Audit CH3

Following the issuance of a PCAOB draft report, how many days does the CPA firm have to respond to accusations?

30 days

In which one of the following situations would a CPA be in violation of the AICPA Code of Professional Conduct in determining a fee?

A fee based on whether the CPA's report on the client's financial statements results in the approval of a bank loan.

In which of the following circumstances would a CPA be bound by ethics to refrain from disclosing any confidential information obtained during the course of a professional engagement?

A major stockholder of a client company seeks accounting information from the CPA after management declined to disclose the requested information.

According to the ethical standards of the profession, which of the following acts is generally prohibited?

Accepting a commission for recommending a product to an audit client

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

All CPA owners must be members of the institute.

In performing an audit, Jackson, CPA, discovers that the professional competence necessary for the engagement is lacking. Jackson informs management of the situation and recommends another local CPA firm and management engages this other firm. Under these circumstances,

Jackson may request compensation from the other CPA firm for any professional services rendered to the other CPA firm in connection with the engagement

What is a purpose of the acceptance and continuance of client relationships and specific engagements element of quality management?

Provide reasonable assurance that firms do not associate with clients whose management lacks integrity.

In which of the following circumstances would a CPA who audits XM Corporation lack independence?

The CPA and XM's president each owns 25 percent of FOB Corporation, a closely-held company.

When auditing a public company, which of the following impairs an auditor's independence?

The auditor has been a partner on the engagement for ten years.

According to the Code of Professional Conduct, which of the following individuals is not in a position to influence an attest engagement (i.e., not a covered member)?

The partner (or partner equivalent) in another office in a nearby city who regularly plays golf with the engagement partner (or partner equivalent) and does not work on the engagement or have any interaction with the client.

Under which of the following circumstances would the independence of a CPA be considered impaired if the CPA, who also is an attorney, serves as auditor and provides legal services to the same private client?

When the CPA, as legal agent, consummates a business acquisition for the client.

Which of the following bodies ordinarily would have the authority to suspend or revoke a CPA's license to practice public accounting?

a state board of accountancy

A basic objective of a CPA firm is to provide professional services that conform to professional, legal, and regulatory requirements. Reasonable assurance of achieving this basic objective is provided through:

a system of quality management.

Which of the following is allowable for a CPA?

a used car loan from a banking client where the client has a lien on the car

The profession's ethical standards would most likely be considered to have been violated when the CPA represents that specific consulting services will be performed for a stated fee and it is apparent at the time of the representation that the:

actual fee would be substantially higher.

Which of the following is an element of a CPA firm's quality management system that should be considered in establishing its quality management policies and procedures?

assigning personnel to engagements

In determining estimates of fees, an auditor may take into account each of the following, except the:

attainment of specific findings.

A CPA's failure to file a tax return is:

considered discreditable to the profession.

A CPA's membership in the AICPA will ordinarily be suspended or revoked automatically for:

conviction of willful failure to file personal income tax return.

In order to achieve effective quality management, a firm of independent auditors should establish policies and procedures for:

deciding whether to accept or continue a client.

An auditor is about to commence a recurring annual audit engagement. The continuing auditor's independence would ordinarily be considered to be impaired if the prior year's audit fee:

has not been paid and will not be paid for at least twelve months

A CPA firm would be reasonably assured of meeting its overall responsibility to provide services that conform with professional standards by:

implementing an appropriate system of quality management.

Which of the following is not component of quality management as defined by Statement of Quality Management Standards No. 1?

independence

Mavis, CPA, has audited the financial statements of South Bay Sales Incorporated for several years and had always been paid promptly for services rendered. Last year's audit invoices have not been paid because South Bay is experiencing cash flow difficulties and the current year's audit is scheduled to commence in one week. With respect to the past due audit fees, Mavis should:

inform South Bay's management that the past due audit fees are considered an impairment of auditor independence.

With respect to ethics, the justice-based approach:

is primarily concerned with equity and impartiality.

A violation of the profession's ethical standards would most likely have occurred when a CPA:

issued an unqualified opinion on the 20X1 financial statements when fees for the 20X0 audit were unpaid.

A CPA, while performing an audit, strives to achieve independence in appearance in order to:

maintain public confidence in and reliance on the profession.

For private companies, accounting firms are prohibited from providing:

none of these.

A CPA firm's personnel partner periodically studies the CPA firm's personnel advancement experience to ascertain whether the individuals who were assigned increased degrees of responsibility met predetermined criteria. This is evidence of the CPA firm's adherence to prescribed standards of:

quality management

A violation of the profession's ethical standards would most likely occur when a CPA who:

refused to hire a new employee does so because the CPA deemed the candidate to be "too old."

In which of the following instances would the independence of the CPA not be considered to be impaired? The CPA has been retained as the auditor of a:

restaurant where the CPA dines frequently.

With respect to ethics, the rights-based approach:

suggests that an individual's actions should not violate the rights of any individual.

A violation of the profession's ethical standards would least likely have occurred when a CPA in public practice:

used a records-retention agency to store the CPA's working papers and client records.

In which of the following instances would the independence of the CPA not be considered to be impaired? The CPA has been retained as the auditor of a brokerage firm:

which owes the CPA audit fees for current year services and has just filed a petition for bankruptcy.

The SEC has issued independence rules that differ from the AICPA's in all of the following areas except:

working paper documentation