Deck 2: Professionalism, Ethics and Legal Liability

Question 1

Rule 1.500 of the AICPA pertains to confidential information.

Answer 1

False

Question 2

The general standards of the AICPA Code of Professional Conduct apply only to CPAs performing attest engagements.

Answer 2

False

Question 3

The general standards of the AICPA Code of Professional Conduct can help study and understand the ethical behavior of CPAs.

Answer 3

True

Question 4

The rules of conduct of the AICPA Code of Professional Conduct establish minimum standards of ethical conduct in the performance of professional services.

Question 5

If a CPA is unable to gain sufficient competence, a CPA should suggest the engagement of a competent person to perform the needed professional service.

Question 6

It is important for a client who is considering purchasing accounting software to know that their CPA is being paid a commission if the business purchases the software.

Question 7

The cornerstone of the public accounting profession is evidenced by the work done in the public interest by CPAs.

Question 8

The auditor generally uses the due care defense in breach of contract suits involving negligence.

Question 9

CPAs must obtain their license from State Boards of Accountancy.

Question 10

Independence in appearance is avoiding potential conflicts of interest that can be observed by others.

Question 11

The rules of AICPA Code of Professional Conduct are applicable to members in public practice only.

Question 12

A professional concerned for the public interest (CPI) is defined by their professional line of work or occupation.

Question 13

Both licensed tax preparers and CPA professionals have the right to sign tax returns.

Question 14

A covered member can be a trustee of a trust or an executor of an estate who invests in an attest client.

Question 15

According to the integrity and objectivity rule, a member need not be free of conflict of interest.

Question 16

An adverse interest threat is a threat that a CPA will not act with objectivity because the CPA's interests are opposed to the client's interests.

Question 17

Partners and managers with consultation, oversight, or review responsibilities related to the engagement are covered members.

Question 18

The rule on integrity and objectivity applies to all services performed by CPAs.

Question 19

CPAs should evaluate identified threats individually only.

Question 20

Of the three basic types of safeguards, the first is the safeguards implemented by a client.

Question 21

Interpretations provide additional guidance regarding the scope and applicability of the _______.

A)rules of conduct
B)standards
C)conceptual framework
D)principles

Question 22

Which component of the AICPA's Code of Professional Conduct expresses the basic tenets of ethical conduct and provides the framework for the rules that govern the performance of a member's professional responsibilities?

A)Principles
B)Rules of Conduct
C)Interpretations
D)General standards

Question 23

In the online version of the AICPA Code of Professional Conduct, what are used to make it easy to find related topics?

A)Summaries
B)A series of hyperlinks
C)Outlines
D)Interpretations

Question 24

Which group licenses CPAs?

A)The FASB
B)The SEC
C)The AICPA
D)The State Boards of Accountancy

Question 25

The structure of the AICPA _______________ includes four major sections: preface, rules for members in public practice, rules for members in business, and rules for other members.

A)Code of Professional Conduct
B)Conceptual Framework
C)Independence Rules
D)Rules of Conduct

Question 26

In legal defense, the defendant must establish that the plaintiff's loss resulted in whole or in part from causes other than the false or misleading statements.

Question 27

Which component of the AICPA's Code of Professional Conduct provides additional guidance regarding the scope and applicability of the rules of conduct?

A)Principles
B)Rules of Conduct
C)Interpretations
D)General standards

Question 28

Which component of the AICPA's Code of Professional Conduct establishes minimum standards of acceptable conduct in the performance of professional services?

A)Principles
B)Rules of Conduct
C)Interpretations
D)General standards

Question 29

According to Chapter 2 regarding professionalism and professional responsibilities, CPI stands for _______.

A)commitment to professional integrity
B)concern for public interest
C)continuing professional interest
D)classified professional intelligence

Question 30

A due care defense is a primary defense against tort actions just as it constitutes a contributory negligence defense.

Question 31

The defendant in a Section 18 suit must prove that he or she had knowledge of the false or misleading statement.

Question 32

Which section of the AICPA Code of Professional Conduct includes ethical rules for members in business?

A)Part I
B)Part II
C)Part III
D)Some other section

Question 33

There was public concern about professional auditing in the late 1990s and the 21^st century when about _______ of all public companies had to restate their earnings.

A)8 percent
B)2 percent
C)15 percent
D)30 percent

Question 34

The AICPA Code of Professional Conduct can be found online and is organized in four sections.Which section is first?

A)Part I on ethical rules.
B)Preface applicable to all members.
C)Introduction to the History of the Code of Conduct.
D)Foreword about AICPA membership.

Question 35

Only smaller class action lawsuits, which involve less than 50 people, can still be filed in a state court.

Question 36

In defining a profession or professional, one common characteristic is _______.

A)concern for the public interest
B)self-promotion
C)effective marketing skills
D)effective communication skills

Question 37

Which of the following provides guidance to all members of the AICPA with respect to performance of their professional responsibilities?

A)Code of Professional Conduct
B)Rules of Conduct
C)Principles
D)Interpretations

Question 38

Which of the following components of the AICPA are enforceable?

A)Rules of conduct
B)Principles
C)Interpretations
D)None of the options is correct

Question 39

What must CPAs complete to achieve licensure?

A)An application, required education, and pass the CPA Exam.
B)Required education, pass the CPA Exam, and requisite experience requirement.
C)An application, finger prints, and pass the CPA Exam.
D)A background check, drug test, and pass the CPA Exam.

Question 40

In the case of an embezzlement, the bonding company can bring suits against the CPA for failing to discover the fraud.

Question 41

A/an ________ threat exists if a CPA performs bookkeeping services for a private company client and that work needs to be evaluated by the same firm in the course of an attest engagement.

A)self-review
B)undue influence
C)adverse interest
D)advocacy

Question 42

If a CFO of a company is dealing with an ethical situation, which section of the AICPA's Code of Professional Ethics might he/she refer?

A)Part I
B)Part II
C)Part III
D)Some other section

Question 43

In the absence of a rule or an interpretation, a CPA could use which of the following to apply to the accounting for a certain situation?

A)The SEC rulings
B)The Conceptual Framework
C)An auditing textbook
D)The IRS Code

Question 44

Rules of Professional Conduct and related interpretations are specifically written for _______.

A)FASB members
B)Accountants in public practice
C)Accountants in private practice
D)SEC personnel

Question 45

A threat that a CPA will not act with objectivity because the CPA's interests are opposed to the client's interests is a(n) _______.

A)familiarity threat
B)advocacy threat
C)self-interest threat
D)adverse Interest Threat

Question 46

If a CPA is unable to implement effective safeguards, what should the CPA do?

A)Decline the engagement.
B)Proceed with the professional service.
C)Document the identified threats.
D)Evaluate the significance of the threat.

Question 47

Which of the following is the threat that, due to a long or close relationship with a client, a CPA will become too sympathetic to the client's interests or too accepting of the client's work or product?

A)Familiarity threat
B)Adverse interest threat
C)Advocacy threat
D)Self-review threat

Question 48

What is a key element that best separates recognized professions from other occupations?

A)Large application fees
B)A commitment to ethical behavior
C)Certifications
D)Specific schooling requirements

Question 49

In which section of the AICPA Code of Professional Conduct could you find the definitions to concepts mentioned in the Code?

A)Part I
B)Part II
C)Part III
D)Preface applicable to all members

Question 50

A threat that is due to a long or close relationship is a(n) _______.

A)familiarity threat
B)management participation threat
C)self-interest threat
D)self-review threat

Question 51

If a public practice CPA firm is concerned about the ethical nature of the firm's advertising, which section of the AICPA's Code of Professional Ethics would provide guidance?

A)Part I
B)Part II
C)Part III
D)Some other section

Question 52

Although codes of ethics may be designed in part to encourage ideal behavior, they must also be _______.

A)practical and enforceable
B)idealistic and above the law
C)easy to remember and basic
D)balanced and confidential

Question 53

To be meaningful, a code of ethics must strike a balance between being _______.

A)above the law but below the ideal
B)below the law but above the ideal
C)above the law but below practical
D)below the law but above practical

Question 54

The AICPA is an accounting organization representing the profession and membership is _______.

A)non-voluntary
B)voluntary
C)free
D)required

Question 55

When you pass the CPA exam and then seek licensure, you would apply to _______.

A)AICPA
B)your university
C)NASBA
D)your State Board of Accountancy

Question 56

A threat that a CPA will take on the role of client decision making or assume associated responsibilities is a(n) _______.

A)familiarity threat
B)management participation threat
C)self-interest threat
D)self-review threat

Question 57

State Boards of Accountancy typically _______.

A)work separately from the AICPA on many professional issues
B)work together with the AICPA on many professional issues
C)have separate codes of conduct from the AICPA
D)leave the task of licensure to the AICPA

Question 58

A threat that a CPA will promote a client's interests or position to the point that his or her objectivity is compromised is a(n) _______.

A)familiarity threat
B)advocacy threat
C)self-interest threat
D)self-review threat

Question 59

An advocacy threat is the threat that a CPA will ______.

A)promote a client's interests
B)take on the role of client management
C)become too sympathetic to a client's interests
D)not act with objectivity

Question 60

A threat that a CPA could benefit, financially or otherwise, from an interest in, or relationship with, a client or persons associated with the client is a(n) _______.

A)familiarity threat
B)management participation threat
C)self-interest threat
D)self-review threat

Question 61

Which of the following issues arises when taxes are not properly distributed to the parties involved in a divorce case?

A)Conflict of interest
B)Misrepresentation of fact
C)Legal liability
D)Gross negligence

Question 62

According to the integrity and objectivity rule, in the performance of any professional service, a member shall not knowingly _______.

A)misrepresent facts
B)decentralize work to subordinates
C)omit a material fact
D)none of the above is correct

Question 63

At step 5 when a CPA confronts threats to ethical decision-making and the safeguards applied to reduce the threat, what is the suggested best practice?

A)Document the identified threats, document the safeguards applied, and document the CPA's evaluation of the effectiveness of the safeguards.
B)Immediately decline the engagement, terminate the contract, and contact the AICPA.
C)Contact the FBI, tape all conversations with the client, then offer the engagement to a competitor.
D)Increase the fee charged to absorb any risk, immediately conclude that the threats are at an acceptable level and proceed with an internal control audit.

Question 64

If the CPA is unable to implement effective safeguard to a threat of compliance with the accounting profession's ethical rules, he/she should _______.

A)proceed with the professional service
B)decline or terminate the engagement
C)limit the engagement to all non-audit areas
D)limit the engagement to only Federal taxation

Question 65

A CPA should judge his or her ethical conduct from the perspective of a _______.

A)reasonable and informed third party
B)circuit court judge
C)high school graduate
D)IRS agent

Question 66

A threat that a CPA will not appropriately evaluate the results of a previous judgment made by, or service performed by, an individual in the CPA's firm is a(n) _______.

A)familiarity threat
B)advocacy threat
C)self-interest threat
D)self-review threat

Question 67

The last step in the process to assist the CPA in making an ethical judgment is _______.

A)document the threats and safeguards
B)evaluate the significance of the threat
C)identify and apply safeguards
D)evaluate the effectiveness of the safeguards

Question 68

The second step in the process to assist the CPA in making an ethical judgment is _______.

A)identify threats to compliance with rules
B)evaluate the significance of the threat
C)identify and apply safeguards
D)evaluate the effectiveness of the safeguards

Question 69

A threat that a CPA will allow a third party to coerce his/her judgment about a client is known as a(n):

A)familiarity threat
B)advocacy threat
C)self-interest threat
D)undue influence threat

Question 70

How does a small firm resolve the conflict of interest issue in a divorce case?

A)Provide tax services to only one of the two parties.
B)Using separate engagement teams in providing tax services to both parties.
C)Resign from the engagement.
D)They do not need to resolve the conflict of interest in the case of a divorce.

Question 71

The third step in the process to assist the CPA in making an ethical judgment is _______.

A)identify threats to compliance with rules
B)evaluate the significance of the threat
C)identify and apply safeguards
D)evaluate the effectiveness of the safeguards

Question 72

The fourth step in the process to assist the CPA in making an ethical judgment is _______.

A)identify threats to compliance with rules
B)evaluate the significance of the threat
C)identify and apply safeguards
D)evaluate the effectiveness of the safeguards

Question 73

The subordination of judgment threat is at an acceptable level when _______.

A)the CPA concludes the position taken by the firm does not result in a material misrepresentation of fact or a violation of applicable standards, laws, or regulations
B)the CPA does not have a difference of opinion related to the application of accounting principles, auditing standards, or other relevant professional standards
C)the CPA safeguards the position by also providing tax services
D)the CPA agrees to maintain confidentiality about the matter

Question 74

The rule on integrity and objectivity applies to _______.

A)all services performed by CPAs
B)some services performed by CPAs
C)only audit, services performed by CPAs
D)only non-audit services performed by CPAs

Question 75

Which of the following statements is true?

A)It is possible for a CPA firm to rely solely on safeguards implemented by the client to eliminate or reduce significant threats to an acceptable level.
B)There are five basic safeguards to assist CPAs with threats to compliance with the accounting profession's ethical rules.
C)If a CPA concludes that threats are at an acceptable level after applying the identified safeguards, then the CPA may proceed with the professional service.
D)To evaluate the significance of a threat, CPAs should evaluate identified threats in aggregate.

Question 76

What are the three types of safeguards against threats to a CPA's compliance with the ethical rules of the profession?

A)Independence, legal liability, and accounting standards
B)Self-control, internal compass, and future goals
C)Safeguard of regulation, client implemented controls, and CPA firm policies
D)Safeguard of standards, Acts of Congress, certification

Question 77

The first step in the process to assist the CPA in making an ethical judgment is _______.

A)identify threats to compliance with rules
B)evaluate the significance of the threat
C)identify and apply safeguards
D)evaluate the effectiveness of the safeguards

Question 78

What should a CPA do if he/she concludes a difference of opinion with an audit supervisor regarding an on-going audit engagement may result in a material misrepresentation of fact or a violation of professional standards?

A)Quit the job.
B)Discuss his or her concerns with the supervisor.
C)Obtain more training.
D)Search for a certification that focuses on material misrepresentations.

Question 79

What are the two common issues that arise and are related to integrity and objectivity?

A)Conflicts of interest and subordination of judgment.
B)Ethical judgment and subjectivity.
C)Independence and compliance
D)Efficiency and effectiveness.

Question 80

A CPA works at a firm and also maintains a private practice as an expert witness for intellectual property cases.While at an audit client's office, he overhears a telephone conversation about a patent dispute and offers his services.When he takes the expert witness job, this position creates what type of threat to his professional ethics?

A)Familiarity threat
B)Advocacy threat
C)Self-interest threat
D)Self-review threat