CH. 4 QUIZ ETHICS – Flashcards

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Metcalf committee
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The committee that first recommended that the profession institute a voluntary program for peer review was:
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Where were the auditors
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During the investigations by the House Subcommittee on Oversight and Investigations, a question that was raised was:
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How the company was able to create 80% or more fictitious revenue
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In its investigation of ZZZZ Best, the House Subcommittee on Oversight and Investigations looked into:
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$152.9 billion including $123.8 billion of U.S. taxpayer losses
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The cost to the public to clean up 1,043 failed savings and loan institutions during the period of 1986- 1995 was:
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1. The failure to provide adequate allowances for loan losses 2. The failure to disclose dubious deals between the S&Ls and some of its major customers 3. The existence of inadequate controls to prevent inadequate allowances and control for dubious deals
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The accounting issues at failed savings and loan institutions included:
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To identify the tone at the top for management to create an ethical culture
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One of the Contributions of the Treadway Commission Report and the work of the Committee of Sponsoring Organizations (COSO) was:
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Pressure to meet financial analysts' earnings estimates
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One concern in the Armadillo Foods case in the text of the chapter is:
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Valuations and end-of-period transactions
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James Doty, the chairman of the PCAOB, in his testimony before Congress on the financial crisis of 2007-2008, admitted that auditors should have been more vigilant—not just at Lehman Brothers, but across the board. Which audit areas did Doty signal out for criticism?
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State board of accountancy
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CPAs should always adhere to the rules of conduct of the
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Independence
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The ethics rules that applies solely to those who conduct an audit of a client entity is:
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Integrity
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The principle of ethical behavior in the AICPA Code that asks questions directly related to ethical courage is:
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1. A CPA owns a direct financial interest in a client 2. A CPA owns a material indirect financial interest in a client 3. Immediate family members of the CPA are in violation of the independence rules
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Impairments of independence can occur when:
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Had loans outstanding from the clien
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In the ESM fraud discussed in this chapter, Jose Gomez violated the Independence standard because he:
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The auditor serves in a management decision making position with the client
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Assume the external auditor of a client entity also served on the client's board of directors. What aspect of independence would be violated?
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The auditor was involved in a business relationship with the client
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In the PeopleSoft case, the auditors violated what aspect of independence?
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Avoid being biased when providing nonattest services for the audit client
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To avoid violating independence when engaged in nonattest services for an audit client, a CPA must:
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Tax services
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Each of the following is an outright restriction on providing nonattest services for an attest client except for:
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Top management certified that the financial statements were accurate
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A unique aspect of the HealthSouth case discussed in the text of this chapter is:
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Addresses the quality of services performed by the CPA
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The due care principle in the AICPA code:
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Independence
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Which rule of professional conduct in the AICPA code does not apply both to internal and external accountants who are CPAs and members of the Institute?
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1. In response to a validly issued court summons 2. To provide information to the CPA's peer reviewers 3. To defend oneself in an ethics investigation
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The confidentiality standard in the AICPA code provides for exceptions to the rule in:
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The CPA informed the client of this matter and the client did not inform the SEC within one business day of being informed by the CPA
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A CPA who informs management of a material misstatement in the financial statements can go to the SEC with his/her concerns if:
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The auditor is unable to observe the physical inventory
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If a client refuses to accept an auditors' report that has been modified, the public accounting firm should withdraw from the engagement and give its reasons in writing to the board of directors except when:
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There is a realistic possibility of success if the tax position is challenged
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The requirement that there should be reasonable support for a tax return position before a CPA recommends it to a client most directly aligns with which tax standard:
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Public interest
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To whom does the CPA owe ultimate allegiance in carrying out professional obligations?
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Those CPAs in public accounting, industry, government, and education.
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To whom do the accounting codes of professional conduct (either the state board of public accountancy or AICPA) apply?
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Have I retained my integrity?
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Integrity is measured in terms of what is right and just. What is a question that a CPA can ask to test decisions?
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It would be a conflict of interest and violates ethical standards.
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Why don't auditors prepare financial statements, as well as audit them?
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The CPA serves on the board of a non-profit with the CFO of the company being audited.
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In which of the following is a CPA independent in fact and appearance?
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Audit documentation obtained by the auditor with reviews by supervisory personnel.
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Which of the following would be an example of due care?
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Relationships where a best friend serves in a financial reporting oversight role with the client
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Which of the following relationships do not impair CPA-auditor independence?
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Safeguards developed to ensure independence when performing nonattest service
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Each of the following is a safeguard that helps to mitigate threats to independence except for:
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Car loan collateralized by the car
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Which of the following is a permitted loan to a CPA from an audit client financial institution?
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ESM Government Securities
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Which case in the text of the chapter illustrates the danger of a CPA accepting loans from an audit client?
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CPA's uncle
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Which of the following immediate family members or close relatives would not have to follow the independence rules that apply to the CPA according to Interpretation 101-1?
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CPA's nephew is starting as a salesperson with an audit client.
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Which of the following situations of a CPA's distant relatives does not impair the CPA's independence?
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10 HOURS
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What is the maximum amount of time an audit manager or partner may spend on nonattest services for an attest client?
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Internal audit outsourcing services
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Which of the following services are allowed to be performed for an attest services client by Sarbanes Oxley Act?
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Professional data
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Which of the following is not part of standards for the quality of work?
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The PCAOB prohibits contingent fees in tax engagements performed for an audit client.
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What is the difference on contingent fees under the PCAOB rules versus the AICPA rules?
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Corporation
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Which is not a permitted form of organization for a CPA practice?
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Auditing of deferred taxes
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Which tax service is still permitted by the PCAOB for audit clients following the KPMG tax shelter case?
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Confidentiality and integrity
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What ethical rules are violated when a CPA auditing a client provides inside information about the client to a friend?
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Client-provided records in the custody or control of the CPA should be returned to the client at the client's request.
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Which statement is correct with respect to a CPA's ethical obligation to return client books and records and CPA work papers:
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Fund of Funds
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The ethical issue raised in the Beauda Medical Center case is similar to that in:
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There has been a misappropriation of assets
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The question that arises in the First Community Church case is whether:
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Report the situation to the firm's oversight or similar committee.
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In the Lee & Han, LLC case, Barbara Strom should:
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Talk to the agency's board of directors
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In the Family Outreach case, Yimei finds three accounts all using the same documentation and amounts. Being skeptical, Yimei should consider doing all but:
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Inflating healthcare costs submitted to Medicare.
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The main ethical issue in Healthcare Fraud case is:
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1. Reporting systems that relied on self-reporting of violations 2. Ownership of client stock 3. Investments by PwC professionals in bank accounts of audit clients
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PricewaterhouseCoopers was investigated by the SEC for independence violations due to:
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