Quiz based on Auditing and Assurance Services 14e by Arens
The emphasis on positive activities.
That they identify ideal conduct.
The difficulty of enforcing principles, or general ideals.
That there are too many to remember.
Maintaining an indirect financial interest.
Not being financially dependent on a client.
Taking an unbiased and objective viewpoint.
Being an advocate for a client.
Conduct.
Appearance.
Fact.
Total.
A staff auditor providing audit services to the client acquires stock in that client.
A staff tax preparer who provides 15 hours of non-audit services to the client acquires stock in that client.
An audit manager in an office different than the office providing audit services has a direct, immaterial financial interest in the audit client.
A covered member has an indirect, immaterial financial interest in an audit client.
All partners in an office that has no responsibility for the engagement.
The firm and its employee benefit plans.
Individuals on the attest engagement.
All of the above describe covered members.
The former partner invests in a current client of the firm and receives retirement benefits from the CPA firm, which are dependent upon the firm’s financial performance.
The former partner uses the CPA firm’s office space and has significant influence over a client.
The former partner severs relations with the firm and accepts employment with the firm’s client after having been retired for 18 months.
The former partner is held out as an associate of the firm and takes part in the firm’s business activities.
Spouse.
Dependent child.
Relative supported by the CPA.
Sibling living in the same city as the CPA.
A director or officer of an audit client.
An underwriter for the sale of a client’s securities.
A trustee of a client’s pension fund.
An honorary director for a not-for-profit charitable or religious organization.
Encourage it.
Prohibit it.
Allow it.
Allow each firm to determine the answer on a case-by-case basis.
Engagement.
Audit engagement.
Engagement excluding tax services.
Engagement excluding management advisory services.
The auditor accepts management’s opinion regarding the collection of accounts receivable without an independent evaluation.
In preparing a client’s tax return, the CPA encourages a client to take a deduction which the CPA believes is risky, but unlikely to be found during an IRS audit.
Either a or b would be a violation of the rule.
Neither a nor b would be a violation of the rule.
The CEO is correct and the auditor must maintain confidentiality.
The CEO is incorrect, but because the audit report has been issued it is too late.
The CEO is correct, but to be ethically correct the auditor should violate the confidentiality rule and disclose the error.
The CEO is incorrect, and the auditor has an obligation to issue a revised audit report, even if the CEO will not correct the financial statements.
An audit.
Consulting services
Preparation of an original tax return.
Preparation of an amended tax return.
Contingent fees based on savings due to implementation of an information system.
Commissions for referring a review client to an insurance agency for insurance coverage.
Preparation of tax returns for which fees are based upon client refunds.
Each of the above is allowed.
Yes Yes
No No
Yes No
No Yes
Whichever rules are less restrictive.
Whichever rules are more restrictive.
The rules of the AICPA.
The rules of the state’s board of accountancy.
Elise cannot be a partner in any separate partnership that offers data processing services.
Elise may form a separate partnership.
Elise may form a separate partnership as long as partners are CPAs.
Elise may form a separate partnership, but must give up the public accounting practice.
Choose independently between alternate accounting principles and auditing standards.
Distinguish between accounting practices that are acceptable and those that are not.
Be unyielding in all matters dealing with auditing procedures.
Maintain an impartial attitude on matters that come under the CPA’s review.
Self-laudatory advertising.
Celebrity endorsement advertising.
Use of trade names, such as “Awesome Auditors.”
Use of phrases, such as “Guaranteed largest tax refunds in town!”
Is a violation of the Code of Professional Conduct.
Is a violation only if Greer and Sawyers are CPAs.
Is a violation only if Jackson & Jackson LLP is a CPA firm.
Is not a violation.
The CPA must not assume a management role or function.
The client must hire an external CPA to approve all of the journal entries prepared by the auditor.
The auditor must comply with GAAS when auditing work prepared by his/her firm.
The client must accept responsibility for the financial statements.
Individuals not on a firm’s board of directors should comprise the audit committee.
The audit committee generally helps in resolving conflicts between the auditors and company management.
All companies listed on the NYSE are required to have an audit committee.
Audit committees are required for all companies.
Principles.
Rules of Conduct.
Interpretations.
Definitions.
Yes Yes
No No
Yes No
No Yes
Should be independent in fact and in appearance at all times.
In public practice should be independent in fact and in appearance at all times.
In public practice should be independent in fact and in appearance when providing auditing and other attestations services.
In public practice should be independent in fact and in appearance when providing auditing, tax, and MAS services.
Principles are enforceable.
Ethical Rulings are enforceable.
Interpretations are enforceable.
Rules of Conduct are enforceable.
Attestation engagements.
Services performed by accountants in public practice.
Accounting and auditing services performed.
Professional work performed by CPAs.
The Interpretations are not enforceable.
The Interpretations are enforceable.
The Interpretations may be enforceable if they have been reviewed and approved by the AICPA’s Division of Professional Ethics.
The Interpretations are not enforceable, but a practitioner must justify departure from them.
Issued by the AICPA’s Board of Governors.
Explanations relating to specific factual circumstances.
Explanations relating to broad hypothetical circumstances.
Enforceable.
Ethical Rulings.
Rules of Conduct.
Principles.
Interpretations.
In all circumstances.
For non-attestation services.
Except for the single exception of a tax practice.
Unless it is specifically stated otherwise in the Code.
Yes Yes
No No
Yes No
No Yes
Dependent child.
Spouse.
Non-dependent grandfather.
All of the above are examples of indirect ownership.
In all circumstances.
Only for direct ownership.
Only for indirect ownership.
Under no circumstances.
Immaterial loans.
Home mortgages.
Material loans.
Secured loans.
When close relatives such as nondependent children, brothers, and sisters have a significant financial interest in the client.
When close relatives such as nondependent children, brothers, and sisters have any financial interest in the client.
When the CPA owns shares in a mutual fund that has an ownership interest in the client.
When close relatives such as brother, sister, or in-laws are employed by client.
Litigation by a client against an audit firm related to tax services.
Litigation by a client against an audit firm claiming a deficiency in the previous audit.
Litigation by an audit firm against a client claiming management fraud or deceit.
Client’s intent to start a lawsuit at some future date, after the current audit is completed, claiming a deficiency in the previous audit.
The client must accept full responsibility for the financial statements.
The client is required to file an annual report, including audited financial statements, with the Securities and Exchange Commission.
The CPA must not assume the role of employee or of manager.
The CPA must follow applicable auditing standards.
Internal audit outsourcing.
Legal services unrelated to the audit.
Appraisal or valuation services.
Services related to assessing the effectiveness of internal control over financial reporting.
Actuarial services.
Assisting the company in preparing certain SEC registration statements (e.g., 10-Q, 10-K).
Investment banker services.
Bookkeeping services.
Subpoena or summons.
Peer review.
Complaint filed with the trial board of the Institute.
Request by a client’s largest stockholder.
Yes Yes
No No
Yes No
No Yes
Proprietorships or partnerships only.
Proprietorships, partnerships, or professional corporations.
Proprietorships, general partnerships, general corporations, professional corporations, limited liability companies, and limited liability partnerships if permitted by state law.
Single proprietorships, partnerships, professional corporations if permitted by state law, or regular corporations.
The auditor’s checking account, which is fully insured by a federal agency, is held at a client financial institution.
The auditor is also an attorney who advises the client as its general counsel.
An employee of the auditor serves as treasurer of a charitable organization that is a client.
The client owes the auditor fees for two consecutive annual audits.
Independent because the financial interest is immaterial and, therefore, may issue a review report.
Not independent and, therefore, may not issue a review report.
Not independent and, therefore, may not be associated with the financial statements.
Not independent and, therefore, may issue a review report, but may not issue an auditor’s opinion.
Auditor.
Client.
Audit committee.
Public.
The proposed engagement is not accounting-related.
Recommendations made by the CPA firm are to be subject to review by the client.
Acceptance would require the CPA firm to make management decisions for an audit client.
Any of the above is true.
The CPA is issued a summons enforceable by a court order which orders the CPA to present confidential information.
A major stockholder of a client company seeks accounting information from the CPA after management declined to disclose the requested information.
Confidential client information is made available as part of a quality review of the CPA’s practice by a peer review team authorized by the AICPA.
An inquiry by a disciplinary body of a state CPA society requests confidential client information.
“Tax fees”
“Consulting fees”
“Audit-related fees”
“All other fees”
Scope and Nature of Services.
Integrity.
Due Care.
The Public Interest.
Quiz Review Timeline +
Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.
Wait!
Here's an interesting quiz for you.