Question

11. One of the AICPA’s Ethical Principles deals with the public interest. It states that members should accept the obligation to act in a way that will

a.     serve the client’s interest above all other interests.

b.    honor the public trust.

c.     demonstrate commitment to professionalism.

d.    do all of the above.

e.     do b. and c. above.

12. Which of the following activities is prohibited, given that a CPA provides an attestation service to this client?

a.     The CPA charges a contingent fee for consulting based on savings from implementation of an information system.

b.    The CPA charges commissions for referring the client to an insurance agency for additional insurance coverage.

c.     The CPA prepares the client’s tax return and receives fees based upon the refund received by the client.

d.    All of the above are prohibited.

e.     Both a. and b. above are prohibited, but c. is permitted.

13. Which statement best describes enforcement implications of the Interpretations of the Rules of Conduct?

a.     The Interpretations are not enforceable.

b.    The Interpretations are enforceable.

c.     The Interpretations may be enforceable if they have been reviewed and approved by the AICPA’s Division of Professional Ethics.

d.    The Interpretations are not enforceable, but a practitioner must justify departure from applicable interpretations.

14. Ethical Rulings

a.     are issued by the AICPA’s Board of Governors.

b.    are explanations relating to specific factual circumstances.

c.     are explanations relating to broad hypothetical circumstances.

d.    are enforceable.

15. If the Board of Accountancy in the state in which a CPA firm is licensed has rules which are either more or less restrictive than the AICPA’s, the CPA firm must follow

a.     the rules of the AICPA.

b.    the rules of the state’s Board of Accountancy.

c.     whichever rules are less restrictive.

d.    whichever rules are more restrictive.

16. Which of the following best describes the applicability of the principle of independence in the Code of Conduct?

a.     all members should be independent in fact and in appearance at all times.

b.    all members in public practice should be independent in fact and in appearance at all times.

c.     all members in public practice should be independent in fact and in appearance when providing auditing and other attestation services.

d.    all members in public practice should be independent in fact and in appearance when providing auditing, tax, and MAS services.

17. Assume that the person described in each of the responses below owns stock in a company audited by a covered member, Which would be considered a direct financial interest?

a.     a person in a domestic partnership with a covered member

b.     a roommate and long-time platonic friend (no benefits) of a covered member.

c.     a brother who lives with the covered member but is financially independent.

d.     all of the above describe situations involving a direct financial interest.

e.     a. and c. above describe situations involving a direct financial interest.

18. An example of a “direct ownership interest in a client” would be ownership of a client’s stock by a member’s

a.     dependent child.

b.    spouse.

c.     grandfather.

d.    All of the above are examples of direct ownership.

e.     Both a. and b. above are examples of direct ownership

19. When determining whether independence is impaired because of an ownership interest in a client, the fact that the ownership interest is immaterial would play a role

a.     in all circumstances.

b.    only for direct ownership.

c.     only for indirect ownership.

d.    under no circumstances.

20. Which of the following circumstances would ordinarily not impair the auditor’s independence?

a.     Litigation by client against audit firm related to tax services.

b.    Litigation by client against audit firm claiming a deficiency in the previous audit.

c.     Litigation by audit firm against client claiming management fraud or deceit.

d.    Intent to start a lawsuit at some future date, after the current audit is completed, claiming a deficiency in the previous audit.

Answer 1