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Exam 4: Professional Ethics

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Question 21

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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

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

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

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Question 22

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

A) True
B) False

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Question 23

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Each state also has rules of conduct that are required for licensing by the state.

If the board of accountancy in the state in which a CPA firm is licensed has rules that are different than the AICPA's rules,the CPA firm must follow

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. a.In 2014,Freeman and Johnson,both CPAs,decided to form a CPA practice.In 2016,Freeman and Johnson approached Bill Delaney,a physician and medical expert,and asked him to assist them with their growing medical consulting practice.Delaney agreed,but only after he was given an ownership interest in the firm.Delaney does not intend to quit his private medical practice. Rule: ________ Violation? Yes No

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. a.Howard Cunningham & Co.,CPAs,designates its firm as "Members of the American Institute of Certified Public Accountants." All of the partners of the firm are CPAs.However,one of the partners has recently chosen to allow her membership to lapse because of personal reasons. Rule: ________ Violation? Yes No

Interpretations to the Rules of Conduct permit a CPA firm to do both bookkeeping and auditing for the same private company client if three criteria are met.Which of the following is not one of those criteria?

Under the AICPA independence rules,independence can be considered impaired when

Which of the following statements is True with respect to audit committees?

Which of the following fee arrangements is not a violation of the AICPA's Code of Professional Conduct?

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

Discuss the Confidential Client Information Rule,including the four exceptions to the rule.

Most people define unethical behavior as conduct that differs from what they believe is appropriate given the circumstances.

Which of the following is not one of the major parts of the AICPA's Code of Professional Conduct?

Which of the following is least likely to impair a CPA firm's independence with respect to an audit client in the Oklahoma City office of a national CPA firm?

The Sarbanes-Oxley Act requires which employees of an accounting firm to rotate off the engagement every five years?

An advantage of the principles of professional conduct in the Code of Professional Conduct is that they are more easily enforced than are the specific rules of conduct.

Don Crosby,a partner in a national CPA firm,has just learned that his self-sufficient daughter has accepted a position as the CFO of Sunglasses,Inc.,a current client within the office with which he is employed.Explain the independence ramifications on 1)Don's independence,2)his office,and 3)the firm's independence.

Under the AICPA's Code of Professional Conduct,CPAs are prohibited from offering audit clients a discount for referring a prospective client even if they are disclosed.

Which of the following loans would be prohibited between a CPA firm or its members and an audit client?