AICPA Part 2 Flashcards
a contingency fee can be charged for its consulting services to the same client if…
a CPA discloses its lack of independence
independence is impaired if a covered member owns…
- shares in a mutual fund and has a direct finanical interest in the fund
- more than 5% of the shares of a diversified fund (indirect interest) have to determine materiality
- shares of an undiverisfied fund must determine if indirect interest in
underlying shares is material
PTI
person in a position to influence
independence rules apply to which groups of individuals?
- covered members and their families
- partners or professional employees who own 5% or less of an attest client’s
ownership interests
independence is not impaired for a covered member who…
- has no active role in investing
- owns less than 10% of audit client’s stock
- owns less than 10% of its assets invested
independence of a CPA who serves as a trustee of a trust or executor of an estate with a direct or material indirect financial interest in a client is impaired if:
- the CPA can make investment decisions for the entity
- if the entity holds more than 10% of the client
- if the stock in the client exceeds 10% of the entity’s holdings
prior to accepting an audit engagement, auditors must have adequate technical training through…
AIPE
1. accounting education (continuing)
2. industry knowledge
3. practical experience
one audit cycle waiting period _____ observed by SOX if the audit client is a __________ company
is NOT; private
is; public
there are 6 quality control elements for a CPA firm
H.E.A.L.M.E
1. human resources
2. ethical requirements
3. acceptance and continuance of client
4. leadership responsibilites for quality
5. monitoring
6. engagement performance
For a trust- a covered members interest is DIRECT if there is
OAR-CID
1. ownership,
2. the ability to amend or revoke a trust,
3. the authority to control the trust
4. AND the ability to supervise the trust’s investment decisions
what is a private letter ruling
a statement from the IRS that provides interpretations of tax law as it relates to situations specific to a particular taxpayer
if the CPA performs a service for a contingent fee, they may NOT perform either of these services for the same client:
- audits or reviews of F/S
- examinations of prospective financial information
adverse interest threat
CPA’s interests conflict with clients
advocacy threat
CPA promotes client’s interests
familiarity threat
relationship makes CPA sympathetic to client
management participation threat
CPA performs management functions for client
self-interest threat
CPAs interests align with clients
self-review threat
CPA expected to judge their own (or their firm’s) work
undue influence threat
CPA is (or appears to be) overly influenced by someone else (ie. client or third-party)
gifts are an example of what kind of threats?
undue influence but can be self-interest or familiarity even if gift doesn’t violate firm policy
the independence rules for employment relationships focuses on which two groups?
partners and professional employees rather than just covered members
A covered member must maintain independence for what attest services?
think attest A.R.E.A.
1. Audits
2. Reviews
3. Examinations
4. Agreed upon procedures
In what five circumstances is it permitted to disclose client confidentially?
- in conjunction with arbitration proceedsings relating to the client
- to a professional liability carrier regarding a claim
- in use of a records retention agency
- as long as its not the CPAs primary field of services (ie. NOT in conjunction with a bankruptcy)
- client says OK
members in public practice are obligated to follow these 3 rules of conduct:
- independence
- contingent fees
- commissions
