Client and Other Responsibilities Quiz

Which of the following statements best describes the ethical standard of the profession pertaining to advertising and solicitation? A. A member may advertise in any manner that is not false, misleading, or deceptive. B. There are no prohibitions regarding the manner in which members may solicit new business. C. A member may only solicit new clients through mass mailings. D. All forms of advertising and solicitation are prohibited.

A. A member may advertise in any manner that is not false, misleading, or deceptive.

An issuer client who disagrees with the independent auditor on a significant matter affecting its financial statements has several courses of action. Which of the following courses of action would be inappropriate? A. Appeal to the FASB to review the significant matter. B. Modify the financial statements by expressing in the notes its viewpoint with regard to the significant matter. C.Engage another independent auditor. D.Ask the auditor to refer in the auditor's report to a client note in the financial statements that discusses the client point of view with regard to the significant matter.

A. Appeal to the FASB to review the significant matter.

A CPA has not committed a discreditable act when (s)he A. Has a bank collect notes received from a client in payment of fees. B. Is found by a court, in a final determination, to have violated an antidiscrimination law. C. Fails to follow standards and procedures established by governmental agencies in audits of grants by those agencies. D. Negligently permits another to make misleading entries in the records of an entity.

A. Has a bank collect notes received from a client in payment of fees.

Based on the Code of Professional Conduct, a CPA Answers A. May not, upon leaving a firm, take any of the firm's client files without permission B. Cannot undertake the responsibility of supervising and evaluating the work of specialists. C. May disclose currently used Uniform CPA Examination questions. D. Is not associated with unaudited interim reports issued by clients even if the CPA's name is listed in the report.

A. May not, upon leaving a firm, take any of the firm's client files without permission.

The AICPA Code of Professional Conduct is violated if a CPA accepts a fee for services and the fee is A. Payable after a specified finding is attained in a review of financial statements. B. Fixed by a public authority. C. Based on the results of judicial proceedings in a tax matter. D. Based on a price quotation submitted in competitive bidding.

A. Payable after a specified finding is attained in a review of financial statements.

A violation of the profession's ethical standards most likely occurs when a CPA A. Receives as a commission a percentage of the amounts invested by the CPA's audit clients in a tax shelter with the client's knowledge and approval. B. Practices in a commercial corporation, a form of organization permitted by state law. C. Has a public accounting practice and also is the owner of a business that offers data processing services to the public. D. Purchases another CPA's accounting practice and bases the price on a percentage of the fees accruing from clients over a 3-year period.

A. Receives as a commission a percentage of the amounts invested by the CPA's audit clients in a tax shelter with the client's knowledge and approval.

According to the AICPA Code of Professional Conduct, under which of the following circumstances may a CPA receive a contingent fee for services? A. Representing a client in an IRS examination of the client's federal income tax return B. Examining a client's prospective financial information. C. Reviewing a client's financial statements. D. Preparing a client's federal income tax return.

A. Representing a client in an IRS examination of the client's federal income tax return

The Acts Discreditable Rule states that a member shall not commit an act discreditable to the profession. Which of the following is not considered such an act? A. Withholding as a result of nonpayment of fees for a completed engagement certain information already contained in the client's books and records. B. Retaining a client's records after a demand is made for them in a state that specifically grants the CPA a lien on all client records. C. Failing to provide the client with client records that are part of the audit documentation. D. Negligently making a materially misleading entry in the financial records of an entity.

A. Withholding as a result of nonpayment of fees for a completed engagement certain information already contained in the client's books and records.

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

B. Any surviving partner(s) on the death of a partner.

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? A. Disclosure of confidential client information to a court or in documents in connection with a subpoena. B. Disclosure of confidential client information to a third-party service provider when the member does not enter into a confidentiality agreement with the provider. C. Disclosure of confidential client information to the member's liability insurance carrier in response to a potential claim. D. Disclosure to a potential client of the name of a client for whom the member or member's firm performed professional services.

B. Disclosure of confidential client information to a third-party service provider when the member does not enter into a confidentiality agreement with the provider.

Thorp, CPA, was engaged to audit Ivor Co.'s financial statements. During the audit, Thorp discovered that Ivor's inventory contained stolen goods. Ivor was indicted and Thorp was subpoenaed to testify at the criminal trial in state court. Ivor claimed accountant-client privilege to prevent Thorp from testifying. Which of the following statements is most likely true regarding Ivor's claim? A. The accountant-client privilege can be claimed only to limit testimony to audit subject matter. B. Ivor can claim an accountant-client privilege only in jurisdictions that have enacted a statute creating such a privilege. C. The accountant-client privilege can be claimed only in civil suits. D. Ivor could claim an accountant-client privilege if a criminal tax case were

B. Ivor can claim an accountant-client privilege only in jurisdictions that have enacted a statute creating such a privilege.

Which of the following is required for a CPA firm to designate itself as "Members of the American Institute of Certified Public Accountants" on its letterhead? A. The firm must be a dues-paying member. B. At least one of the owners must be a member. C. All CPA owners must be members. D. The owners whose names appear in the firm name must be members.

C. All CPA owners must be members.

A violation of the profession's ethical standards most likely occurs when a CPA who A. Has been admitted to the Bar represents on letterhead to be an attorney and a CPA. B. Has not prepared a newsletter permits the publisher to attribute it to the CPA. C. Maintains a separate, distinct practice but forms an association with other CPAs for joint advertising. The group practices public accounting under the association's name. D. Is controller of a bank permits the bank to use the controller's CPA title in the listing of officers in its publications.

C. Maintains a separate, distinct practice but forms an association with other CPAs for joint advertising. The group practices public accounting under the association's name.

The Confidential Client Information Rule is violated when a member in public practice A. Advises potential consulting services clients about previous problems on similar engagements. B. Performs consulting services for similar clients. C. Provides client profit and loss percentages to a trade association without the clients consent D. Uses outside computer services to process tax returns.

C. Provides client profit and loss percentages to a trade association without the clients consent

Based on AICPA requirements, if a public accounting practice is incorporated, A. All employees must be CPAs. B. All directors must be CPAs. C. All officers must be CPAs. D. A majority of the ownership of the firm must belong to CPAs.

D. A majority of the ownership of the firm must belong to CPAs.

Which is most likely a violation of the AICPA Code of Professional Conduct? A. A member firm's name is imprinted on a tax booklet prepared by an outside author who is clearly identified. B. A member firm buys computer time at wholesale prices from another CPA firm and sells it at retail prices to clients. C. A member forms a partnership for the practice of public accounting with non-CPAs. D. A member begins a public accounting firm with the trade name "Pay Less Tax Service.

D. A member begins a public accounting firm with the trade name "Pay Less Tax Service.

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 A. Fee was a competitive bid. B. Actual fee would be substantially lower than the fees charged by other CPAs for comparable services. C. CPA would not be independent. D. Actual fee would be substantially higher.

D. Actual fee would be substantially higher.

Which of the following statements concerning an accountant's disclosure of confidential client data is ordinarily true? A. Disclosure may be made to comply with generally accepted accounting principles. B. Disclosure may be made to comply with an IRS audit request. C. Disclosure may be made to any state agency without subpoena. D. Disclosure may be made to any party on consent of the client.

D. Disclosure may be made to any party on consent of the client.

Which AICPA Conduct Rule applies only to members in the practice of public accounting? A. Create unjustified expectations of favorable results. B. Imply the ability to influence a court. C. Claim to be able to save the taxpayer 20% of a determined tax liability. D. Indicate the CPA's educational and professional attainments

D. Indicate the CPA's educational and professional attainments

Richard, CPA, performs compilation services for Norton Corporation, a nonpublic entity. The compilation reports issued by Richard disclose lack of independence and are not used by third parties. Richard has accepted a commission from a software company for recommending its products to Norton. The commission agreement was disclosed to Norton. Richard also refers Norton to Cruz, CPA, who is more competent with respect to engagements involving the industry in which Norton operates. Cruz performs an audit of Norton's financial statements and subsequently remits to Richard a portion of the fee collected. The referral fee agreement was likewise disclosed to Norton. Richard accepts the fee. Who, if anyone, has violated the Code of Professional Conduct? A. Only Cruz. B. Only Richard. C. Both Richard and Cruz. D. Neither Richard nor Cruz.

D. Neither Richard nor Cruz.