Question 1

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

Accepted Answer

The principle of objectivity requires an accountant to remain unbiased and impartial. Receiving company shares as payment for audit services creates a conflict of interest, which can compromise the auditor's objectivity. Therefore, accepting company shares as payment for audit services violates the principle of objectivity.

Question 2

The following value is not necessary for an accounting professional:
A)Honesty
B)Integrity
C)Objectivity
D)A primary commitment to self-interest
E)All but one of the above

Accepted Answer

A primary commitment to self-interest is not necessary for an accounting professional. In fact, it goes against the ethical standards and principles of the profession. Honesty, integrity, and objectivity, on the other hand, are essential values for an accounting professional to maintain public trust and credibility.

Question 3

Which of the following is not a fundamental principle in codes of conduct for professional accountants?
A)Act in the client's best interest
B)Objectivity and independence
C)Maintain the good reputation of the profession
D)Maintain confidentiality
E)Not to be associated with misleading information

Accepted Answer

While professional accountants are expected to act in the best interest of their clients to a reasonable extent, they have a higher duty to be objective and act with professional competence, due care, and diligence. Therefore, "Act in the client's best interest" is not a fundamental principle in codes of conduct for professional accountants.

Question 4

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

Accepted Answer

The three essential features of a profession are extensive training, provision of important services to society, and primarily intellectual skills. While license or certification and representation by professional organizations may be important aspects of a profession, they are not necessarily essential features. Autonomy may also be beneficial, but it is not a requirement for something to be considered a profession. Therefore, the best choice is C - extensive training, provision of important services to society, and primarily intellectual skills.

Question 5

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)Over-dependence

Accepted Answer

Over-dependence on a single client for a large portion of revenue could create a threat to professional independence as the firm may become reluctant to risk losing the client's business by reporting unfavorable findings or providing unbiased advice. This could result in the firm compromising their objectivity and professional skepticism, leading to potential ethical violations.

Question 6

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

Accepted Answer

The answer of Professional Accountants, in their fiduciary role, owe...

Question 7

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)aand bonly

Accepted Answer

All of the above duties are essential to maintaining a fiduciary relationship in the accounting profession. Development and maintenance of required knowledge and skills ensure that the accountant is competent and able to provide reliable financial information. Maintenance of trust is crucial in establishing and maintaining professional relationships with clients. Maintenance of an acceptable personal reputation is important in building trust and credibility with clients and other stakeholders.

Question 8

This organization can issue auditing standards in the U.S.:
A)AICPA
B)FASB
C)SEC
D)PCAOB
E)All of the above

Accepted Answer

The answer of This organization can issue auditing standards in...

Question 9

This organization is developing an international code of conduct for professional accountants:
A)International Accounting Standards Board
B)European Federation of Accountants
C)Financial Accounting Standards Board
D)Public Accounting Oversight Board
E)International Federation of Accountants

Accepted Answer

The International Federation of Accountants (IFAC) is the global organization that is developing an international code of conduct for professional accountants. It is a professional association that represents accountants worldwide and is committed to developing and promoting high-quality standards for the accounting profession. The IFAC's  Code of Ethics for Professional Accountants sets out the fundamental principles of ethical behavior for accountants, including integrity, professional competence, confidentiality, and professional behavior.

Question 10

The adoption of the following measures would reduce the expectation gap and lessen public misunderstanding of the auditor's role
A)Publish a statement of management responsibility
B)Auditor to report annually to audit committee
C)Expand audit report to clarify auditor's role and the level of assurance
D)aand b
E)aand c

Accepted Answer

The answer of The adoption of the following measures would...

Question 11

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)aand conly

Accepted Answer

The external review of an audit firm's quality control system is a safeguard that reduces the risk of conflict of interest within a professional accounting firm. This is because the review is conducted by an independent third-party to assess whether the audit firm's quality control policies and procedures are adequate and effective. This helps to ensure that the firm is meeting its professional responsibilities and providing high-quality audit services to clients. Option A is incorrect because it refers to safeguards for conflict of interest within the audit profession as a whole, rather than within a specific firm. Option B is incorrect because it refers to safeguards for conflict of interest within a client, which is not related to the external review of an audit firm's quality control system. Option D is incorrect because it includes options A and B, which are not relevant, and also includes option C, which is the correct answer. Option E is incorrect because it only includes options A and B, which are not relevant to the question.

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

Accepted Answer

The Public Company Accounting Oversight Board (PCAOB) is the organization that issues auditing standards, carries out inspections of public accounting firms auditing U.S. public clients, and imposes sanctions when applicable. The other options listed do not fulfill all of these functions.

Question 13

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

Accepted Answer

The situation described represents a familiarity threat to professional independence, as the accountant has developed long-standing personal relationships with the client's management and may be too sympathetic to the client's perspective. This may lead to reduced professional skepticism and compromise independence.

Question 14

According to Kohlberg, at this stage of moral reasoning, fear of punishment and authorities are a motive for doing right:
A)Pre-conventional
B)Conventional
C)Post-conventional
D)Autonomous
E)Principled

Accepted Answer

Kohlberg's pre-conventional stage of moral reasoning is characterized by a focus on obedience and avoidance of punishment. At this stage, individuals make moral decisions based on the consequences of their actions rather than on principles or values. Fear of punishment and authority figures play a significant role in shaping moral behavior.

Question 15

A new audit client was taken on by a professional accountant's firm.The fee for this client's audit engagement is significantly lower than that charged by the prior 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

Accepted Answer

The answer of A new audit client was taken on...

Question 16

If a professional accountant is billing an audit client for more hours than those actually worked, he will be violating the following fundamental principle:
A)Objectivity
B)Professional due care
C)Integrity
D)Confidentiality
E)All of the above

Accepted Answer

Billing for more hours than actually worked is a violation of the principle of integrity, which requires honesty and straightforwardness in all professional and business relationships.

Question 17

The recommendation of appointment and review of the 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)aand conly

Accepted Answer

The recommendation of appointment and review of external auditors by the audit committee relates to reducing the risk of conflict of interest between an auditor and management. It does not relate to the other two options listed.

Question 18

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

Accepted Answer

The accountant would be violating the principle of confidentiality by using information from client A's audit without their permission and using it for the benefit of client B. It is important for accountants to maintain confidentiality to build trust with their clients and protect sensitive information.

Question 19

According to Kohlberg, at this stage of moral reasoning, adherence to moral codes or to codes of law and order are a motive for doing right:
A)Pre-conventional
B)Conventional
C)Post-conventional
D)Autonomous
E)Principled

Accepted Answer

According to Kohlberg, this stage is called the conventional stage, where individuals conform to societal expectations and values, and are motivated by maintaining law and order and being seen as a good citizen.

Question 20

Using partners who do not report to audit partners for the provision of non-assurance 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)aand conly

Accepted Answer

This is an example of safeguards reducing the risk of conflict of interest within a professional accounting firm, as non-assurance services provided by partners who do not report to audit partners can help to maintain independence and objectivity in the audit. Safeguards reducing the risk of conflict of interest created by the profession, legislation, or regulation would include things like ethical codes and regulations that govern auditors, while safeguards reducing the risk of conflict of interest within a client would involve measures taken by the auditor to ensure they remain independent and objective in their work for that client.

Quiz 6: Professional Accounting in the Public Interest, Post Enron

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:

The following value is not necessary for an accounting professional:

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

The following elements are essential features of a profession:

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:

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

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

This organization can issue auditing standards in the U.S.:

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

The adoption of the following measures would reduce the expectation gap and lessen public misunderstanding of the auditor's role

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

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

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:

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

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

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

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

According to Kohlberg, at this stage of moral reasoning, adherence to moral codes or to codes of law and order are a motive for doing right:

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