gleim study guide audit

An accountant can perform, with preapproval of the audit committee of the board of directors, which of the following non-audit services during the audit of an issuer? 1 Tax planning services. 2 Human resource services. 3 Bookkeeping services. 4 Internal audit outsourcing services.

1

The profession's ethical standards most likely are violated when 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 1 Actual fee would be substantially higher. 2 Fee was a competitive bid. 3 CPA would not be independent. 4 Actual fee would be substantially lower than the fees charged by other CPAs for comparable services.

1

When a former partner of a registered public accounting firm who left the firm 2 years ago accepts a financial reporting oversight role at an issuer audit client, the independence of the registered public accounting firm is considered impaired unless which of the following is true? 1 The former partner has no remaining capital balance in the registered public accounting firm. 2 The former partner was employed by the registered public accounting firm for a period of 2 years or less. 3 The former partner discloses the relationship to the issuer audit client's board of directors. 4 The former partner exerts only limited influence over the registered public accounting firm's operations and financial policies.

1

Which of the following acts by a CPA who is not in public practice is most likely to be a violation of the ethical standards of the profession? 1 Using the CPA designation without disclosing employment status in connection with financial statements issued for external use by the CPA's employer. 2 Compiling the CPA's employer's financial statements and referring to the CPA's lack of independence. 3 Distributing business cards indicating the CPA designation and the CPA's title and employer. 4 Corresponding on the CPA's employer's letterhead, which contains the CPA designation and the CPA's employment status.

1

Which of the following statements is true regarding an accountant's working papers? 1 The accountant owns the working papers but generally may not disclose them without the client's consent or a court order. 2 The client owns the working papers, but, in the absence of the accountant's consent, may not disclose them without a court order. 3 The client owns the working papers, but the accountant has custody of them until the accountant's bill is paid in full. 4 The accountant owns the working papers and generally may disclose them as the accountant sees fit.

1

According to the AICPA Code of Professional Conduct, which of the following disclosures of client information by a member CPA to an outside party would normally require client consent? 1 Disclosure of confidential client information to the member's liability insurance carrier in response to a potential claim. 2 Disclosure of confidential client information to a third-party service provider when the member does not enter into a confidentiality agreement with the provider. 3 Disclosure of confidential client information to a court or in documents in connection with a subpoena. 4 Disclosure to a potential client of the name of a client for whom the member or member's firm performed professional services.

2

According to the profession's ethical standards, an auditor is considered independent in which of the following instances? 1 The client sponsors an employee benefit plan in which the auditor participates. 2 The auditor's checking account, which is fully insured by a federal agency, is held at a client financial institution. 3 The auditor is the officially appointed stock transfer agent of a client. 4 The client is the only tenant in a commercial building owned by the auditor.

2

An accounting firm's independence is most likely to be impaired when 1 An immediate family member is employed by the client in other than a key position. 2 The firm and the client have a material cooperative arrangement. 3 The firm has a material financial interest in a nonclient but does not know of the client's material financial interest in the investee. 4 In an agreed-upon procedures engagement, the firm is independent of the responsible party but not the party that engaged the firm.

2

An auditor may provide an issuer client any of the following nonaudit services without impairing independence and without obtaining the preapproval of the audit committee, except 1 Nonaudit services that were promptly brought to the attention of, and approved by, the audit committee prior to the completion of the audit. 2 Nonaudit services to perform financial information systems design and implementation. 3 Services that the issuer did not recognize as nonaudit services at the time of the engagement. 4 Nonaudit services with revenues in aggregate of less than 5% of the total revenues paid by the issuer to the auditor during the fiscal year in which the nonaudit services are provided.

2

Kar, CPA, is a staff auditor participating in the audit engagement of Fort, Inc. Which of the following circumstances most likely impairs Kar's independence? 1 Kar's friend, an employee of another local accounting firm, prepares Fort's tax returns. 2 Kar's sibling is the director of internal auditing for Fort. 3 During the period of the professional engagement, Fort gives Kar tickets to a football game worth $25. 4 Kar owns stock in a corporation that Fort's 401(k) plan also invests in. These interests are immaterial.

2

Smith, CPA, is a partner of Johnson Accounting Firm. Johnson audited the books of Hometown Bank. Smith's independence would be impaired under which of the following circumstances? 1 Smith has a collateralized automobile loan with Hometown Bank. 2 Smith is a director of Hometown Bank. 3 Smith had an account with Hometown Bank 2 years ago. 4 Smith and a Hometown Bank board member belong to the same church.

2

The AICPA Code of Professional Conduct contains both general ethical principles that are aspirational in character and also a 1 Description of a member's procedures for responding to an inquiry from a trial board. 2 Set of specific, mandatory rules describing minimum levels of conduct a member must maintain. 3 List of violations that would cause the automatic suspension of a member's license. 4 List of specific acts discreditable to the profession.

2

The AICPA's Code of Professional Conduct includes a Form of Organization and Name Rule. It states that a member may practice public accounting only in a form or organization allowed by law or regulation that conforms with resolutions of the AICPA Council. Assume that a CPA firm is part of an alternative practice structure (APS) in which the firm is a subsidiary of another entity. Which attribute prevents a member of the AICPA from practicing public accounting in the APS? 1 The parent performs back-office functions for the firm. 2 Non-CPAs own a majority of the firm's financial interests. 3 Substantially all revenues of the firm are paid to another entity. 4 The parent leases employees to the firm.

2

The auditor's opinion refers to U.S. generally accepted accounting principles (U.S. GAAP). Which of the following best describes U.S. GAAP? 1 The guidelines set forth by various governmental agencies that derive their authority from Congress. 2 Principles issued by bodies designated by the Council of the AICPA. 3 The pronouncements of the Financial Accounting Standards Board. 4 The interpretations of accounting rules and procedures by certified public accountants on audit engagements.

2

To which of the following parties may a CPA partnership provide its audit documentation, without being lawfully subpoenaed or without the client's consent? 1 The FASB. 2 Any surviving partner(s) on the death of a partner. 3 The IRS. 4 A CPA before purchasing a partnership interest in the firm.

2

Which of the following activities would be most helpful to a CPA in deciding whether to accept a new audit client? 1 Considering the client's compensation methods. 2 Evaluating the CPA's ability to properly service the client. 3 Reviewing industry benchmarking data. 4 Evaluating the most recent peer review of the client's previous auditor.

2

A CPA is permitted to disclose confidential client information without the consent of the client to Another CPA firm if the information concerns suspected tax return irregularities A state CPA society voluntary peer review board 1 Both I and II. 2 Neither I nor II. 3 II only. 4 I only.

3

According to the AICPA Code of Professional Conduct, which of the following actions by a CPA most likely involves an act discreditable to the profession? 1 Accepting a commission from a nonattest function client. 2 Auditing financial statements according to governmental standards despite the client's preferences. 3 Retaining client records after the client demands their return. 4 Refusing to provide the client with copies of the CPA's working papers.

3

According to the AICPA Code of Professional Conduct, which of the following activities results in an act discreditable to the profession? 1 A CPA who is engaged to perform a government audit neglects to follow certain government auditing requirements and discloses in the audit report the fact that such requirements were not followed and the reasons for it. 2 A CPA fails to give a client copies of the CPA's workpapers related to a completed and issued work product upon the client's request because the client has not paid fees payable to the CPA for the work product. 3 A CPA solicits recent Uniform CPA Examination questions without written authorization from the AICPA. 4 A CPA signs a document containing immaterial, false, and misleading information or permits or directs another CPA to do so.

3

According to the AICPA Code of Professional Conduct, which of the following disclosures of client information by a member CPA to an outside party would normally require client consent? 1 Disclosure of confidential client information to the member's liability insurance carrier in response to a potential claim. 2 Disclosure to a potential client of the name of a client for whom the member or member's firm performed professional services. 3 Disclosure of confidential client information to a third-party service provider when the member does not enter into a confidentiality agreement with the provider. 4 Disclosure of confidential client information to a court or in documents in connection with a subpoena.

3

According to the PCAOB, an accounting firm's independence is least likely to be impaired if the firm 1 Receives a commission from the audit client. 2 Provides tax services to a person in a financial reporting oversight role at the audit client. 3 Has an audit client that employs a former firm professional. 4 Provides a service to the audit client for a contingent fee.

3

According to the standards of the profession, which of the following circumstances will prevent a CPA performing audit engagements from being independent? 1 Litigation with a client relating to billing for consulting services for which the amount is immaterial. 2 Acting as an honorary trustee for a not-for-profit organization client. 3 Employment of the CPA's spouse as a client's director of internal audit. 4 Obtaining a collateralized automobile loan from a financial institution client.

3

The AICPA Code of Professional Conduct states, in part, that a CPA should maintain integrity and objectivity. Objectivity in the Code refers to a CPA's ability 1 To independently distinguish between accounting practices that are acceptable and those that are not. 2 To independently choose between alternate accounting principles and auditing standards. 3 To maintain an impartial attitude on all matters that come under the CPA's review. 4 To be unyielding in all matters dealing with auditing procedures.

3

Various situations create threats to auditor independence. Which type of threat most likely results from an auditor's financial interest in a client? 1 Self-review threat. 2 Management participation threat. 3 Self-interest threat. 4 Advocacy threat.

3

Which of the following rules of the AICPA Code of Professional Conduct must be observed only by a member who is in public practice? 1 Integrity and Objectivity. 2 Commissions. 3 Independence. 4 Compliance with Standards.

3

A violation of the AICPA's ethical standards most likely would have occurred when a CPA 1 Compiled the financial statements of a nonpublic client that employed the CPA's spouse as a bookkeeper. 2 Arranged with a financial institution to collect notes issued by a client in payment of fees due. 3 Performs a valuation of a client's business for tax planning purposes. 4 Received a fee for referring audit clients to a company that sells limited partnership interests.

4

Advertising or other forms of solicitation that are false, misleading, or deceptive are not in the public interest, and AICPA members in public practice shall not seek to obtain clients in such a manner. Such activities include all the following except those that 1 Create unjustified expectations of favorable results. 2 Claim to be able to save the taxpayer 20% of a determined tax liability. 3 Imply the ability to influence a court. 4 Indicate the CPA's educational and professional attainments.

4

In which of the following situations would a covered member's independence be considered to be impaired? I The covered member maintains a checking account that is fully insured by a government deposit insurance agency at an audit-client financial institution. II The covered member has a direct financial interest in an audit client, but the interest is maintained in a blind trust. III The covered member owns a commercial building and leases it to an audit client. The lease is properly classified as a capital lease, and the rental income is material to the CPA. 1 I and II. 2 I and III. 3 I, II, and III. 4 II and III.

4

The controller of a small utility company has interviewed audit firms proposing to perform the annual audit of their employee benefit plan. According to the guidelines of the Department of Labor (DOL), the selected auditor must be 1 Independent of the utility company and not relying on its services. 2 The firm that proposes the lowest fee for the work required. 3 Included on the list of firms approved by the DOL. 4 Independent for purposes of examining financial information required to be filed annually with the DOL.

4

Under the AICPA's conceptual framework for independence, the member-client relationship is evaluated to determine whether independence in fact and appearance is jeopardized. This is considered 1 A sufficiency of safeguards approach. 2 A professional skepticism approach. 3 An avoidance approach. 4 A risk-based approach.

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