Auditing Chapter 4

62 Questions  I  By Kosdaisy
Quiz based on Auditing and Assurance Services 14e by Arens

  
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1.  A challenge associated with the Ethical Principles stated in the Code of Professional Conduct is:
A.
B.
C.
D.
2.  “Independence” in auditing means:
A.
B.
C.
D.
3.  When CPAs are able to maintain their actual independence, it is referred to as independence in:
A.
B.
C.
D.
4.  Which of the following statements is true? The CPA firm will lose its independence if:
A.
B.
C.
D.
5.  Interpretations of Rule 101 prohibit covered members from owning any stock or other direct investment in audit clients. Covered members include all but which of the following?
A.
B.
C.
D.
6.  In some situations, the interpretations of the Rules of Conduct permit former partners to have relationships with a client of the firm without affecting the firm’s independence. Which of the following situations would not cause a loss of independence?
A.
B.
C.
D.
7.  The financial interests of which of the following parties would not be included as a “direct financial interest” of the CPA?
A.
B.
C.
D.
8.  Interpretations of the rules regarding independence allow an auditor to serve as:
A.
B.
C.
D.
9.  When the question arises whether a CPA firm may do both bookkeeping and auditing services for the same public company client, the Interpretations of the AICPA’s Code of Professional Conduct:
A.
B.
C.
D.
10.  The CPA must not subordinate his or her professional judgment to that of others in any:
A.
B.
C.
D.
11.  Which of the following would be a violation of the rule requiring “objectivity” by the CPA?
A.
B.
C.
D.
12.  Several months after an unqualified audit report was issued, the auditor discovers the financial statements were materially misstated. The client’s CEO agrees that there are misstatements, but refuses to correct them. She claims that “confidentiality” prevents the CPA from informing anyone.
A.
B.
C.
D.
13.  A member in public practice may perform for a contingent fee any professional services for a client for whom the member or member’s firm performs:
A.
B.
C.
D.
14.  Which of the following activities is allowed for a CPA firm’s attestation clients?
A.
B.
C.
D.
15.  A member in public practice shall neither receive from, nor pay to, a client a commission when the member or member’s firm also performs certain services for that client.  Are commissions allowed if the CPA performs: A compilation that will be used by a third party   An audit of prospective financial information
A.
B.
C.
D.
16.  If the board of accountancy in the state in which a CPA firm is licensed has rules that are different than the AICPA’s rules, the CPA firm must follow:
A.
B.
C.
D.
17.  Elise, CPA, owns a public accounting firm and wishes to establish a separate partnership to offer data processing services to the public and other public accountants.
A.
B.
C.
D.
18.  The AICPA’s Code of Professional Conduct states that a CPA should maintain integrity and objectivity. The term “objectivity” in the Code refers to a CPA’s ability to:
A.
B.
C.
D.
19.  CPAs are prohibited from which of the following forms of advertising?
A.
B.
C.
D.
20.  Anna Greer, a CPA in public practice, contacts Blake Sawyers, an employee of Jackson & Jackson, LLP, and makes him an offer of employment without first notifying Jackson & Jackson, LLP. According to the AICPA’s Code of Professional Conduct, Anna’s behavior:
A.
B.
C.
D.
21.  CPAs may provide bookkeeping services to their non-public audit clients, but there are a number of conditions that must be met if the auditor is to maintain independence. Which of the following conditions is not necessary?
A.
B.
C.
D.
22.  Which of the following statements is not true with respect to audit committees?
A.
B.
C.
D.
23.  Which of the following is not one of the four parts of the AICPA’s Code of Professional Conduct?
A.
B.
C.
D.
24.  One of the AICPA’s Ethical Principles deals with the public interest. It states that members should accept the obligation to act in a way that will: Honor the public trust   Serve the client’s interest
A.
B.
C.
D.
25.  According to the Principles section of the Code of Professional Conduct, all members:
A.
B.
C.
D.
26.  Of the various parts of the AICPA’s Code of Professional Conduct, the:
A.
B.
C.
D.
27.  The AICPA’s Code of Professional Conduct requires independence for all:
A.
B.
C.
D.
28.  Which of the following statements best describes the enforceability of the Interpretations of the Rules of Conduct?
A.
B.
C.
D.
29.  Ethical Rulings are:
A.
B.
C.
D.
30.  Of the four parts of the AICPA’s Code of Professional Conduct, which part is enforceable?
A.
B.
C.
D.
31.  Rules of Conduct contained in the Code of Professional Conduct apply to all AICPA members for all services provided, whether or not the member is in the practice of public accounting:
A.
B.
C.
D.
32.  A member firm of the AICPA is not only responsible for its compliance with the Rules of Conduct, but it is also responsible for compliance by its: Employees   Shareholders
A.
B.
C.
D.
33.  An example of an “indirect ownership interest in a client” would be ownership of a client’s stock by a member’s:
A.
B.
C.
D.
34.  When determining whether independence is impaired because of an ownership interest in a  client company, materiality will affect whether ownership is a violation of Rule 101:
A.
B.
C.
D.
35.  Generally, loans between a CPA firm or its members and an audit client are prohibited because it is a financial relationship. Which of the following, made under normal lending procedures, is not an exception to this rule?
A.
B.
C.
D.
36.  Interpretations of Rule 101 regarding a “direct financial interest” have presumed that a violation exists in which of the following circumstances, unless other circumstances offset such a presumption?
A.
B.
C.
D.
37.  Which of the following circumstances would ordinarily not impair the auditor’s independence?
A.
B.
C.
D.
38.  Interpretations to the Rules of Conduct permit a CPA firm to do both bookkeeping and auditing for the same client if three criteria are met. Which of the following is not one of those criteria?
A.
B.
C.
D.
39.  Which of the following services is not prohibited by the SEC whenever a CPA also audits the company?
A.
B.
C.
D.
40.  Which of the following services is not prohibited by the SEC whenever a CPA also audits the company?
A.
B.
C.
D.
41.  Rule 301 of the AICPA’s Code of Professional Conduct requires CPAs to maintain the confidentiality of client information. This rule would be violated if a CPA disclosed information without a client’s consent as a result of a:
A.
B.
C.
D.
42.  A CPA is allowed to accept a referral fee for recommending a client to another CPA if: The client pre-approves the transaction                       Payment of the referral fee is disclosed to the client
A.
B.
C.
D.
43.  Rule 505 of the AICPA’s Code of Professional Conduct permits CPA firms to organize as:
A.
B.
C.
D.
44.  According to the profession’s ethical standards, an auditor would be considered independent in which of the following instances?
A.
B.
C.
D.
45.  If a nonpublic company asks an accountant to perform a review engagement, and the accountant has an immaterial direct financial interest in the company, the accountant is:
A.
B.
C.
D.
46.  In determining independence with respect to any audit engagement, the ultimate decision as to whether or not the auditor is independent must be made by the:
A.
B.
C.
D.
47.  A CPA firm should decline an offer to perform management advisory services engagement if:
A.
B.
C.
D.
48.  In which of the following circumstances would a CPA be bound by ethics to refrain from disclosing any confidential information about a client?
A.
B.
C.
D.
49.  Companies are required to disclose in their proxy statement or annual filings with the SEC the total amount of audit and non-audit fees paid to the audit firm for the two most recent years. Which of the following is not one of the categories of fees that must be disclosed?
A.
B.
C.
D.
50.  Four of the six Ethical Principles in the AICPA’s Code of Professional Conduct are equally applicable to all members of the AICPA. Which of the following principles applies only to members in public practice?
A.
B.
C.
D.
51.  Interpretations of the AICPA Code of Professional Conduct are dominated by the concept of:
A.
B.
C.
D.
52.  An audit committee, consisting of members of the client’s board of directors who are not a part of company management, is required for all companies:
A.
B.
C.
D.
53.  The Code of Professional Conduct is established by the membership of the AICPA, and the Interpretations of the Rules of Conduct are prepared by the:
A.
B.
C.
D.
54.  Generally, loans between a CPA firm or its members and an audit client are prohibited because they create a financial relationship.  Which of the following is not an exception to this rule?
A.
B.
C.
D.
55.  Rule 101 indicates that materiality is a consideration for: Evaluating direct investments made by the CPA                            Evaluating indirect ownership investments       
A.
B.
C.
D.
56.  It is not a violation of the AICPA’s Code of Professional Conduct for a CPA to:
A.
B.
C.
D.
57.  Which of the following is not defined as an act discreditable in either the Rules or the Interpretations of the AICPA’s Code of Professional Conduct?
A.
B.
C.
D.
58.  There are a number of offenses for which a CPA may be expelled from membership in the AICPA. Which of the following is not one of these offenses?
A.
B.
C.
D.
59.  Which of the following statements regarding professional and regular corporations is not true?
A.
B.
C.
D.
60.  In which of the following instances would the independence of the CPA most likely not be considered to be impaired? The CPA has been retained as the auditor of a:
A.
B.
C.
D.
61.  Rule 201 - General Standards requires members to comply with certain standards and interpretations. Which of the following is not a standard specifically addressed in Rule 201?
A.
B.
C.
D.
62.  Which of the following statements is correct?
A.
B.
C.
D.
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