Question 1

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 organization developing an international code of conduct for professional accountants. IFAC is the global organization for the accountancy profession, with a mission to serve the public interest by promoting high-quality international standards, good governance, and ethical behavior among accountants. The organization is responsible for developing and issuing the International Code of Ethics for Professional Accountants, which sets out the ethical requirements that professional accountants must comply with in order to uphold their professional responsibilities.

Question 2

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

A significantly lower fee does not directly relate to any of the listed threats to independence such as self-review, intimidation, advocacy, or familiarity. It may raise concerns about the quality of the audit or the firm's ability to remain independent, but it does not fit neatly into these specific categories.

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)Over-dependence

Accepted Answer

Over-dependence on a single client can lead to the threat of loss of professional independence as the firm may become too reliant on this client for its revenue. This can create a situation where the firm may be reluctant to take actions that could lead to losing the client, even if it is in the best interest of the client or the public. This threat can compromise the objectivity, integrity, and professional skepticism required by the audit and tax engagements, leading to potential conflicts of interest.

Question 4

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 5

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 fundamental principle being violated is objectivity. Objectivity requires that the auditor remain impartial, unbiased and intellectually honest throughout the audit engagement. Accepting shares as payment for audit services would create a self-interest threat to the auditor's objectivity as it may affect their ability to render truly independent and impartial professional services.

Question 6

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

Accepted Answer

All of the above duties are essential to maintaining a fiduciary relationship in the accounting profession. Developing and maintaining required knowledge and skills ensure that the accountant is competent to carry out their responsibilities. Maintaining trust is crucial as clients depend on their accountants to manage their finances and provide accurate information. And, maintaining an acceptable personal reputation is necessary to uphold the profession's ethical standards and protect the clients' interests.

Question 7

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

Accepted Answer

The answer of The external review of an audit firm's...

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

Accepted Answer

The length of the professional relationship could lead to the threat of familiarity, which impairs independence. The accountant may become too comfortable and sympathetic towards the client and fail to maintain an objective and skeptical attitude.

Question 9

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 the first stage, in which fear of punishment and authorities are the primary motivators for behaving in a manner considered "right" or "good." This stage is typically seen in children around the ages of 4-10 years old.

Question 10

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 professional accountant is violating the confidentiality principle by sharing specific information obtained during one client's audit with another client. This breaches the trust and expectation of confidentiality that client A placed on the accountant.

Question 11

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 goes against the ethical code of conduct expected from an accounting professional. Instead, they are expected to prioritize the interests of their clients or the organization they work for. Therefore, this value is not necessary for an accounting professional. The other values listed (honesty, integrity, and objectivity) are essential for an accounting professional to carry out their duties effectively and ethically.

Question 12

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

Extensive training is necessary to acquire the knowledge and skills required to provide important services to society. These services require primarily intellectual skills, which are developed through the training process. Therefore, the combination of extensive training, provision of important services to society, and primarily intellectual skills are the essential features of a profession. License or certification and representation by professional organizations may also be important, but they are not as critical as the other factors in determining whether a field can be considered a profession. Autonomy is not necessarily a defining characteristic of a profession, although some professions may enjoy a greater level of autonomy than others.

Question 13

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 it may be important for accountants to provide quality service to their clients, their primary responsibility is to act in an ethical and professional manner. Acting in the client's best interest is not a fundamental principle as it may conflict with other principles such as objectivity and independence.

Question 14

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)(a)and (c)only

Accepted Answer

Using partners who do not report to audit partners for non-assurance services helps reduce the risk of conflict of interest within a professional accounting firm by maintaining independence and objectivity.

Question 15

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

The fundamental principle that is violated in this scenario is integrity. Integrity refers to being straightforward and honest in professional and business relationships. Falsely billing for more hours than actually worked is a lack of integrity and goes against the ethical standards of the accounting profession.

Question 16

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

The Conventional stage of moral reasoning, which typically emerges during adolescence and early adulthood, is characterized by an emphasis on social norms, rules, and expectations. Adherence to moral codes or codes of law and order are seen as important for maintaining social order and pleasing others. This stage is focused on conformity and social norms, rather than individual ethical principles.

Question 17

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

Professional accountants owe primary loyalty to the general public as they are expected to act in the public interest, ensuring transparency, accuracy, and integrity in financial reporting.

Question 18

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)(a)and (b)
E)(a)and (c)

Accepted Answer

The correct answers are (a) and (b) because they both help to reduce the expectation gap and lessen public misunderstanding of the auditor's role.

Question 19

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) 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 have the same responsibilities as the PCAOB. AICPA issues auditing standards for private companies, CPAB is the Canadian equivalent of PCAOB, FASB issues accounting standards, and SEC oversees financial reporting for public companies.

Question 20

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)(a)and (c)only

Accepted Answer

The audit committee's role in recommending and reviewing external auditors helps ensure independence and objectivity, reducing conflicts of interest between auditors and management.

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

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

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 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:

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

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

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

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:

The following value is NOT necessary for an accounting professional:

The following elements are essential features of a profession:

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

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:

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

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:

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

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

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

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