Audit HW7
Which of the following statements best explains why the CPA profession has found it essential to establish ethical standards and means for ensuring their observance?
A distinguishing mark of a profession is its acceptance of responsibility to the public.
Which is most likely a violation of the AICPA Code of Professional Conduct?
A member begins a public accounting firm with the trade name "Pay Less Tax Service."
According to the SEC, members of an issuer's audit committee may not
Accept any consulting, advisory, or other compensatory fee from the registrant for services other than as a member of the board.
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
Actual fee would be substantially higher.
Which of the following legal situations would be considered to impair the auditor's independence?
Actual litigation by the auditor against the current management alleging management fraud or deceit.
According to the ethical standards of the profession, a CPA's independence would most likely be impaired if the CPA
Contracted with a client to supervise the client's office personnel.
In which of the following instances is the independence of the CPA most likely not considered to be impaired? The CPA has been retained as the auditor of a
Credit union of which the CPA is a member.
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?
Disclosure of confidential client information to a third-party service provider when the member does not enter into a confidentiality agreement with the provider.
According to the standards of the profession, which of the following circumstances will prevent a CPA performing audit engagements from being independent?
Employment of the CPA's spouse as a client's director of internal audit.
With respect to records in a CPA's possession, the Code of Professional Conduct provides that
Extensive analyses of inventory prepared by the client at the auditor's request are working papers that belong to the auditor and need not be furnished to the client upon request.
Under the Sarbanes-Oxley Act of 2002, exactly how many consecutive years may an audit partner lead an audit for an issuer?
Five years.
In which of the following situations would a covered member's independence be considered to be impaired?
II and III.
Under which of the following circumstances may a CPA charge fees that are contingent upon finding a specific result?
If fixed by courts, other public authorities, or in tax matters if based on the results of judicial proceedings.
Which of the following rules of the AICPA Code of Professional Conduct must be observed only by a member who is in public practice?
Independence.
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
Indicate the CPA's educational and professional attainments.
A violation of the profession's ethical standards would most likely occur when a CPA
Is the sole shareholder in a professional accountancy corporation and uses the designation "and company" in the firm title.
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?
Kar's sibling is the director of internal auditing for Fort.
Must a CPA in public practice be independent in fact and appearance when providing the following services?
No No No
An accountant has an immaterial direct financial interest in a nonpublic entity. The accountant is
Not independent and may not perform a review.
A cooling-off period of how many years is required before a member of an issuer's audit engagement team may begin working for the registrant in a key position?
One year.
A CPA's retention of client-provided records as a means of enforcing payment of an overdue audit fee is an action that is
Prohibited under the AICPA Code of Professional Conduct.
Which of the following acts by a CPA is a violation of professional standards regarding the confidentiality of client information?
Releasing financial information to a local bank with the approval of the client's mail clerk.
According to the ethical standards of the profession, which of the following acts is generally prohibited?
Retaining client-provided records after an engagement is terminated prior to completion and the client has demanded their return.
According to the Code of Professional Conduct of the AICPA, for which type of service may a CPA receive a contingent fee?
Seeking a private letter ruling.
The appearance of independence of a CPA, or that CPA's firm, is most likely to be impaired if the CPA
Serves as an executor and trustee of the estate of an individual who owned the majority of the stock of a closely held client corporation.
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 member must maintain.
Each of the following is a required attribute of an issuer's audit committee financial expert except
Significant audit experience as a certified public accountant.
Which of the following is an act discreditable to the accounting profession?
Solicitation of Uniform CPA Examination questions without AICPA authorization.
Which of the following reports may be issued only by an accountant who is independent of a client?
Standard report on an examination of a financial forecast.
In which of the following circumstances would a CPA who audits XM Corporation lack independence?
The CPA and XM's president each owns 25% of FOB Corporation, a closely held company.
Which of the following statements is true regarding an accountant's working papers?
The accountant owns the working papers but generally may not disclose them without the client's consent or a court order.
An audit independence issue might be raised by the auditor's participation in consulting services engagements. Which of the following statements is most consistent with the profession's attitude toward this issue?
The auditor should not make management decisions for an audit client.
According to the profession's ethical standards, an auditor would be considered independent in which of the following instances?
The auditor's checking account, which is fully insured by a federal agency, is held at a client financial institution.
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?
The former partner has no remaining capital balance in the registered public accounting firm.
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
To maintain an impartial attitude on all matters that come under the CPA's review.
According to the Integrity and Objectivity Rule, a member of the AICPA
Who has a difference of opinion with his or her supervisor about statement preparation has an obligation to act if a material misstatement would otherwise result.
On June 1, Year 1, a CPA obtained a $100,000 personal loan from a financial institution client for whom the CPA provided compilation services. The loan was fully secured and considered material to the CPA's net worth. The CPA paid the loan in full on December 31, Year 1. On April 3, Year 2, the client asked the CPA to audit the client's financial statements for the year ended December 31, Year 2. Is the CPA considered independent with respect to the audit of the client's December 31, Year 2, financial statements?
Yes, because the CPA was not required to be independent at the time the loan was granted.
A CPA purchased stock in an audit client corporation and placed it in a revocable educational trust for the CPA's dependent minor child. The trust securities were not material to the CPA but were material to the child's personal net worth. Is the independence of the CPA considered to be impaired with respect to the client?
Yes, because the stock is considered a direct financial interest and, consequently, materiality is not a factor.
