Chapter 19 SB HW

Question 1

A CPA who is honest and candid and honors both the form and the spirit of ethical standards is said to have ______.

Answer 1

integrity

Question 2

When determining independence for an attest engagement, a “covered member” under the AICPA’s approach includes ______.

Answer 2

1. a CPA firm manager who provides 20 hours of nonattest services to the client during the year
2. an individual on the attest engagement team
3. the firm’s employee benefits plan

Question 3

Is performing services for contingent fees considered a discreditable act?

Answer 3

No

Question 4

The Confidential Client Information rule prohibits the auditor from disclosing confidential client information without the specific consent of the client. However, information can be disclosed without the client’s consent to ______.

Answer 4

1. allow a review of the member’s professional practice in conjunction with the sale or merger of the practice
2. allow a review of the member’s professional practice under the authority of the AICPA
3. comply with a valid subpoena

Question 5

The successful functioning of nearly every aspect of society, from law to medicine, family life to government is underpinned by ______.

Answer 5

ethics

Question 6

The value of an action is determined solely by the consequences of the action on the welfare of individuals under the ______ approach.

Answer 6

utilitarian theory

Question 7

Until recently, quality control standards developed by the ASB, the PCAOB, and the IAASB ______ significantly from each other.

Answer 7

diverged

Question 8

CPA firms are required to follow certain ______ quality management standards established by the ASB, the PCAOB, and the IAASB.

Answer 8

firm-wide

Question 9

The ASB, the PCAOB, and the IAASB intend that new quality control standards will be, to the greatest extent possible, in ______ with each other.

Answer 9

conformity

Question 10

Membership in the AICPA can be terminated without a hearing if the member has __________________.

Answer 10

1. had his or her CPA certificate suspended or revoked by a government agency
2. been convicted of certain criminal offenses

Question 11

A private, nongovernmental association which only has the authority to require its members to comply with the Code of Professional Conduct as a condition of continued membership is the _______.

Answer 11

AICPA

Question 12

The purpose of PCAOB inspections is to ensure that registered firms, in connection with their audits of public companies, comply with ______.

Answer 12

1. PCAOB Rules
2. SEC Rules
3. SOX Act
4. Professional Standards

Question 13

Part 1 of the AICPA Code of Professional Conduct applies to all ______.

Answer 13

public practice CPAs

Question 14

The most complex and controversial area of auditor ethics and professionalism is _________.

Answer 14

independence

Question 15

When a CPA has such a close, long-standing relationship with a client that it has become difficult to maintain objectivity, it is called a(n) ______ threat.

Answer 15

familiarity

Question 16

AICPA standards require independence when attest work is performed including ______.

Answer 16

1. Financial statement audits
2. Financial statement reviews

Question 17

The utilitarian theory __________.

Answer 17

1. Focuses on the consequences of an action on the individuals affected
2. Recognizes decision making involves trade-offs between benefits and burdens of actions
3. Proposes the interest of all parties should be considered

Question 18

Until recently, ASB, PCAOB, and IAASB quality control standards diverged significantly from each other. This situation began to change when the IAASB issued a new standard in December 2020 introducing a ______ based approach to quality management.

Answer 18

risk

Question 19

Threats to a CPA’s independence include ________.

Answer 19

1. Advocacy
2. Management participation
3. Adverse Interest