Question 1

In the AICPA Code of Professional Conduct, the sixth principle of professional conduct, entitled "Scope and Nature of Services," applies to members of the AICPA who work in public practice, business, government, or education.

Accepted Answer

A) True 
 B)False

Question 2

Interpretations of the rules regarding independence allow an auditor to serve as:

Accepted Answer

A)  a director or officer of an audit client.
B)  an underwriter for the sale of a client's securities.
C)  a trustee of a client's pension fund.
D)  an honorary director for a not-for-profit charitable or religious organization.E) All of the above
F) None of the above

Question 3

The Sarbanes-Oxley Act ________ a CPA firm from doing both bookkeeping and auditing services for the same public company client.

Accepted Answer

A)  encourages
B)  prohibits
C)  allows
D)  allows on a case-by-case basisE) B) and C)
F) A) and B)

Question 4

Rule 201 - General Standards requires members to comply with certain standards and interpretations.Which of the following is not a standard specifically addressed in Rule 201?

Accepted Answer

A)  Professional integrity
B)  Due professional care
C)  Planning and supervision
D)  Sufficient relevant dataE) A) and B)
F) A) and C)

Question 5

Companies are required to disclose in their proxy statement or annual filings with the SEC the total amount of audit and non-audit fees paid to the audit firm for the two most recent years.Which of the following is not one of the categories of fees that must be disclosed?

Accepted Answer

A)  Tax fees
B)  Consulting fees
C)  Audit-related fees
D)  All other feesE) All of the above
F) A) and B)

Question 6

The following situations involve a possible violation of the AICPA's Code of Professional Conduct.For each situation, (1)determine the applicable rule from the Code, (2)decide whether or not the Code has been violated, and (3)briefly explain how the situation violates (or does not violate)the Code.

Accepted Answer

a.Violation of the rule on Form of Organization and Name (Rule 505).Non-CPA ownership of firms is allowable, however, non-CPA owners must actively provide services to the firm's clients as their principal occupation.
b.No violation of the Commissions and Referral Fees rule (Rule 503).A CPA may pay a referral fee to a non-CPA as long as the payment is disclosed to the client.
c.Violation of the Contingent Fees rule (Rule 302).This is a contingent fee agreement and is prohibited by Rule 302.
d.Violation of the Independence rule (Rule 101).Don is a covered member for purposes of Rule 101.Because his daughter is a dependent, her ownership interest in Shaw is treated as a direct financial interest of her father.
e.No violation of the Independence rule (Rule 101).According to the Code a close relative is defined as a parent, sibling, or nondependent child.Thus, a sister-in-law is not considered to be a close relative.

Question 7

Which of the following circumstances impairs an auditor's independence?
I.Litigation by a client against an audit firm claiming a deficiency in the previous audit
II.Litigation by a client against an audit firm related to tax services
III.Litigation by an audit firm against a client claiming management fraud or deceit

Accepted Answer

A)  I and II
B)  I and III
C)  II and III
D)  I, II, and IIIE) A) and D)
F) A) and C)

Question 8

A CPA firm:

Accepted Answer

A)  can sell securities to a client for whom they perform an attestation service.
B)  can receive a commission for a client that they are engaged to perform an attestation service for.
C)  cannot receive a referral fee for recommending the services of another CPA.
D)  can receive a commission from a nonattestation client as long as the situation is disclosed.E) B) and C)
F) A) and B)

Question 9

Freedom from ________ means the absence of relationships that might interfere with objectivity or integrity.

Accepted Answer

A)  independence.
B)  acts discreditable.
C)  impartiality.
D)  conflicts of interest.E) None of the above
F) B) and D)

Question 10

A CPA firm may practice public accounting only in a form of organization permitted by federal law or regulation.

Accepted Answer

A) True 
 B)False

Question 11

According to the Principles section of the Code of Professional Conduct, all members:

Accepted Answer

A)  should be independent in fact and in appearance at all times.
B)  in public practice should be independent in fact and in appearance at all times.
C)  in public practice should be independent in fact and in appearance when providing auditing and other attestations services.
D)  in public practice should be independent in fact and in appearance when providing auditing, tax, and other attestation services.E) A) and B)
F) None of the above

Question 12

CPAs are prohibited from which of the following forms of advertising?

Accepted Answer

A)  Self-laudatory advertising
B)  Celebrity endorsement advertising
C)  Use of trade names, such as "Awesome Auditors"
D)  Use of phrases, such as "Guaranteed largest tax refunds in town!"E) A) and B)
F) A) and C)

Question 13

Which of the following is(are) true concerning the Ethical Principles of the Code of Professional Conduct?
I.They identify ideal conduct.
II.They are general ideals and are not enforceable.

Accepted Answer

A)  I only
B)  II only
C)  I and II
D)  Neither I nor IIE) C) and D)
F) A) and B)

Question 14

Which of the following is required for a firm to designate itself "Member of the American Institute of Certified Public Accountants" on its letterhead?

Accepted Answer

A)  At least one of the partners must be a member of the AICPA.
B)  All partners must be members of the AICPA.
C)  The partners whose names appear in the firm name must be members of the AICPA.
D)  A majority of the partners must be members of the AICPA.E) C) and D)
F) A) and B) B

Question 15

Which of the following services are allowed by the SEC whenever a CPA also audits the company?

Accepted Answer

A)  Internal audit outsourcing
B)  Legal services unrelated to the audit
C)  Appraisal or valuation services
D)  Services related to assessing the effectiveness of internal control over financial reportingE) None of the above
F) B) and D)

Question 16

In determining independence with respect to any audit engagement, the ultimate decision as to whether or not the auditor is independent must be made by the:

Accepted Answer

A)  auditor.
B)  client.
C)  audit committee.
D)  public.E) A) and B)
F) A) and C) A

Question 17

Under Rule 505, Form of Organization and Name, a CPA firm may not designate itself as "Members of the American Institute of Certified Public Accountants" unless a majority of its owners are members of the Institute.

Accepted Answer

A) True 
 B)False

Question 18

The AICPA's Code of Professional Conduct states that a CPA should maintain integrity and objectivity.The term "objectivity" in the Code refers to a CPA's ability to:

Accepted Answer

A)  choose independently between alternate accounting principles and auditing standards.
B)  distinguish between accounting practices that are acceptable and those that are not.
C)  be unyielding in all matters dealing with auditing procedures.
D)  maintain an impartial attitude on matters that come under the CPA's review.E) A) and B)
F) B) and C)

Question 19

The Code of Conduct rule on independence indicates that materiality must be considered when:

Accepted Answer

A)   
B)   
C)   
D)   E) All of the above
F) None of the above

Question 20

Which of the following instances would impair a CPA's independence when they have been retained as the auditor?
I.A charitable organization where the CPA serves as treasurer
II.A municipality where the CPA owns $250,000 of the $25 million outstanding bonds of the municipality
III.A company that the CPA's investment club owns a 10% investment interest

Accepted Answer

A)  I and II
B)  I and III
C)  II and III
D)  I, II, and IIIE) A) and B)
F) C) and D)

Exam 4: Professional Ethics

In the AICPA Code of Professional Conduct, the sixth principle of professional conduct, entitled "Scope and Nature of Services," applies to members of the AICPA who work in public practice, business, government, or education.

Correct Answer
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Interpretations of the rules regarding independence allow an auditor to serve as:

Correct Answer
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The Sarbanes-Oxley Act ________ a CPA firm from doing both bookkeeping and auditing services for the same public company client.

Correct Answer
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Rule 201 - General Standards requires members to comply with certain standards and interpretations.Which of the following is not a standard specifically addressed in Rule 201?

Correct Answer
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Companies are required to disclose in their proxy statement or annual filings with the SEC the total amount of audit and non-audit fees paid to the audit firm for the two most recent years.Which of the following is not one of the categories of fees that must be disclosed?

Correct Answer
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The following situations involve a possible violation of the AICPA's Code of Professional Conduct.For each situation, (1)determine the applicable rule from the Code, (2)decide whether or not the Code has been violated, and (3)briefly explain how the situation violates (or does not violate)the Code.

Correct Answer
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A CPA firm:

Correct Answer
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Freedom from ________ means the absence of relationships that might interfere with objectivity or integrity.

Correct Answer
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A CPA firm may practice public accounting only in a form of organization permitted by federal law or regulation.

Correct Answer
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According to the Principles section of the Code of Professional Conduct, all members:

Correct Answer
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CPAs are prohibited from which of the following forms of advertising?

Correct Answer
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Which of the following is(are) true concerning the Ethical Principles of the Code of Professional Conduct? I.They identify ideal conduct. II.They are general ideals and are not enforceable.

Correct Answer
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Which of the following is required for a firm to designate itself "Member of the American Institute of Certified Public Accountants" on its letterhead?

Correct Answer
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B

Which of the following services are allowed by the SEC whenever a CPA also audits the company?

Correct Answer
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In determining independence with respect to any audit engagement, the ultimate decision as to whether or not the auditor is independent must be made by the:

Correct Answer
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A

Under Rule 505, Form of Organization and Name, a CPA firm may not designate itself as "Members of the American Institute of Certified Public Accountants" unless a majority of its owners are members of the Institute.

Correct Answer
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The AICPA's Code of Professional Conduct states that a CPA should maintain integrity and objectivity.The term "objectivity" in the Code refers to a CPA's ability to:

Correct Answer
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The Code of Conduct rule on independence indicates that materiality must be considered when:

Correct Answer
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Correct Answer
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Exam 4: Professional Ethics

In the AICPA Code of Professional Conduct, the sixth principle of professional conduct, entitled "Scope and Nature of Services," applies to members of the AICPA who work in public practice, business, government, or education.

Correct AnswerverifiedShow Answer

Interpretations of the rules regarding independence allow an auditor to serve as:

Correct AnswerverifiedShow Answer

The Sarbanes-Oxley Act ________ a CPA firm from doing both bookkeeping and auditing services for the same public company client.

Correct AnswerverifiedShow Answer

Rule 201 - General Standards requires members to comply with certain standards and interpretations.Which of the following is not a standard specifically addressed in Rule 201?

Correct AnswerverifiedShow Answer

Companies are required to disclose in their proxy statement or annual filings with the SEC the total amount of audit and non-audit fees paid to the audit firm for the two most recent years.Which of the following is not one of the categories of fees that must be disclosed?

Correct AnswerverifiedShow Answer

The following situations involve a possible violation of the AICPA's Code of Professional Conduct.For each situation, (1)determine the applicable rule from the Code, (2)decide whether or not the Code has been violated, and (3)briefly explain how the situation violates (or does not violate)the Code.

Correct AnswerverifiedShow Answer

A CPA firm:

Correct AnswerverifiedShow Answer

Freedom from ________ means the absence of relationships that might interfere with objectivity or integrity.

Correct AnswerverifiedShow Answer

A CPA firm may practice public accounting only in a form of organization permitted by federal law or regulation.

Correct AnswerverifiedShow Answer

According to the Principles section of the Code of Professional Conduct, all members:

Correct AnswerverifiedShow Answer

CPAs are prohibited from which of the following forms of advertising?

Correct AnswerverifiedShow Answer

Which of the following is(are) true concerning the Ethical Principles of the Code of Professional Conduct? I.They identify ideal conduct. II.They are general ideals and are not enforceable.

Correct AnswerverifiedShow Answer

Which of the following is required for a firm to designate itself "Member of the American Institute of Certified Public Accountants" on its letterhead?

Correct AnswerverifiedB

Which of the following services are allowed by the SEC whenever a CPA also audits the company?

Correct AnswerverifiedShow Answer

In determining independence with respect to any audit engagement, the ultimate decision as to whether or not the auditor is independent must be made by the:

Correct AnswerverifiedA

Under Rule 505, Form of Organization and Name, a CPA firm may not designate itself as "Members of the American Institute of Certified Public Accountants" unless a majority of its owners are members of the Institute.

Correct AnswerverifiedShow Answer

The AICPA's Code of Professional Conduct states that a CPA should maintain integrity and objectivity.The term "objectivity" in the Code refers to a CPA's ability to:

Correct AnswerverifiedShow Answer

The Code of Conduct rule on independence indicates that materiality must be considered when:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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B

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A

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