Chapter 19 Multiple Choice Questions

A client company has not paid its 2011 audit fees. According ti the AICPA Code of Professional Conduct, for the auditor to be considered independent with respect to the 2012 audit, the 2011 audit fees must be paid before the

2012 report is issued.

Rick, an independent CPA, must make an ethical judgement elated to the audit of a client. If the primarily focuses on whether his decision might yield advantages for some at the expense of others, he is using

A justice-based perspective

One of a CPA firm's basic objectives is to provide professional services that conform with professional standards. Reasonable assurance of achieving this basic objective is provided through

A system of quality control

Which if the following legal situations would be considered to impair the auditor's independence?

Actual litigation by the auditor against the present management, alleging management fraud or deceit.

Without the consent to the client, a CPA should not disclose confidential client information contained in working papers to a(n)

CPA firm that has been engaged to audit a former client.

Which of the following statement best explains why public accounting, as a profession, promulgates ethical standards and establishes means for ensuring their observance?

Ethical standards are established so that users of accounting services know what to expect and accounting professionals know what behaviors are acceptable, and so that discipline can be applied when necessary.

Under the SEC's rules regarding independence, which of the following must a client disclose?

Fees for the external audit, audit-related fees, tax fees, and fees for other nonaudit services performed by the audit firm.

In connection with the element of engagement performance, a CPA firm's system of quality control should ordinarily include procedures covering all of the following except

Performance evaluation

A violation of the prifession's ethical standards is least likely to occur when a CPA

Purchases another CPA's accounting practice and bases the price on a percentage of the fees accruing from clients over the three-year period.

During the audit of Moon Co, the auditor disagrees with management's estimation of collectible accounts receivable. The possible misstatements amounts is material. Which of the statements below should weigh more heavily for the auditor in this instance?

Requiring an adjustment to the allowance for doubtful accounts would give stockholders access to fair and adequate information.

The AICPA Code of Professional Conduct contains both general ethical principles that are aspirational in character and also a

Set of specific, mandatory rules describing minimum levels of conduct a CPA must maintain.

All of the following nonaudit services are identified by the SEC as generally impairing an auditor's independence except

Some specific tax services

In which of the following situations would a CPA's independence be consider impaired according to the Code of Professional Conduct?

The CPA has a direct financial interest in an audit client, but the interest is maintained in a blind trust, and The CPA owns a commercial building and leases it to an audit client.The rental income is material to the CPA.