Question 1

Which of the following is NOT a safeguard to mitigate threats to compliance with the rules for CPAs in business or reduce them to an acceptable level?

Accepted Answer

A)  Independent external audit
B)  Tone at the top
C)  Independent audit committee
D)  Whistle-blower hot lineE) A) and B)
F) B) and D)

Question 2

Safeguards implemented by the attest client include each of the following except:

Accepted Answer

A)  Proper oversight by client management
B)  Management participation in the client by the attest firm
C)  Policies and procedures to address ethical conduct
D)  The tone at the top set by executive managementE) C) and D)
F) A) and B)

Question 3

The SEC's Advisory Committee on Improvements to Financial Reporting (CIFiR)  developed a framework for accounting judgments consisting of which components?

Accepted Answer

A)  A critical good faith thought process and reflective judgment
B)  A critical good faith thought process and documentation
C)  Documentation and reflective judgment
D)  Values and principlesE) B) and D)
F) B) and C)

Question 4

Which of the following is NOT an example of a conflict of interest?

Accepted Answer

A)  Advising two clients at the same time who are competing to acquire the same company when the advice might be relevant to the parties' competitive positions
B)  Advising a client to invest in a business in which,for example,the immediate family member of the CPA has a financial interest in the business
C)  Providing tax or personal financial planning services for several members of a family whom the CPA knows to have opposing interests
D)  Accepting commissions in a financial planning engagement for a nonaudit clientE) B) and D)
F) B) and C)

Question 5

In its investigation of ZZZZ Best,the House Subcommittee on Oversight and Investigations looked into:

Accepted Answer

A)  Why the board of directors failed to uncover the fraud at ZZZZ Best
B)  How the company was able to create 80% or more fictitious revenue
C)  How the company was able to create cookie jar reserves
D)  All of the aboveE) C) and D)
F) A) and D)

Question 6

An example of a management participation threat is:

Accepted Answer

A)  Establishing and maintaining the budget for audit completion
B)  Establishing and maintaining internal controls for the client
C)  Initiating litigation against the client
D)  Preparing source documents used to generate the client's financial statementsE) B) and C)
F) A) and D)

Question 7

The Commercialism versus Professionalism case raises issues about:

Accepted Answer

A)  The future of the accounting profession
B)  Pressures to compromise ethical values that exist in alternative practice structures
C)  Low-ball bidding for audit services
D)  Opinion shoppingE) All of the above
F) A) and B)

Question 8

During the investigations by the House Subcommittee on Oversight and Investigations,a question that was raised was:

Accepted Answer

A)  Why was fraud allowed to occur at some many companies?
B)  Where was the board of directors in all these frauds?
C)  Where were the auditors?
D)  Why did the internal controls fail in so many frauds?E) A) and D)
F) B) and C)

Question 9

Circular 230 applies to CPAs who:

Accepted Answer

A)  Audit the financial statements of a tax client
B)  Practice before the IRS
C)  Practice before the SEC
D)  Prepare tax services for clientsE) A) and D)
F) All of the above

Question 10

Objectivity may be impaired when a CPA prepares a tax return for a client because:

Accepted Answer

A)  The CPA violates the independence rule
B)  The CPA violates the integrity rule
C)  The CPA serves in a tax advocacy position for the client
D)  The CPA must prepare the tax return solely based on the information provided by the clientE) A) and D)
F) All of the above

Question 11

The most significant change in the Revised AICPA Code of Professional Conduct is:

Accepted Answer

A)  A conceptual framework approach for evaluating ethics violations
B)  Two conceptual frameworks: one for members in public practice and one for CPAs in business
C)  Eliminating Code coverage for members in business
D)  Clarifying that all CPAs must follow the Independence rule regardless of professional servicesE) B) and C)
F) None of the above

Question 12

Common judgment traps include:

Accepted Answer

A)  Group think,judgment triggers,and reacting to pressures
B)  Group think,judgment triggers,and a rush to solve problems
C)  Reacting to pressures,a rush to solve problems,and Systems 1 thinking
D)  Systems 1 thinking,cognitive dissonance,a rush to solve problemsE) A) and C)
F) B) and C)

Question 13

Which of the following is NOT a safeguard that can help to mitigate threats to independence?

Accepted Answer

A)  Safeguards created by the Sarbanes-Oxley Act
B)  Safeguards created by the corporate governance system of the attest client
C)  Quality control safeguards created by the audit firm
D)  All of the above are safeguardsE) A) and B)
F) B) and C)

Question 14

Describe the basic features of the Revised AICPA Code of Professional Conduct.

Accepted Answer

•Emphasizes the public interest as the c...

Question 15

The accounting issues at failed savings and loan institutions included:

Accepted Answer

A)  The failure to provide adequate allowances for loan losses
B)  The failure to disclose dubious deals between the S&Ls and some of its major customers
C)  The existence of inadequate controls to prevent inadequate allowances and control for dubious deals
D)  All of the aboveE) A) and B)
F) None of the above

Question 16

One of the differences between the ethical obligations of CPAs and lawyers is:

Accepted Answer

A)  Lawyers are obligated first and foremost to the public interest while CPAs are obligated to their clients' interests
B)  Lawyers are obligated first and foremost to the client's interest while CPAs are obligated to the public interest
C)  Lawyers and CPAs both must be independent of their clients
D)  Lawyers and CPAs must exercise objective judgmentE) None of the above
F) All of the above

Question 17

Discuss the conceptual framework for independence in the Revised AICPA Code and how it deals with risks to independence.

Accepted Answer

Independence in fact requires avoiding r...

Question 18

The House Subcommittee on Oversight and Investigations made its recommendations after looking into failures at each of the following companies except:

Accepted Answer

A)  ESM Government Securities
B)  Continental Illinois National Bank and Trust
C)  Penn Square Bank
D)  EnronE) A) and B)
F) None of the above

Question 19

What is "Operation Broken Gate?"

Accepted Answer

A)  An SEC initiative to identify audit firms that violate independence standards
B)  A PCAOB initiative to identify audit firms with deficiencies in audits through its inspection program
C)  An SEC initiative to identify auditors who neglect their duties and the required auditing standards
D)  An AICPA program to implement its conceptual framework standardsE) A) and C)
F) None of the above

Question 20

Which of the following is NOT an example of a conflict situation for CPAs in business that may lead to subordination of judgment?

Accepted Answer

A)  Making or permitting or directing another party to make,materially false and misleading entries in an entity's financial statements or records
B)  Failing to correct the entity's financial statements or records that are materially false and misleading when the CPA has the authority to record the entries
C)  Signing,or permitting or directing another to sign,a document containing materially false and misleading information.
D)  Preparing the financial statements and auditing the same workE) C) and D)
F) B) and D)

Exam 4: Ethics and Professional Judgment in Accounting

Which of the following is NOT a safeguard that can help to mitigate threats to independence?

Correct AnswerverifiedShow Answer

Which of the following is NOT an example of a conflict of interest?

Correct AnswerverifiedShow Answer

Circular 230 applies to CPAs who:

Correct AnswerverifiedShow Answer

During the investigations by the House Subcommittee on Oversight and Investigations,a question that was raised was:

Correct AnswerverifiedShow Answer

Discuss the conceptual framework for independence in the Revised AICPA Code and how it deals with risks to independence.

Correct AnswerverifiedIndependence in fact requires avoiding r...View AnswerShow Answer

The accounting issues at failed savings and loan institutions included:

Correct AnswerverifiedShow Answer

The most significant change in the Revised AICPA Code of Professional Conduct is:

Correct AnswerverifiedShow Answer

Safeguards implemented by the attest client include each of the following except:

Correct AnswerverifiedShow Answer

The House Subcommittee on Oversight and Investigations made its recommendations after looking into failures at each of the following companies except:

Correct AnswerverifiedShow Answer

The Commercialism versus Professionalism case raises issues about:

Correct AnswerverifiedShow Answer

In its investigation of ZZZZ Best,the House Subcommittee on Oversight and Investigations looked into:

Correct AnswerverifiedShow Answer

Objectivity may be impaired when a CPA prepares a tax return for a client because:

Correct AnswerverifiedShow Answer

One of the differences between the ethical obligations of CPAs and lawyers is:

Correct AnswerverifiedShow Answer

What is "Operation Broken Gate?"

Correct AnswerverifiedShow Answer

Common judgment traps include:

Correct AnswerverifiedShow Answer

Which of the following is NOT an example of a conflict situation for CPAs in business that may lead to subordination of judgment?

Correct AnswerverifiedShow Answer

The SEC's Advisory Committee on Improvements to Financial Reporting (CIFiR) developed a framework for accounting judgments consisting of which components?

Correct AnswerverifiedShow Answer

Which of the following is NOT a safeguard to mitigate threats to compliance with the rules for CPAs in business or reduce them to an acceptable level?

Correct AnswerverifiedShow Answer

Describe the basic features of the Revised AICPA Code of Professional Conduct.

Correct Answerverified•Emphasizes the public interest as the c...View AnswerShow Answer

An example of a management participation threat is:

Correct AnswerverifiedShow Answer

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Independence in fact requires avoiding r...
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•Emphasizes the public interest as the c...
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