Deck 6: Professional Accounting in the Public Interest

Question 1

Using partners who do not report to audit partners for the provision of nonassuranc services to an assurance client would be an example of:

A)safeguards reducing the risk of conflict of interest created by the profession, legislation, or regulation.
B)safeguards reducing the risk of conflict of interest within a client.
C)safeguards reducing the risk of conflict of interest within a professional accounting firm.
D)All of the above
E)a and c only

Answer 1

C

Question 2

The external review of an audit firm's quality control system is an example of:

A)safeguards reducing the risk of conflict of interest within the audit profession.
B)safeguards reducing the risk of conflict of interest within a client.
C)safeguards reducing the risk of conflict of interest within a professional accounting firm.
D)All of the above
E)a and c only

Answer 2

C

Question 3

A professional accounting firm has several audit and tax clients; however, a single client represents 40% of the firm's revenue. This situation could result in the following threat to professional independence.

A)Self-review
B)Intimidation
C)Advocacy
D)Familiarity
E)Self-interest

Answer 3

B,E

Question 4

If a professional accountant is billing an audit client for more hours than those actually worked, he or she will be violating the following fundamental principle.

A)Objectivity
B)Professional due care
C)Integrity
D)Confidentiality
E)All of the above

Question 5

This organization is developing an international code of conduct for professional accountants.

A)The International Accounting Standards Board
B)The European Federation of Accountants
C)The Financial Accounting Standards Board
D)The Public Accounting Oversight Board
E)The International Federation of Accountants

Question 6

A new audit client has been taken on by a professional accountant's firm. The fee for this client's audit engagement is significantly lower than that charged by the previous accountants. This situation could result in the following threat to professional independence.

A)Self-review
B)Intimidation
C)Advocacy
D)Familiarity
E)None of the above

Question 7

The following elements are essential features of a profession.

A)Extensive training, license or certification, and provision of important services to society
B)Extensive training, primarily intellectual skills, and representation by professional organizations
C)Extensive training, provision of important services to society, and primarily intellectual skills
D)License or certification, representation by professional organizations, and autonomy
E)License or certification, autonomy, and provision of important services to society

Question 8

A professional accountant has been the partner in charge of a particular audit client for the past eight years. This situation could result in the following threat to professional independence.

A)Self-review
B)Intimidation
C)Advocacy
D)Familiarity
E)None of the above

Question 9

A professional accountant is auditing client A and providing consulting services to client B. Both clients are in the same industry. If the professional accountant uses specific information from client A's audit to prepare a business plan for client B, he will be violating the following fundamental principle.

A)Integrity
B)Objectivity
C)Professional due care
D)Confidentiality
E)All of the above

Question 10

The following value is not necessary for an accounting professional.

A)Honesty
B)Integrity
C)Objectivity
D)A primary commitment to self-interest
E)Trustworthiness

Question 11

Professional accountants, in their fiduciary role, owe primary loyalty to:

A)the accounting profession.
B)the client.
C)the general public.
D)government regulations.
E)All of the above

Question 12

This organization issues auditing standards, carries out inspections of public accounting firms auditing U.S. public clients, and imposes sanctions when applicable.

A)CPAB
B)PCAOB
C)SEC
D)FASB
E)AICPA

Question 13

According to Kohlberg, at this stage of moral reasoning, fear of punishment and authorities is a motive for doing right.

A)Obedience
B)Egotism
C)Interpersonal concordance
D)Law and duty
E)General rights and standards agreed upon by society
F)Self-chosen principles

Question 14

According to Kohlberg's stages of moral reasoning, which of the following is the first stage at which a professional accountant should be motivated?

A)Obedience
B)Egotism
C)Interpersonal concordance
D)Law and duty
E)General rights and standards agreed upon by society
F)Self-chosen principles

Question 15

Adopting the following measures would reduce the expectations gap and lessen public misunderstanding of the auditor's role.

A)Publishing a statement of management responsibility
B)The auditor reporting annually to the audit committee
C)Expanding the audit report to clarify the auditor's role and the level of assurance
D)a and b
E)a and c

Question 16

The recommendation of the appointment and review of external auditors by the audit committee is an example of:

A)safeguards reducing the risk of conflict of interest created by the profession, legislation, or regulation.
B)safeguards reducing the risk of conflict of interest between an auditor and management.
C)safeguards reducing the risk of conflict of interest within a professional accounting firm's own systems and procedures.
D)All of the above
E)a and c only

Question 17

Which of the following is not a fundamental principle of codes of conduct for professional accountants?

A)Act in the client's best interest
B)Maintain objectivity and independence
C)Maintain the good reputation of the profession
D)Maintain confidentiality
E)Do not associate with misleading information

Question 18

This organization can set auditing standards in the U.S.

A)AICPA
B)FASB
C)SEC
D)PCAOB
E)All of the above

Question 19

If a professional accountant is auditing a public company and she receives company shares as payment for her audit services, she will be violating the following fundamental principle.

A)Integrity
B)Objectivity
C)Professional due care
D)Confidentiality
E)All of the above

Question 20

The following duties are essential to maintaining a fiduciary relationship in the accounting profession.

A)Development and maintenance of required knowledge and skills
B)Maintenance of trust
C)Maintenance of an acceptable personal reputation
D)All of the above
E)a and b only

Question 21

The most recent International Code of Ethics for Professional Accountants mandates that professional accountants must protect the public interest because professionals serving the public:

A)must be trusted by the public.
B)must serve only the best interests of their client.
C)must do what their boss says.
D)must do only what is in their self-interest.

Question 22

Professionalism is essential for professional accountants to protect the public interest. Which of the following are the most important aspects of professionalism?

A)Technical competence
B)Ethical behavior
C)Awareness and consideration of the public interest
D)Professional skepticism
E)Moral courage

Question 23

If you are a professional accountant who is considering reporting noncompliance as contemplated under the NOCLAR standards, you would decide if the matter was significant enough to require reporting if it:

A)was larger than the company's materiality standards for financial disclosure.
B)would have increased bonuses.
C)was self-correcting in the next quarter year and resulted in no distortion.
D)understated taxes payable.
E)avoided the exercise of legal covenants from lenders.

Question 24

Maintaining the confidentiality of client or employer matters is considered essential for a professional accountant (PA)in order that clients and employers:

A)will continue to discuss all matters with the PA.
B)will not fire the PA.
C)will be protected from prosecution.
D)will be able to maximize profits.
E)will not find their competitive position to be jeopardized.

Question 25

New NOCLAR standards have been introduced in some jurisdictions requiring professional accountants (PAs)to report internally if a client or employer is not in compliance with laws or regulations on a significant matter, and if the matter is not remediated, to report externally because some PAs were witnessing noncompliance but not speaking up because:

A)they thought confidentiality prohibited it.
B)they weren't sure if confidentiality prohibited it.
C)they didn't have the moral courage to do so.
D)they did not understand that speaking up was in the public interest.
E)they did not want to be identified as whistleblowers.