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Multiple Choice
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1

A CPA, while performing an audit, strives to achieve independence in appearance in order to:
A)Reduce risk and liability.
B)Comply with the generally accepted standards of field work.
C)Become independent in fact.
D)Maintain public confidence in the profession.
2

A violation of the profession's ethical standards is most likely to occur when a CPA:
A)Receives a fee for referring audit clients to a company that sells limited partnership interests.
B)Purchases the portion of an insurance company that performs actuarial services for employee benefit plans.
C)Arranges with a financial institution to collect notes issued by a client in payment of fees due.
D)Compiles the financial statements of a client that employs the CPA's spouse as a bookkeeper.
3

A CPA firm should establish procedures for conducting and supervising work at all organizational levels to provide reasonable assurance that the work performed meets the firm's standards of quality. To achieve this goal, the firm would most likely establish procedures for:
A)Evaluating prospective and continuing client relationships.
B)Reviewing engagement audit documentation and reports.
C)Requiring personnel to adhere to the applicable independence rules.
D)Maintaining personnel files containing documentation related to the evaluation of personnel.
4

Which of the following types of services are prohibited by the SEC rules on auditor independence?
A)Providing tax services for publicly-held audit clients.
B)Providing tax services for non-public audit clients.
C)Providing internal audit services for public-held audit clients.
D)Providing internal audit services for non-public audit clients.
5

Decisions made in accordance with the theory of justice:
A)Recognizes that decisions involve trade-offs between costs and benefits.
B)Considers the legal ramifications of the decisions.
C)Are based on a fair and equitable distribution of resources.
D)Should not violate the rights of any individual.
6

Which of the following individuals is not considered a "close relative" as defined by the Code of Professional Conduct?
A)Sibling.
B)Parent.
C)Nondependent child.
D)Dependent child.
7

Which of the following is not considered an act discreditable to the profession?
A)Solicitation of CPA exam questions.
B)Failure to file a personal tax return on a timely basis.
C)Billing an audit client an amount in excess of the originally quoted fee.
D)Retaining client records without permission.
8

A CPA is aware that a client has "skimmed" [unrecorded] cash receipts and thus not reported them to the Internal Revenue Service. If the CPA signs the client's tax return as a CPA after preparing the return, he/she would be violating which AICPA Rule of Conduct?
A)Rule 101 Independence
B)Rule 102 Integrity & Objectivity
C)Rule 203 Accounting Principles
D)Rule 301 Confidential Client Information
9

Which of the following is not an element of quality control as defined by the AICPA's Statement of Quality Control Standards No. 2?
A)Monitoring.
B)Personnel management.
C)Reliability
D)Acceptance and continuance of clients and engagements.
10

Which of the following statements is false concerning PCAOB & AICPA inspections of public accounting firms?
A)PCAOB inspections effectively replace the AICPA peer review program for those registered firms that audit public companies.
B)The AICPA peer review process is conducted more frequently and in more depth in comparison with new PCAOB guidelines.
C)These inspections focus on the system of quality controls in put in place by the CPA firms.
D)The "Big 4" CPA firms are a good example of a "registered" firm with the PCAOB.





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