Question 1

Describe the methods used by the AICPA and State Boards of Accountancy to enforce the rules of conduct.

Accepted Answer

The AICPA uses two levels of disciplinar...

Question 2

Imprisonment for a period of six months or longer will result in automatic expulsion from the AICPA.

Accepted Answer

A) True 
 B)False

Question 3

A public company may obtain internal audit services from their financial statement auditor if it is approved by the company's audit committee.

Accepted Answer

A) True 
 B)False

Question 4

Interpretations of Independence Rule 101 prohibit covered members from owning any stock or other direct investment in audit clients.Covered members would include which of the following?

Accepted Answer

A)   
B)   
C)   
D)   E) C) and D)
F) B) and D) A

Question 5

Expulsion from the AICPA for failing to follow the rules of conduct is,by itself,sufficient to prevent a CPA from practicing public accounting.

Accepted Answer

A) True 
 B)False

Question 6

When a member observes the profession's technical and ethical standards and strives to continually improve her competence and quality of services,she is exercising:

Accepted Answer

A)   due care.
B)   integrity.
C)   independence.
D)   objectivity.E) C) and D)
F) B) and D) A

Question 7

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 C)
F) A) and D)

Question 8

Which of the following would be considered a violation of the AICPA Code of Conduct?

Accepted Answer

A)   The CPA makes the audit files available to the client's bank without the permission of the client.
B)   The CPA firm charges a contingent fee for nonattestation services to a client for whom he does not perform any attestation services.
C)   The CPA firm takes a prospective client to lunch to discuss auditing services.
D)   A CPA firm uses the name San Diego Tax Specialists.E) A) and D)
F) A) and B)

Question 9

All owners of a CPA firm must be CPAs who are qualified to practice.

Accepted Answer

A) True 
 B)False

Question 10

Which one of the following statements is false?

Accepted Answer

A)   Confidentiality is broken when an auditor is presented with a subpoena concerning an audit client.
B)   Information that a CPA obtains from a client is generally not privileged.
C)   When a CPA firm conducts an AICPA-authorized peer review of the quality controls of another CPA firm, permission of the client is not needed to examine audit documentation.
D)   A CPA firm which observes substandard audit documentation of another firm during a peer review can initiate a complaint to the AICPA.E) B) and D)
F) B) and C) A

Question 11

Four of the six Ethical Principles in the AICPA's Code of Professional Conduct are equally applicable to all members of the AICPA.Which of the following principles applies only to members in public practice?

Accepted Answer

A)   Scope and Nature of Services
B)   Integrity
C)   Due Care
D)   The Public InterestE) C) and D)
F) B) and C)

Question 12

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 13

For which of the following professional services must CPAs be independent?

Accepted Answer

A)   Management advisory services
B)   Audits of financial statements
C)   Preparation of tax returns
D)   All three of the aboveE) A) and D)
F) A) and C)

Question 14

The AICPA Code of Professional Conduct permits the auditor to perform a wide variety of non-audit services for audit clients.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is true? The CPA firm will lose its independence if:

Accepted Answer

A)   a staff auditor providing audit services to the client acquires stock in that client.
B)   a staff tax preparer who provides 15 hours of non-audit services to the client acquires stock in that client.
C)   an audit manager in an office different than the office providing audit services has a direct, immaterial financial interest in the audit client.
D)   a covered member has an indirect, immaterial financial interest in an audit client.E) B) and D)
F) A) and D)

Question 16

CPAs may provide bookkeeping services to their private company audit clients,but there are a number of conditions that must be met if the auditor is to maintain independence.Which of the following conditions is not necessary?

Accepted Answer

A)   The CPA must not assume a management role or function.
B)   The client must hire an external CPA to approve all of the journal entries prepared by the auditor.
C)   The auditor must comply with GAAS when auditing work prepared by his/her firm.
D)   The client must accept responsibility for the financial statements.E) B) and D)
F) A) and D)

Question 17

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) A) and B)
F) A) and C)

Question 18

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 19

Interpretations of rules of conduct in the Code of Professional Conduct are not officially enforceable and practitioners need not justify departure from them.

Accepted Answer

A) True 
 B)False

Question 20

The audit committee of a private company need not approve all non-audit services provided by the company's financial statement auditor.

Accepted Answer

A) True 
 B)False

Exam 5: Ethics and the Audit Profession

Describe the methods used by the AICPA and State Boards of Accountancy to enforce the rules of conduct.

Correct AnswerverifiedThe AICPA uses two levels of disciplinar...View AnswerShow Answer

Imprisonment for a period of six months or longer will result in automatic expulsion from the AICPA.

Correct AnswerverifiedShow Answer

A public company may obtain internal audit services from their financial statement auditor if it is approved by the company's audit committee.

Correct AnswerverifiedShow Answer

Interpretations of Independence Rule 101 prohibit covered members from owning any stock or other direct investment in audit clients.Covered members would include which of the following?

Correct AnswerverifiedA

Expulsion from the AICPA for failing to follow the rules of conduct is,by itself,sufficient to prevent a CPA from practicing public accounting.

Correct AnswerverifiedShow Answer

When a member observes the profession's technical and ethical standards and strives to continually improve her competence and quality of services,she is exercising:

Correct AnswerverifiedA

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

Correct AnswerverifiedShow Answer

Which of the following would be considered a violation of the AICPA Code of Conduct?

Correct AnswerverifiedShow Answer

All owners of a CPA firm must be CPAs who are qualified to practice.

Correct AnswerverifiedShow Answer

Which one of the following statements is false?

Correct AnswerverifiedA

Four of the six Ethical Principles in the AICPA's Code of Professional Conduct are equally applicable to all members of the AICPA.Which of the following principles applies only to members in public practice?

Correct AnswerverifiedShow Answer

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

For which of the following professional services must CPAs be independent?

Correct AnswerverifiedShow Answer

The AICPA Code of Professional Conduct permits the auditor to perform a wide variety of non-audit services for audit clients.

Correct AnswerverifiedShow Answer

Which of the following statements is true? The CPA firm will lose its independence if:

Correct AnswerverifiedShow Answer

CPAs may provide bookkeeping services to their private company audit clients,but there are a number of conditions that must be met if the auditor is to maintain independence.Which of the following conditions is not necessary?

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

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 rules of conduct in the Code of Professional Conduct are not officially enforceable and practitioners need not justify departure from them.

Correct AnswerverifiedShow Answer

The audit committee of a private company need not approve all non-audit services provided by the company's financial statement auditor.

Correct AnswerverifiedShow Answer

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The AICPA uses two levels of disciplinar...
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