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1

Ethical dilemmas generally involve situations in which the:
A)Welfare of one or more individuals is affected by another's decision.
B)AICPA has established "rulings" prohibiting conflicts of interest.
C)Individual involved must make a decision that affects continuation of an ethical approach.
D)The IIA Code of Conduct has recently been modified.
2

Which of the following forms of organization is most likely to restrict the personal liability of CPAs not involved on a particular audit that their firm has conducted?
A)Limited liability partnership.
B)Partnership.
C)Professional corporation.
D)Restricted company.
3

A CPA's investment in the stock of an audit client is considered a(n):
A)Direct financial interest which impairs independence regardless of amount.
B)Direct financial interest which impairs independence when material.
C)Indirect financial interest that impairs independence regardless of amount.
D)Indirect financial interest that impairs independence when material.
4

Which of the following statements is true with respect to the SEC's concept of independence when an auditor both prepares financial statements and audits those financial statements for a client?
A)The auditor is not independent.
B)The auditor is independent if he or she is able to maintain a level of professional detachment.
C)The auditor can audit the financial statements only if the of the audit process does not culminate in the expression of an opinion on the financial statements.
D)The auditor cannot audit the financial statements since the auditor lacks integrity.
5

In which circumstance is a CPA firm's independence most likely to be impaired?
A)An individual on the audit has a close relative who is a receptionist for the client.
B)The father of the audit senior holds a material financial interest in the client of which the senior is unaware.
C)The spouse of a staff member on the audit has an immaterial common stock investment in the audit client.
D)The partner in charge of the office's compensation is affected by office profitability, a portion of which arises from this audit.
6

Which of the following partners is least likely to be considered a "covered member" for purposes of the audit of Company A, performed by the Chicago office of a national CPA firm?
A)The partner in charge of the entire CPA firm.
B)A partner in the San Diego office of the CPA firm who maintains a small, immaterial investment in Company A.
C)A partner in the Chicago office who worked on the Company A audit in previous years, but currently has no responsibilities with respect to the audit.
D)The partner in charge of the Chicago office.
7

Which of the following is a correct statement concerning the Sarbanes-Oxley Act of 2002?
A)It applies to audits of all companies doing business in the United States.
B)It makes performance of nonattest services relating to financial information systems design and implementation for audit clients unlawful.
C)It requires the divestiture of a consulting department of any CPA firm performing audits of publicly traded companies.
D)It requires the reporting of all illegal acts identified during an audit to the Justice Department.
8

Contingency fee based pricing of accounting services is:
A)Always strictly prohibited in public accounting practice.
B)Never restricted in public accounting practice.
C)Prohibited if associated with the type of audit opinion received.
D)Considered an act discreditable to the profession.
9

Which of the following best describes the passing of confidential information from a client to its auditor, that information:
A)Should in no circumstances be conveyed to third parties.
B)Is not legally protected and can be subpoenaed by a federal court.
C)Can only be released for peer reviews after receiving permission from the client.
D)Should be conveyed to the public if it affects the "correctness" of the financial statements.
10

Which of the following is a correct statement concerning a publicly traded company that purchases the practice of a public accounting firm.
A)It must be owned by partners who are involved in public accounting.
B)It must separate performance of attest services and allow them to be performed by the remaining "shell" public accounting firm it has purchased (or by another public accounting firm).
C)It can perform all services ordinarily performed by a traditional CPA firm within the framework of its own corporate entity.
D)It may not restrict its liability in any manner for services it now provides which previously had been provided by the traditional CPA firm.





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