Question 1

A CPA, acting on behalf of a client company, makes a payment to a foreign government official to ensure that goods that are entitled to be exported into that country are processed more rapidly than other competing shipments into that country are processed. By doing so, the CPA has:

Accepted Answer

B

Question 2

If a CPA charges a contingent fee in connection with providing professional services to a review client, the CPA's fee arrangement is:

Accepted Answer

Contingent fee arrangements for a CPA providing review services are not permitted under professional ethics standards because they could impair the CPA's objectivity and independence.

Question 3

A facilitation payment:

Accepted Answer

D

Question 4

An auditor has discovered that its audit client made numerous facilitation payments to foreign officials over the past two years. This client's stock trades on the New York Stock Exchange. The auditor should:

Accepted Answer

The answer of An auditor has discovered that its audit...

Question 5

Which of the following would most likely be classified as a facilitation payment?

Accepted Answer

Facilitation payment is a payment made to a low-level government official to perform routine services that they are already obligated to perform. Option B fits this definition as it encourages a lower-level government official to perform a routine service more rapidly than it otherwise would be performed. Option A is bribery, Option C is a legitimate business payment, and Option D is a violation of the Foreign Corrupt Practices Act.

Question 6

A CPA wishes to accept a commission from one client for marketing the client's software product to other clients served by the CPA. The CPA:

Accepted Answer

A CPA may accept a commission for marketing a client's product, as long as the CPA discloses this commission to potential purchasers and the potential purchasers are not audit clients of the CPA. This is in accordance with the AICPA Code of Professional Conduct's Rules 503 and 504. The commission must also be reasonable and cannot impair the CPA's objectivity, integrity, or professional skepticism.

Question 7

Under the Foreign Corrupt Practices Act, a company can be held criminally liable:

Accepted Answer

The Foreign Corrupt Practices Act holds companies criminally liable if they engage in "willful blindness" to acts of bribery that furthered their economic interests. This means that companies cannot simply turn a blind eye to potential bribery and must take steps to prevent it. Thus, it is not necessary for documentary evidence to confirm the existence of bribery in order for a company to be held criminally liable under the Act.

Question 8

The rules governing contingent fee arrangements do not permit a tax practitioner to charge a contingent fee for rendering:

Accepted Answer

The rules governing contingent fee arrangements specifically prohibit tax practitioners from charging a contingent fee for the preparation of a request for a refund of previously overpaid taxes. This is because such fees could create a conflict of interest and potentially incentivize the practitioner to take positions that are not in the best interest of the taxpayer or the tax system.

Question 9

Contingency fee arrangements are always allowed in tax matters if the amount of the fee an accountant is entitled to receive depends on:

Accepted Answer

The answer of Contingency fee arrangements are always allowed in...

Question 10

The key difference between bribery of a public official and bribery of a corporate employee is that:

Accepted Answer

Bribery of a public official is unlawful under anti-bribery criminal laws as well as the Foreign Corrupt Practices Act (FCPA), which prohibits the bribery of foreign government officials. However, bribery of a corporate employee can also be unlawful under the FCPA if the employee is a foreign government official or if the bribe is intended to obtain or retain business. Both bribery of public officials and bribery of corporate employees can result in criminal charges and imprisonment. Civil actions for damages may also be pursued in either case. Therefore, the key difference is not that bribery of a public official is the only unlawful form of bribery, but rather that only bribery of a public official is always unlawful under anti-bribery laws.

Question 11

A musician believed that his record company was not paying him the agreed-upon royalty on all songs downloaded by fans from a well-known music Internet site. This musician hired a CPA to perform a royalty audit of the record company's sales revenues. The musician and the CPA agreed that that the CPA will be entitled to receive 5% of all amounts recovered by the musician as a result of this royalty audit. They also agreed to keep the results private. This arrangement is:

Accepted Answer

Contingent fee arrangements, where a CPA receives a fee based on the outcome of their work, are generally considered ethical in situations where they are not auditing or reviewing financial statements. In this scenario, the CPA is conducting a royalty audit, which is a consulting service, and the fee arrangement does not compromise the CPA's objectivity or integrity.

Question 12

Under insider trading rules applicable to publicly traded companies, an accountant is considered to be an "insider":

Accepted Answer

According to insider trading rules, an accountant, whether internal or external, is considered an insider if they have access to material nonpublic information while working on the company's premises. Therefore, even if the accountant is temporarily working as an external auditor, they are still considered an insider. Choices A, B, and C are incorrect because they only consider certain accounting roles within the company and do not take into account external auditors who also have access to material nonpublic information.

Question 13

The key difference between a kickback and a contingent fee is:

Accepted Answer

A kickback refers to an unlawful transaction in which someone is paid for a referral, while a contingent fee is a payment made to an attorney based on the outcome of a lawful transaction. The amount involved and how the percentage is shared may vary, but the key difference is the legality of the transaction.

Question 14

If a CPA charges a contingent fee in connection with providing management consulting services to a non-audit client, the CPA's fee arrangement is:

Accepted Answer

The answer of If a CPA charges a contingent fee...

Question 15

The "books and records" provisions of the Foreign Corrupt Practices Act:

Accepted Answer

The "books and records" provisions of the Foreign Corrupt Practices Act require publicly-held companies to devise and maintain adequate internal controls over payments that constitute bribes. This refers to ensuring that accurate and transparent records are maintained regarding such payments, and does not directly impose liability on auditors for failure to detect bribery or corruption. Additionally, while documentation of facilitation payments is required, the purpose is to ensure accurate tax reporting and does not relate specifically to the "books and records" provisions.

Question 16

A CPA, acting on behalf of a client company, makes a payment to a foreign government official to ensure that goods that are not entitled to be exported into that country are indeed allowed to enter that country. By doing so, the CPA has:

Accepted Answer

The answer of A CPA, acting on behalf of a...

Question 17

If a company makes a payment to a foreign government official to ensure that goods that are not entitled to be exported into that country are indeed allowed to enter that country, the company has given:

Accepted Answer

The company has given a bribe because they are using illegal means to ensure their goods are allowed into the country. Bribes involve offering something of value to influence someone's actions or decisions, and in this case, the company is offering a payment to a foreign government official to get them to allow their goods into the country, even though they are not entitled to be exported there. This is a violation of anti-corruption laws and can lead to severe legal and financial consequences for the company.

Question 18

Mary, a CPA, accepted a fee from Rajiv, a CPA, for referring one of Mary's clients to him. Mary's client was not informed of this referral fee. Was Mary's acceptance of this fee permitted by applicable professional rules?

Accepted Answer

The answer of Mary, a CPA, accepted a fee from...

Question 19

A company makes a payment to a political campaign committee that supports the reelection of a foreign government official. The company's goal was to ensure that the government official authorizes goods that are not entitled to be exported into that country to indeed be allowed to enter that country. However, the company never had any direct communications with that government official. The company has given:

Accepted Answer

The payment made to the political campaign committee with the intention of influencing a government official's decision to authorize goods that are not legally entitled to enter the country is considered a bribe, even if the company did not have direct communication with the official. The payment was made with the intent to influence the official's decision-making process, which violates anti-bribery laws.

Question 20

The "books and records" requirement of the Foreign Corrupt Practices Act require a firm involved in international commerce to maintain especially tight internal controls over transactions involving:

Accepted Answer

The "books and records" requirement of the Foreign Corrupt Practices Act requires firms to maintain accurate and detailed records of all transactions, including those related to travel and entertainment expenses, which are often used to bribe foreign officials. This requirement helps to prevent corrupt practices and promotes transparency in international business dealings. Options A, C, and D are not directly related to transactions that could involve corruption or bribery.

Quiz 6: Greed, Corruption, and Collusion