code of Ethics for Professional Accountants.
B. What types of services may Harry Rawlins perform for DK under APES 110 Code of Ethics for Professional Accountants?