CODE OF ETHICS

The following steps are part of the conceptual framework approach to the Code of Ethics for Professional Accountants. Set the steps in proper order. I. Address the threats by eliminating or reducing them to an acceptable level. II. Evaluate the significance of threats to compliance with fundamental principles. III. Identify threats to compliance with the fundamental principles.

. III, II, I

In which of the following types of clients would the Revised Code provide the strictest set of requirements regarding independence? A. A financial statement audit client. B. A non-financial statement audit assurance client. C. A non-assurance client. D. A non-client.

A. A (listed) financial statement audit client.

Which of these statements describe attainment of professional competence? A. Act diligently and in accordance with applicable technical and professional standards. B. A continuing awareness and an understanding of relevant technical professional and business developments. C. The responsibility to act in accordance with the requirements of an assignment, carefully, thoroughly and on a timely basis D. Making clients, employers or other users of the professional services aware of limitations inherent in the services to avoid the misinterpretation of an expression of opinion as an assertion of fact

A. Act diligently and in accordance with applicable technical and professional standards.

The Code of Ethics would be violated if a 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 A. Actual fee would be substantially higher. B. Actual fee would be substantially lower than the fees charged by other professional accountants for comparable services. C. Fee was a competitive bid. D. CPA would not be independent.

A. Actual fee would be substantially higher.

The fundamental principle of integrity requires a CPA to A. Be straightforward and honest in performing professional services. B. Be fair and should not allow prejudice or bias, conflict of interest or influence of others to override objectivity. C. Perform professional services with due care, competence and diligence. D. Act in a manner consistent with the good reputation of the profession and refrain from any conduct which might bring discredit to the profession

A. Be straightforward and honest in performing professional services.

Which of the following are appropriate responses to a suspected NOCLAR? I. Obtain an understanding of the NOCLAR II. Discuss with appropriate level of management but not with those charged with governance A. I only C. Both I and II B. II only D. Neither I nor II

A. I only

Which of the following best describes self-interest threat? A. May occur as a result of the financial or other interests of a professional accountant or of an immediate or close family member will inappropriately influence a professional accountant's judgment or behavior. B. May occur when a previous judgment needs to be re-evaluated by the professional accountant responsible for that judgment. C. May occur when a professional accountant promotes a position or opinion to the point that subsequent objectivity may be compromised. D. May occur when, because of a close relationship, a professional accountant becomes too sympathetic to the interests of others. E. May occur when a professional accountant may be deterred from acting objectively by threats, actual or perceived.

A. May occur as a result of the financial or other interests of a professional accountant or of an immediate or close family member will inappropriately influence a professional accountant's judgment or behavior.

Certain entities may be of significant public interest because, as a result of their business, their size or their corporate status they have a wide range of stakeholders. Examples of these entities include (select the exception): A. Non-listed companies C. Insurance companies B. Credit institutions D. Pension funds

A. Non-listed companies

The fundamental principle of Objectivity in the Code requires CPAs: A. Not to compromise professional or business judgment because of bias, conflict of interest, or undue influence of others. B. To independently distinguish between accounting practices that are acceptable and those that are not. C. Not to be unyielding in all matters dealing with auditing procedures. D. To independently choose between alternate accounting principles and auditing standards.

A. Not to compromise professional or business judgment because of bias, conflict of interest, or undue influence of others.

Contingent fees are widely used for certain types of non-assurance engagements. They may, however, give rise to threats to compliance with the fundamental principles, especially the principle of: A. Objectivity C. Confidentiality B. Professional competence and due care D. Professional behavior

A. Objectivity

S1 A CPA in public practice should agree to provide only those services that the CPA in public practice is competent to perform. S2 Acceptance decisions need not be periodically reviewed for recurring client engagements. A. True, false B. False, true C. True, true D. False, false

A. True, false

Which fundamental principle is explicitly mentioned to be safeguarded even as the CPA consults with relevant professional bodies and legal advisors? A. Technicality B. Confidentiality C. Integrity D. Objectivity

B. Confidentiality

The avoidance of facts and circumstances that are so significant a reasonable and informed third party, having knowledge of all relevant information, including any safeguards applied, would reasonably conclude a firm's, or a member of the assurance team's, integrity, objectivity or professional skepticism had been compromised. A. Principle of segregation C. Functional integrity B. Independence in appearance D. Preemptive estoppels

B. Independence in appearance

An inducement is an object, situation, or action that is used as a means to influence another individual's behavior, but not necessarily with the intent to improperly influence that individual's behavior. If a professional accountant accepts hospitality, the nature of which could be perceived to be inappropriate were it to be publicly disclosed, which of the following is a correct combination of threat to compliance with fundamental principle created by this situation? A. Self-interest threat - professional competence and due care. B. Intimidation threat - professional behavior C. Self-interest threat - objectivity D. Advocacy threat - objectivity

B. Intimidation threat - professional behavior

Which fundamental principle may be threatened when the CPA in public practice is asked to provide a second opinion on the application of professional standards or principles to specific circumstances or transactions by, or on behalf of a company or entity that is not an existing client? A. Integrity C. Confidentiality B. Professional competence and due care D. Professional behavior

B. Professional competence and due care

After beginning an audit of a new client, Sydney, CPA, discovers that the professional competence necessary for certain part of the engagement is lacking. Sydney informs management of the situation and recommends another CPA, and management engages the other CPA. Under these circumstances: A. Sydney's lack of competence should be considered to be a violation of generally accepted auditing standards. B. Sydney may request compensation from the client for any professional services rendered to it in connection with the audit. C. Sydney's request for a commission from the other CPA is permitted because a more competent audit can now be performed. D. Sydney may be indebted to the other CPA since the other CPA can collect from the client only the amount the client originally agreed to pay Sydney.

B. Sydney may request compensation from the client for any professional services rendered to it in connection with the audit.

A CPA shall not disclose any confidential information obtained in the course of a professional engagement except with the consent of the client. This rule should be understood to preclude a CPA from responding from an inquiry made by: A. The trial board of the Code of Professional Ethics. B. An investigative body of a CPA society. C. A CPA-shareholder of the client corporation. D. A Code of Professional Conduct voluntary quality review body

C. A CPA-shareholder of the client corporation.

Which of the following are appropriate responses to a NOCLAR in the event that Management has not taken any corrective action? I. Auditor may decide to disclose the matter to appropriate authorities II. Auditor may also consider withdrawing from the engagement and client relationship A. I only B. II only C. Both I and II D. Neither I nor II

C. Both I and II

Which of the following statements is true? A. The professional accountant's responsibility for non-compliance to laws and regulations (NOCLAR) is different for public interest entities and other entities. B. The best interest of the client is paramount when it comes to the professional accountant's responsibility for NOCLAR. C. Bribery is one of the examples of events and related laws covered by the auditor's responsibility for NOCLAR D. NOCLAR only includes intentional acts of commission

C. Bribery is one of the examples of events and related laws covered by the auditor's responsibility for NOCLAR

Certain safeguards may increase the likelihood of identifying or deterring unethical behavior. Such safeguards, which may be created by the accounting profession, legislation, regulation, or an employing organization, include, but are not restricted to: I. Effective, well-publicized complaints systems operated by the employing organization, the profession, or a regulator, which enable colleagues, employers, and members of the public to draw attention to unprofessional or unethical behavior. (ethics hotlines) II. An explicitly stated duty to report breaches of ethical requirements. A. I only B. II only C. I and II D. Neither I nor II

C. I and II

Which statement is incorrect regarding custody of clients' assets? A. Client's assets should not be held by the CPA if there is reason to believe that the assets were obtained from, or are to be used for illegal activities. B. Custody of clients' assets may create a self-interest threat to objectivity and professional behavior. C. No safeguards are applicable to reduce threats created by having custody of clients' assets. D. Fees due from a client may be drawn from the client's monies, subject to client approval.

C. No safeguards are applicable to reduce threats created by having custody of clients' assets.

Evaluate the following statements related to PAIB: I. They have the responsibility to further the legitimate business objectives of their organization II. The code would expressly hinder their responsibility in I even though their fundamental principles are not compromised A. Both are true. B. Both are false C. Only I is true D. Only II is true

C. Only I is true

These are policies and procedures designed to eliminate or to reduce threats to fundamental principles to an acceptable level. A. Internal controls C. Safeguards B. Control activities D. Segregation of duties

C. Safeguards

A CPA in public practice should not pay or receive a referral fee or commission, unless the CPA in public practice has established: A. Internal controls designed to scientifically compute the referral fee or commission. B. That explicit approval to pay or receive commissions has been obtained from the Securities and Exchange Commission. C. Safeguards to eliminate or reduce threats to fundamental principles to an acceptable level. D. Another company as recipient, whose name does not include the name of the CPA in public practice.

C. Safeguards to eliminate or reduce threats to fundamental principles to an acceptable level.

In the few instances where the domestic laws are in conflict with the IESBA Code, A. Both are applied simultaneously. B. The IESBA Code requirement prevails C. The local law prevails D. There will be no ruling for that particular requirement.

C. The local law prevails

An inadvertent violation of the Code of Ethics, depending on the nature and significance of the matter, may not compromise compliance with the fundamental principles provided, once the violation is discovered, A. The CPA withdraws from the specific professional service involved. B. A disclaimer of opinion is issued to the client as a result of the violation. C. The violation is corrected promptly and any necessary safeguards are applied. D. The engagement is promptly transferred to another, non-violating professional accountant.

C. The violation is corrected promptly and any necessary safeguards are applied.

S1 A CPA should maintain confidentiality even in a social environment. S2 A CPA shall not disclose confidential information acquired as a result of professional and business relationships outside the firm or employing organization without proper and specific authority, unless there is a legal or professional duty or right to disclose. A. True, false B. False, true C. True, true D. False, false

C. True, true

Competence as a CPA includes all of the following, except: A. Having the technical qualifications to perform an engagement. B. Possessing the ability to supervise and evaluate the quality of staff work. C. Warranting the infallibility of the work performed. D. Consulting others if additional technical information is needed.

C. Warranting the infallibility of the work performed.

Partner Rotation Rules for PIE

Code of Ethics - Time On Period - Cool off period Engagegement partner - 7 years - 5 years EQCR - 7 - 3 other key audit partners - 7 - 2 Regulators - Time On - Cool Off 5 -2 SEC BSP Insurance Commission

When associated with a larger structure of other firms and entities, a firm should: A. Exercise professional judgment to determine whether a network is created by such as larger structure B. Consider whether a reasonable and informed third party would be likely to conclude that the other firms and entities in the larger structure are associated in such a way that a network exists 14. C. Apply such judgment consistently throughout such a larger structure D All of the choices

D All of the choices

In which of the following situations would a CPA be in violation of the rules of professional ethics in determining professional fees? A. A fee based on appropriate rates per hour or per day for the time of each person engaged in performing professional services. B. A fee which is lower compared to the fee charged in the prior year for similar services. C. A fee based on appropriate rates per hour, where the appropriate rate is based on the fundamental premise that the organization and conduct of the CPA and the services provided to clients are well planned, controlled and managed. D. A fee that is based on 10% of the client's adjusted net income for the current year.

D. A fee that is based on 10% of the client's adjusted net income for the current year.

In ethical conflict resolution, if the matter remains unresolved, the CPA should A. Consult with other appropriate persons within the firm or employing organization for help in obtaining resolution. B. Consider consulting with those charged with governance of the organization, such as the board of directors or the audit committee. C. Document the substance of the issue and details of any discussions held or decisions taken, concerning that issue, as necessary. D. All of the above.

D. All of the above.

A CPA should not be associated with reports, returns, communications, or other information where they believe that the information: A. Contains a materially false or misleading statement. B. Contains statements or information furnished recklessly. C. Omits or obscures information required to be included where such omission or obscurity would be misleading. D. All of these.

D. All of these.

Appropriate safeguards during client acceptance may include: A. Obtaining knowledge and understanding of the client B. Obtaining knowledge and understanding about the client's owners, managers and those responsible for its governance and business activities C. Securing the client's commitment to improve corporate governance practices or internal controls. D. All of these.

D. All of these.

A CPA should maintain objectivity and free of conflicts of interest when performing: A. Audits, but not any other professional services. B. All attestation services, but not other professional services. C. All attestation and tax services, but not other professional services. D. All professional services.

D. All professional services.

A professional accountant in business (PAIB) may be: A. a salaried employee. B. a partner, director (whether executive or non-executive) or an owner manager. C. a volunteer or another working for one or more employing organization. D. Any of these.

D. Any of these.

When applying the conceptual framework of the Code, the professional accountant shall consider the following, except: A. Exercise professional judgment. B. Remain alert for new information and to changes in facts and circumstances. C. Use the reasonable and informed third party test. D. Apply the provisions of the Code without any exception.

D. Apply the provisions of the Code without any exception.

Regarding conflicts of interest, the following safeguards are applicable (select the exception): A. Notifying the client of the firm's business interest or activities that may represent a conflict of interest, and obtaining their consent to act in such circumstances. B. Notifying all known relevant parties that the CPA in public practice is acting for two or more parties in respect of a matter where their respective interests are in conflict, and obtaining their consent to so act. C. Notifying the client that the CPA in public practice does not act exclusively for any one client in the provision of proposed services and obtaining their consent to so act D. Clear guidelines for members of the client personnel on issues of security and confidentiality.

D. Clear guidelines for members of the client personnel on issues of security and confidentiality.

This fundamental principle requires a CPA not to use or disclose information acquired during the course of performing professional services without proper and specific authority: A. Objectivity C. Professional Behavior B. Professional Competence and due Care D. Confidentiality

D. Confidentiality

Client issues that, if known, could threaten compliance with the fundamental principles include the following, except: A. Client involvement in illegal activities (such as money laundering) B. Dishonesty C. Questionable financial reporting practices D. Conservative basis in determining accounting estimates

D. Conservative basis in determining accounting estimates

In discussing the non-compliance or suspected non-compliance with management and, where appropriate, those charged with governance, the professional accountant shall advise them to take appropriate and timely action to achieve the following, except: A. Rectify, remediate or mitigate the consequences of the non-compliance. B. Deter the commission of the non-compliance where it has not yet occurred. C. Disclose the matter to an appropriate authority where required by law or regulation or where considered necessary in the public interest. D. Determine the account to be charged in order to conceal the non-compliance.

D. Determine the account to be charged in order to conceal the non-compliance.

Tisha, CPA, has exhausted all relevant possibilities in an ethical conflict that she is trying to resolve. The conflict remains unresolved. Accordingly, the Code allows which of the following steps to be taken by Tisha? I. Refuse to remain associated with the matter creating the conflict. II. Withdraw from the engagement team or specific assignment. III. Resign from the engagement IV. Resign from the firm or the employing organization A. I and II C. II, III and IV B. III and IV D. I, II, III and IV

D. I, II, III and IV

When initiating either a formal or informal conflict resolution process, a CPA should consider the following, either individually or together with others, as part of the resolution process: I. Relevant facts II. Ethical issues involved III. Fundamental principles related to the matter in question IV. Established internal procedures V. Alternative courses of action A. I, II, III, and V. C. I, II, V. B. I, III, IV, and V. D. I, II, III, IV, V.

D. I, II, III, IV, V.

The payment or receipt of referral fees or commissions may create threats to which fundamental principles? I. Integrity II. Objectivity III. Professional competence and due care IV. Professional behavior A. I and III B. I and IV C. II, III and IV D. II and III

D. II and III

The state of mind that permits the provision of an opinion without being affected by influences that compromise professional judgment, allowing an individual to act with integrity, and exercise objectivity and professional judgment. A. Professional skepticism C. Objectivity B. Integrity D. Independence of mind

D. Independence of mind

Non-compliance with laws and regulations (NOCLAR) comprises acts of omission or commission, intentional or unintentional, which are contrary to the prevailing laws or regulations committed by the following parties, except: A. The professional accountant's employing organization. B. Those charged with governance of the employing organization or of a client. C. Management of a client. D. Independent or external auditors.

D. Independent or external auditors.

Evaluate the following possible threats related to PAIB: I. PAIB participates in an incentive compensation program offered by the organization II. PAIB accounts for a business combination after preparing the related feasibility study A. Both are self-review threats B. Both are self-interest threats C. Self-review, self-interest D. Self-interest, self-review

D. Self-interest, self-review

Professional fees should be a fair reflection of the value of the professional services performed for the client, taking into account: A. The skill and knowledge required for the type of professional services involved. B. The level of training and experience of the persons necessarily engaged in performing the professional services C. The time necessarily occupied by each person engaged in performing the professional services D. The degree of responsibility and urgency that performing those services entails E. All of the answers

E. All of the answers

If a CPA cannot implement appropriate safeguards, the professional accountant should do the following, except: A. Decline the specific professional service involved. B. Discontinue the specific professional service involved. C. Resign from the client or the employing organization, as necessary. D. Issue an adverse opinion on the subject matter of the engagement.

Issue an adverse opinion on the subject matter of the engagement.

Prohibited Non Assurance Services

M - assuming management responsibility G - serving as general counsel A - accounting & and bookkeeping services PU - promoting, dealing underwriting services R - recruiting evaluating or compensating based on partner's success in selling non-assurance services

Fundamental Principles (PICPO)

Professional Competence and Due Care Integrity Confidentiality Professional Behavior Objectivity

Threats to Compliance (SSAFI)

Self Interest Threat Self Review Threat Advocacy Threat Familiarity Threat Intimidation Threat

What's more important? Independence of Mind or Appearance

both

Which is/are contained in the Code of Ethics for Professional Accountants? I. Rules II. Principles a. I only b. II only c. Both I and II with more provisions on the latter d. Both I and II with more provisions on the former

c. Both I and II with more provisions on the latter

Evaluate the following issues related to PAIB: I. PAIB serves in a governance capacity for two employing organizations in the same industry and area of operation. II. PAIB is a member of the committee that selects a vendor where an immediate family member is a key management personnel in the vendor. a. Only I poses as a source of conflict of interest b. Only II poses as a source of conflict of interest c. Both pose as sources of conflict of interest d. Neither I nor I poses as a source of conflict of interest

c. Both pose as sources of conflict of interest

Which of the following is/are required of by the code? I. Comply with the fundamental principles of ethics. II. Apply conceptual framework in identifying, evaluating, and addressing threats a. I only b. II only c. I and II d. Neither I nor II

c. I and II

Using the same individual on an assurance engagement over a long period of time may create a familiarity threat and a self-interest threat. The significance of the threat will least likely depend upon a. The length of time that the individual has been a member of the assurance team. b. The role of the individual on the assurance team. c. The structure of the client. d. The closeness of the individual's personal relationship with senior management or those charged with governance.

c. The structure of the client.

In reference to the code of ethics, in the FS audit of listed entities, the engagement partner, the individual responsible for the engagement quality control review or any other key audit partner should be rotated after serving in either capacity, or a combination thereof, for a predefined period (i.e., "time-on" period), normally no more than a. 5 consecutive years c. 7 consecutive years b. 5 cumulative years d. 7 cumulative years

d. 7 cumulative years

In an audit of a public interest entity (PIE), which of the following individual role can be held for a period of more than seven cumulative years (the "time-on" period)? a. Engagement partner; c. Engagement quality control reviewer; b. Other key audit partner; d. Engagement staff member.

d. Engagement staff member.

Which best describes the parts of the latest version of the Code of Ethics? a. Three parts: Parts A, B, and C b. Four parts: Parts A, B, C, and D c. Three parts: Parts 1, 2, and 3 d. Four parts: Parts 1, 2, 3, and 4

d. Four parts: Parts 1, 2, 3, and 4

Evaluate the following services to be provided to a public entity: I. Underwriting client share II. Designing/implementing financial reporting IT systems a. Both are not allowed without materiality considerations b. Both are not allowed if not material to the financial statements c. Only I is allowed if not material to the financial statements d. Only II is allowed if not material to the financial statements

d. Only II is allowed if not material to the financial statements

Identify from which sections will the following information be located in the Code: I. Independence for Audits and Reviews II. Independence for Other Assurance Engagements a. Parts 3A and 3B, respectively b. Parts 3B and 3A, respectively c. Parts 4B and 4A, respectively d. Parts 4A and 4B, respectively

d. Parts 4A and 4B, respectively