Question 1

Client permission is not required to disclose confidential information under all of following situations,EXCEPT:

Accepted Answer

Client permission is required when an audit firm is contacted by a successor auditor. The successor auditor may request information about the client as part of their client acceptance procedure, but the current or predecessor auditor must obtain permission from the client before sharing any confidential information. In the other situations listed (A, B, and C), specific exceptions to the confidentiality rule allow for the disclosure of information without client permission.

Question 2

Which of the following statements regarding advertising is FALSE?

Accepted Answer

Advertising may not contain a fee estimate that the PA knows is likely to be substantially increased, as this would be misleading and deceptive to potential clients.

Question 3

Which of the following statements concerning rules of conduct and ethical principles is FALSE?

Accepted Answer

This statement is false. Rules of conduct are necessary to ensure that ethical standards are met consistently and objectively. While ethical behaviour is ultimately a personal choice, rules of conduct serve as a framework to guide decision-making in situations where ethical principles may not be clear-cut or sufficient. Without rules of conduct, professionals may be more likely to engage in behaviour that is at odds with ethical principles.

Question 4

Which of the following examples demonstrates a likely violation of the Code of Professional Conduct rules on advertising and solicitation?

Accepted Answer

Sending unsolicited mail to a potential client violates the Code of Professional Conduct rules on solicitation, which prohibit the use of coercive, misleading, or manipulative tactics in acquiring new clients or retaining existing ones. The other options demonstrate permissible forms of advertising and solicitation, such as sponsoring a public event, hosting a free seminar, or informing current clients of additional services.

Question 5

The duty of confidentiality requires a public accountant (PA)to do which of the following?

Accepted Answer

The duty of confidentiality requires a public accountant to not disclose client information unless required to do so by a validly issued subpoena or summons. This means that if the accountant is legally compelled to disclose the information, they must do so. However, they are otherwise required to keep client information confidential. Option A is too absolute and may not be accurate in all situations. Option B is redundant because the duty of confidentiality already implies that the information is deemed to be confidential. Option D is incorrect because accountants are required to report evidence of illegal acts to the relevant authorities.

Question 6

Under which of the following situations is the payment or receipt of a commission by a public accountant (PA)permissible?

Accepted Answer

According to the AICPA Code of Professional Conduct, a public accountant may receive a commission or referral fee if the professional service being offered is not prohibited by the rules of the Professional Conduct. In this scenario, the PA only prepares tax returns for the dry-cleaning business and is receiving a discount on cleaning services, which is not a prohibited act. However, in scenarios A, B, and D, the PA is receiving commissions or referral fees for services that could create a conflict of interest or impair their independence, which are prohibited by the AICPA Code of Professional Conduct.

Question 7

CPA Ontario Rule 214 regarding fee quotation is ultimately concerned with ________.

Accepted Answer

Rule 214 of CPA Ontario is concerned with ensuring audit quality by addressing how fees are quoted, ensuring they are fair and reasonable, and not compromising the quality of the audit.

Question 8

Which of the following statements regarding confidentiality principles is FALSE?

Accepted Answer

Confidentiality principles do not allow a PA to ignore the obligation to comply with a validly issued subpoena or summons. However, if a PA receives a subpoena, they should inform the client and seek legal advice to determine their obligations and potential courses of action.

Question 9

If a discipline committee requires a member to take continuing professional education,and the member fails to complete it in the required time,what is the likely further penalty?

Accepted Answer

The answer of If a discipline committee requires a member...

Question 10

Which of the following statements regarding communications between predecessor and successor auditors is FALSE?

Accepted Answer

The statement "When enquiries are made, the predecessor auditor does not need the client's permission to provide the successor auditor with confidential information" is false. The predecessor auditor must obtain the client's permission before disclosing any confidential information to the successor auditor. This is required to maintain the confidentiality of the client's information.

Question 11

Withholding a client's books and records when the client has requested their return is an example of ________.

Accepted Answer

Withholding a client's books and records is a discreditable act as it violates the fundamental ethical principle of professional behavior which requires accountants to act with integrity and serve the public interest.

Question 12

Which of the following conditions is consistent with a contingency fee?

Accepted Answer

A contingency fee is a fee paid to an attorney that is contingent upon the outcome of a case or legal matter. This means that the amount paid for the performance must be directly affected by the results obtained, as stated in choice A. Choices B, C, and D do not describe a contingency fee accurately.

Question 13

Which of the following statement regarding advertising is FALSE?

Accepted Answer

The answer of Which of the following statement regarding advertising...

Question 14

Auditors' moral responsibilities can be summarized as

Accepted Answer

Auditors' moral responsibilities refer to the idea that public accountants (PAs) should act with integrity and ethics, rather than simply following a set of rules or formal ethical responsibilities. PAs should maintain their own ethical standards and values in order to provide reliable and trustworthy audit services. Therefore, option C is the best choice as it fully captures the essence of auditors' moral responsibilities.

Question 15

How are competence and due care best described?

Accepted Answer

Competence refers to having the necessary knowledge and skills to perform a task, while due care is the level of performance expected from a professional in carrying out their responsibilities. Therefore, competence is knowing what to do, and due care is doing it to the best of one's abilities.

Question 16

Canada Revenue Agency (CRA)has requested the taxes payable working papers of ABC Co.from CPA.CPA should ________.

Accepted Answer

CPA should request client permission before providing the working papers to CRA, as it is the client's confidential information. CPA should also inform the client about CRA's request and the potential consequences of not complying with it. However, if the client does not consent, CPA should not provide the working papers.

Question 17

In which of the following circumstances would a CPA be in violation of the "Rules of Professional Conduct" in quoting a fee to a client?

Accepted Answer

The "Rules of Professional Conduct" states that a CPA cannot base their fee on the expectation of obtaining certain favorable results or on a percentage of the client's income. Basing a fee on the approval of a bank loan violates this rule. The other options do not violate the rule. A fee fixed by a court is outside the control of the CPA, a fee based on time estimated to complete the engagement plus out-of-pocket expenses is a commonly used method, and a fee based on the complexity of the engagement is a reasonable method to determine a fee.

Question 18

The interpretation of the phrase "acts discreditable to the profession" would NOT include ________.

Accepted Answer

Membership in an activist political party may not necessarily be considered as an act discreditable to the profession, as long as it does not violate any professional ethics or conflict with the professional obligations of the individual.

Question 19

In the interest of independence,CPAB and SOX require the rotation of the lead audit partner and/or concurring review partner every ________.

Accepted Answer

Both CPAB (Canadian Public Accountability Board) and SOX (Sarbanes-Oxley Act) require the rotation of lead audit partner and/or concurring review partner every five years in the interest of maintaining independence and objectivity in the audit process.

Question 20

Based on an analysis published in CA Magazine,the most common problems in professional audit practice include all EXCEPT which of the following items?

Accepted Answer

The analysis published in CA Magazine highlighted the following common problems in professional audit practice:
A) Failure to consult partners on complex issues.
B) Failure to budget sufficient time for audit fieldwork. This option is not mentioned in the article.
C) Failure to support the audit opinion with sufficiently documented audit evidence.
D) Failure of the public accounting firm to internally monitor the quality of their audits.

Quiz 18: Professional Rules of Conduct Details and Auditor Responsibilities