section 2 Flashcards
(33 cards)
During a consulting engagement, a CPA must act with
Integrity.
Independence.
Objectivity.
Intg and obj
Which of the following would impair a CPA’s independence in regards to attest clients?
I. The CPA is a member of the same exclusive country club as the CEO of the client company. II. The CPA prepares routine invoices for the client. III. The CPA has a money market account with a financial institution client; the account in excess of insured amounts is immaterial to the CPA’s net worth.
2 only
Which of the following statements is true regarding confidentiality?
An auditor may allow other accountants and the PCAOB to see confidential information in connection with a valid program of peer review.
Which of the following statements are true regarding the ethical requirements of the profession?
In some circumstances it may be reasonable and necessary for the accountant to retain client records in order to ensure client payment for work performed.
It is acceptable to charge a contingent fee for filing an amended tax return in a case where the client had inadvertently omitted a common deduction in the original return.
none
Which statement is true regarding a situation where an auditor agrees to become an employee of an audit client?
The next annual audit must be separately reviewed by an audit firm professional uninvolved in the audit.
According to the profession’s standards, which of the following statements is correct regarding the standards a CPA should follow when recommending tax return positions and preparing tax returns?
I. The practitioner should not recommend a position or prepare or sign a tax return taking a position that the practitioner does not believe in good faith will have at least a remote possibility of being sustained on its merits.
II. The practitioner should be aware that the ‘reasonable basis’ of success standard is generally understood to mean that there is approximately a 20% likelihood that a tax position will be sustained on the basis of its merits.
III. At a minimum, the practitioner should recommend a position or prepare or sign a tax return taking a position in support of which the practitioner can present a well-documented argument.
2
Weller, CPA is conducting an audit of Wadd, LLC. Weller wishes to independently perform procedures to validate assumptions inherent in certain reserve accounts on Wadd’s balance sheet. The CEO of Wadd asks if Weller could rely primarily on Wadd’s own internal support for the accounts, citing a pressing need to provide audited financial statements to prospective investors as soon as possible, and as a sign of Wadd’s gratitude, presents Weller with valuable tickets to a sporting event. What category of threat to independence is Weller being subjected to?
Undue infl
Under the ethical standards of the profession, which of the following investments in a client is not considered to be a direct financial interest?
An investment held through a nonclient regulated mutual fund.
Under the ethical standards of the profession, which of the following business relationships would generally not impair an auditor’s independence?
Advisor to a client’s board of trustees.
Each of the following broker-dealer relationships impairs auditor independence with respect to a broker-dealer issuer audit client, except:
The auditor has a cash balance in a brokerage account that is fully covered by the Securities Investor Protection Corporation.
Choose the correct statement(s) regarding the Public Company Accounting Oversight Board (PCAOB):
I. Public accounting firms must register with the PCAOB in order to perform audits of public companies.
II. The PCAOB is a private, nonprofit organization established in 1933. III. Two of the five board members of the PCAOB are CPAs.
I and III
According to the standards of the profession, which of the following activities may be required in exercising due care?
I. Consulting with experts
II. Obtaining specialty accreditation
I only
hoose the correct statement(s) regarding corporate audit committees:
I. Corporate audit committees are responsible for establishing and maintaining effective internal control. II. As established by the Sarbanes-Oxley Act of 2002, audit committees of issuer companies must be independent. III. The audit committee consists of managers assigned from within the company to serve terms that usually last one ye
II
In which of the following circumstances would a covered member’s independence be impaired with respect to an “issuer” client under PCAOB auditing standards?
The member owns municipal utility bonds issued by a client, and the bonds are not material to the member’s wealth.
An issuer’s auditor is prohibited from providing tax services to which of the following individuals?
The CEO
On June 1, 20X0, a CPA obtained a $100,000 personal loan from a financial institution client for whom the CPA provided compilation services. The loan was fully secured and considered material to the CPA’s net worth. The CPA paid the loan in full on December 31, 20X0. On April 3, 20X1, the client asked the CPA to audit the client’s financial statements for the year ended December 31, 20X1. Is the CPA considered independent with respect to the audit of the client’s December 31, 20X1, financial statements?
Yes, because the CPA was not required to be independent at the time the loan was granted.
Under the ethical standards of the profession, which of the following investments by a CPA in a corporate client is an indirect financial interest?
An investment held through a regulated mutual fund.
Which of the following bodies ordinarily would have the authority to suspend or revoke a CPA’s license to practice public accounting?
A state board of accountancy.
A CPA audits the financial statements of a client. The CPA has also been asked to perform bookkeeping functions for the client. Under the AICPA Code of Professional Conduct, which of the following activities would impair the CPA’s independence with respect to the client?
The CPA authorizes client transactions and reports them to management.
Which of the following best describes the effect of a contingent fee arrangement on the auditor’s independence?
The contingent fee arrangement impairs independence.
Under the Statements on Standards for Consulting Services, which of the following statements best reflects a CPA’s responsibility when undertaking a consulting services engagement? The CPA must
Inform the client of significant reservations concerning the benefits of the engagement.
Which of the following services may a CPA perform in carrying out a consulting service for a client?
I. Analysis of the client’s accounting system.
II. Review of the client’s prepared business plan.
III. Preparation of information for obtaining financing.
all
Which of the following services is a CPA generally required to perform when conducting a personal financial planning engagement?
Assisting the client to identify tasks that are essential in order to act on planning decisions.
To ensure that the audit report for an issuer is prepared in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, the report must
Attest to and report on the internal control assessment made by the management of the issuer.