Ethics Chpt 4

The independence restrictions under PCAOB Rule 3521 mirrors those of the____Code of Professional Conduct

AICPA

Which of the following professional standards must tax accountants adhere to when providing professional services?

Confidentiality Rule Contingent Fees Rule SSTS

Which of the following are examples of potential conflicts of interest?

Referring clients to other service providers who refer clients to the CPA in an exclusive arrangement. A CPA accepting gifts from a client. Providing relevant information to two clients who are in competition to acquire the same company.

The AICPA Revised Code links the Integrity and Objectivity Rule to challenges from:

Subordination of judgment Conflict of interest situations

The elements of a tax return position include which of the following?

Reflected on a tax return on which the CPA has specifically advised a taxpayer Position about which a CPA has knowledge of all material facts

Client-provided records are ______.

provided to the CPA by or on behalf of the client hard-copy or electronic reproductions of such records accounting or other records belonging to the client

Section 1.000.010 of the AICPA Revised Code applies to members in public practice and ______.

provides a foundation to evaluate whether safeguards should be developed to prevent a violation of the rules of conduct

The lasting legacy of COSO is ______.

the development of an integrated framework for internal control

A concern of state boards of accountancy about CPA-firm names is that ______.

the firm name may mask the true identity of the firm the firm name may be misleading

Under the AICPA Revised Code, if an interpretation does not exist related to a specific relationship or circumstance, the CPA should evaluate ____ and______

threats safegaurds

Which of the following are components of the KPMG Professional Judgment Framework?

Consider alternatives. Articulate and document rationale. Clarify issues and objectives. Gather and evaluate information.

Which of the following are appropriate processes for a CPA in business to resolve an ethical conflict?

Consult with legal counsel. Consider whether to remain with the employer.

Under Rule 3522 Tax Transactions, an aggressive tax position exists when ______.

a significant purpose of the transaction is tax avoidance

When a CPA takes custody of or stores client data and records that are only accessible through the CPA, this is commonly called a(n) ______.

hosting service

The SEC's Operation Broken Gate is ______.

intended to identify auditors who neglect required auditing standards intended to hold gatekeepers accountable

The allegiance of independent auditors to the interests of the public is known as the ______ _____function

public watchdog

As described by the text, IFAC Policy Position Paper #4 links the common benefit of serving the public interest through sound financial reporting to ______.

the application of high standards of professional judgment

CPAs are prohibited from advertising and soliciting potential clients when ______.

the statements create false or unjustified expectations of favorable results the statements imply the ability to influence a court or regulatory agency

If a client refuses to provide consent for a predecessor auditor to discuss confidential client information to the successor auditor, the best response by the successor would be ______.

to be skeptical and concerned about the reasons for denying permission

The Subordination of Judgment rule applies

to internal accountants as well as external auditors.

The difference between receipt of a contingent fee and a commission or referral fee is that ______.

A contingent fee is conditioned on the outcome of the service a referral fee is typically paid to the CPA by the client for referring a service of the client to another party a commission is typically paid to the CPA for recommending a product of another party to the client

Under Rule 1.510.001, a CPA is prohibited from receiving a contingent fee from a client when also performing which of the following?

An audit or review of financial statements An examination of prospective financial information A compilation of financial statements when there is third-party reliance and the lack of independence is not disclosed

Which of the following nonattest service is prohibited for attest clients?

Appraisal or valuation services

Which of the following is conducted primarily to satisfy the public interest?

Audit services

The SEC investigated Thomas Avent because ______.

Avent leaked proprietary information to his stock broker

Which of the following leads to public perception that auditors may not act independent of their client's interests?

Commercialism

Having the appropriate technical qualifications to perform professional services describes what for CPAs in professional practice?

Competence

Under Rule 3524, which of the following requirements exist for a firm that seeks audit committee preapproval to perform permissible tax services for the audit client?

Describe in writing the scope of the services and fee structure for the engagement. Document the substance of the discussions with the audit committee. Discuss with the audit committee the potential effects of the services on audit independence.

If there is no specific rule of conduct addressing a particular relationship in the AICPA Code, what should the CPA do?

Evaluate whether or not the relationship would lead an informed third party to conclude that the CPA's compliance with the rules is acceptable.

Which of the following relate to the professional standards of a tax accountant?

Exercise due care Act honestly Act as an advocate for his/her client

How individuals should bring their concerns to superiors within the organization and how possible objections can effectively be counteracted are addressed by the ______.

Giving Voice to Values methodology

Which of the following are included in the conceptual framework for CPAs in business?

Integrity Objectivity

Identify the principles identified in the IFAC Code.

Integrity Objectivity Confidentiality Professional behavior

Which of the following are common cognitive traps that our judgment can incur?

Judgment triggers Groupthink Problem solving rush

The public watchdog function requires that accountants do which of the following?

Maintain ultimate allegiance to the corporation's shareholders and creditors. Maintain total independence from the client at all times. Demonstrate complete fidelity to the public trust.

During the period of an attest engagement, a CPA can perform nonattest services for an audit client without impairing independence when the client does which of the following?

Makes all management decisions and performs all management functions Evaluates the adequacy and results of the services performed Designates an individual with the necessary abilities to oversee the services

Member (CPA)-prepared records include ______.

adjusting, closing, combining, or consolidated journal entries

When a CPA makes a whistleblowing charge against the employer under Sarbanes-Oxley or Dodd-Frank, a(n) ______ threat arises.

adverse interest

Safeguards implemented by the attest client include ______.

an ethical tone at the top an active audit committee a commitment to fair financial reporting

When a CPA subordinates his judgment to another individual of the employing organization due to that individual's reputation with the company, ______.

an undue influence threat exists

Prior to performing any permissible tax service for an audit client, Rule 3524 requires the registered public accounting firm to seek preapproval from the____ committee

audit

In relation to conflicts of interest, a violation of the Integrity and Objectivity Rule exists when the CPA knowingly ______.

certifies false and misleading financial statements directs others to make false and misleading entries in the financial statements becomes involved in a conflict of interest with another party

The independent auditor's public responsibility underlies its ______.

fidelity to the public trust certification of public reports allegiance to creditors and shareholders

State board rules of accounting prohibit the use of a firm name that ______.

implies unjustified services is deceptive is misleading

Circumstances that create doubts about the ability of a CPA to act with integrity, objectivity, or professional skepticism are classified as threats to an auditor's ____

independence

The state of mind that permits the performance of an attest service without being influenced in ways that compromise professional judgment is called ______.

independence in fact

The SEC's Operation Broken Gate is an initiative to identify auditors who violate ______.

independence standards

Advertising and solicitation practices raise ethical issues for CPAs that were not present years ago because ______.

information is more readily available the new forms of advertising create challenges for regulators

The financial frauds in public companies led to the strengthening of______ controls to help detect these frauds.

internal

The process of reaching a decision or drawing a conclusion where there are a number of possible alternative solutions is referred to as ______

judgement

What is at the center of the KPMG Professional Judgment Framework?

mindset

A situation may cause the SEC to determine that auditor independence is impaired when the situation ______.

places the accountant in the position of auditing his own work places the accountant in a position of being an advocate for the client results in the accountant acting as management or an employee of the audit client creates a mutual or conflicting interest between the CPA and the audit client

The spirit of the rules suggests the essence of professionalism is ______.

protect the public interest follow the spirit of the rule follow the letter of the rule

Under Rule 3521 Contingent Fees, independence is considered to be impaired when a registered public accounting firm performs an audit and ______.

provides any service or product to the client for a commission receives from the client a contingent fee or commission provides any service or product to the client for a contingent fee

Rule 1.700.001 provides that a CPA can divulge confidential client information without violating the rule in order to ______.

respond to a validly issued subpoena or summons support the CPA's defense in a disciplinary investigation enable an inspection of the CPA's professional practice by the PCAOB adhere to applicable laws and regulations

Differences of opinion between a CPA and that person's supervisor or others within the organization are addressed by the ____ of_____interpretation.

subordination judgement

When a CPA firm seeks audit committee preapproval of nonauditing services related to internal control over financial reporting, ______.

the accounting firm should describe the scope of the service in writing the substance of discussions between audit committee and issuer should be documented the accounting firm should discuss potential effects on independence with the audit committee

IFAC Policy Position Paper #4 links the common benefits of serving the public interest through sound financial reporting to ______.

the application of high standards of ethical behavior and professional judgment

When a CPA firm requests audit committee preapproval of nonauditing services related to internal control over financial reporting, ______.

the auditor should provide written documentation of the scope of the service

A CPA can disclose confidential client information when ______.

the client specifically consents

KPMG was criminally prosecuted for its role in a tax shelter scandal during 1996 to 2002, because ______.

the firm prepared false documents to deceive regulators about the true nature of the tax shelters

Rule 3523 treats a registered public accounting firm as not independent if ______.

the firm provides tax services to members of management who serve in financial reporting oversight roles

Rule 3523 treats a registered public accounting firm as not independent if the firm provides tax services to members of management who serve in financial reporting oversight roles unless ______.

the person is in that role only because she serves as a member of the board of directors

A self-interest threat exists for a CPA in business ______.

when the CPA could benefit from a relationship with the employing organization

A conflict of interest threatens the Integrity and Objectivity Rule ______.

when the interests of the CPA with respect to a certain matter differ from the interest of the client related to the matter

Since the PCAOB was formed, a mandatory quality inspection program was implemented. What is the average audit deficiency rate range since the program started?

30-40%

Changes in the form of professional accounting organizations and the name rule in recent years include which of the following?

CPAs can practice in alternative practice structures. CPAs only need to own a majority of the equity interests in the firm.

The two broad conceptual frameworks in the AICPA Revised Code apply to which of the following?

CPAs in business Members in public practice

COSO examined the role of which of the following elements in the internal control environment?

Effective internal audit functions Independent audit committee Tone at the top

CPAs may be exposed to disciplinary action when engaged in which of the following acts discreditable?

Failure to follow all relevant rules and regulations pertaining to government audits Failure to file personal tax returns or pay tax liability Negligence in the preparation of financial statements or records

Which of the following guide accountants when making a professional judgment?

Independence Objectivity Professional skepticism

Which of the following are sections in the AICPA Revised Code of Professional Conduct?

Members in public practice Members in business

Historically, the SEC allowed the accounting profession to police itself through which process?

Peer review

Which rule requires the accounting firm to be independent of the client throughout the professional engagement period?

Rule 3520 Auditor Independence

Which rule applies when a registered public accounting firm is not independent of the client when an aggressive tax position exists?

Rule 3522 Tax Transactions

Which of the following lead to loss of public trust in the accounting profession?

Taking shortcuts Biased decision making Subordination of judgment

Which rule prohibits a CPA in business from subordinating judgment when performing professional services for their employer?

The Integrity Rule

Which of the following should be avoided when accountants make professional judgment?

Undue influence Conflict of interest Bias

When a CPA firm provides professional services related to a particular matter involving two or more clients whose interests differ

a conflict of interest exists.

Hosting services are offered as nonattest services and may include ______.

acting as sole host of a financial information system providing back up services of client records

An annual requirement under Rule 3526 is for the CPA firm to affirm to the audit committee ______.

all relationships with persons in financial reporting oversight roles are reasonably thought to bear on independence

In dealing with the employer's external auditor, an internal accountant and internal auditor must ______.

be candid and not knowingly misrepresent facts or knowingly fail to disclose material facts

Prior to concluding whether a tax position is appropriate, the CPA should ______.

become knowledgeable of all the material facts related to the position

The General Standards Rule calls for ______.

competence due care

The Giving Voice to Values methodology relates to the conceptual framework for CPAs in business with the goal of ______.

convincing others of the most ethical action

Safeguards that might eliminate or reduce threats to independence include those ______.

created by legislation implemented by the firm implemented by the attest client created by the profession

In the KPMG tax shelter scandal, the transactions for wealthy clients were designed solely to _______taxes

decrease

Unlike the acceptance of a contingent fee, a CPA who receives a commission or referral fee must ______.

disclose permitted commissions and referral fees to any party to whom the recommendation is made

Failure of a CPA firm to file and pay income taxes is considered a(n)_____act

discreditable

Rule 3526 guidelines for audit committee communications require the firm to ______.

document the substance of its discussions with the audit committee Discuss any relationships between the firm and the entity that might impair audit independence

Under the competence standards for CPAs in professional practice, when a CPA prepares financial statements for an organization that he is a shareholder of, the CPA ______.

has a responsibility to disclose the relationship

PCAOB chairman, James Doty stated that, "The bedrock of audit quality is _____

independence

Prior to acceptance of the engagement and throughout the term of the relationship, to identify possible conflicts of interest, the CPA should look at situations that might create threats to compliance with ____and _____

integrity objectivity

To appear to be independent, CPAs should avoid circumstances that might lead informed third-party users to conclude ______.

integrity, objectivity, or professional skepticism has been compromised

If a CPA in professional practice employs the services of a third-party provider, the CPA ______.

is responsible for verifying that the third party meets competence standards

The acceptance of a contingent fee for professional services when also preparing attest-related services for a client is prohibited because ______.

it is a violation of independence

Ethical values as well as one's knowledge of the accounting issues in question influence the professional _______of accountants.

judgement

Restrictions exist on advertising and solicitation practices because they ______.

may lead a reasonable person to misunderstand or be deceived by the nature of the services

An ethical conflict occurs for a CPA in business when ______.

obstacles exist when applying legal standards

The independence rules apply to close relatives of the CPA who ______.

own a financial interest in the client that is material to their net worth and is known by the CPA hold a key position with the client that enables them to exercise significant influence over the client.

With regard to a tax return position, a CPA should advise a taxpayer of ______.

relevant tax return disclosure responsibilities

PCAOB Rule 3520 covering Auditor Independence ______.

requires auditors to maintain independence throughout the audit and professional engagement period

Applying ethical reasoning to identify shareholder interests and the effect of actions on shareholders is inconsistent with which cognitive judgment trap?

rush to judgement

When a CPA knowingly misrepresents facts when performing professional services for a client as a result of pressure from their direct supervisor,

the Integrity Rule is violated. subordination of judgment exists.

The AICPA Revised Code of conduct includes material for CPAs in business to evaluate the relationship between the CPA and their employer and any potential threats to ______.

the Integrity and Objectivity Rule