Practice Test Geeks(AICPA) Association of International Certified Professional Accountants Practice Test
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Ethics, Governance & Business Law Flashcards

7 cards from real AICPA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Ethics, Governance & Business Law flashcards as text

  1. Under the AICPA Code of Professional Conduct, which threat to independence arises when a CPA has a close personal relationship with a client's management?

    Answer: Familiarity threat

    A familiarity threat occurs when a CPA becomes too sympathetic to a client's interests due to a close personal or long-standing relationship.

  2. Under the Sarbanes-Oxley Act, who is directly responsible for establishing and maintaining internal controls over financial reporting?

    Answer: Company management (CEO and CFO)

    SOX Section 302 and 404 place direct responsibility on the CEO and CFO to certify and maintain adequate internal controls over financial reporting.

  3. A CPA firm that performs bookkeeping services for an audit client and then audits those same records faces which primary independence threat?

    Answer: Self-review threat

    A self-review threat occurs when a CPA audits records or systems they or their firm previously prepared.

  4. Under the UCC Article 2, when does title to goods pass from seller to buyer in the absence of a specific agreement?

    Answer: When the seller completes delivery obligations

    Under UCC Article 2, title passes to the buyer at the time and place the seller completes performance of delivery obligations.

  5. Which corporate governance principle requires that board members act in the best interest of shareholders rather than personal gain?

    Answer: Duty of loyalty

    The duty of loyalty requires directors and officers to prioritize corporate and shareholder interests over their own personal financial interests.

  6. An accountant discovers a client is engaged in a material fraud. Under the AICPA's ethical standards, what is the accountant's primary obligation regarding current-year audit findings?

    Answer: Withdraw from the engagement if the client refuses to correct the fraud

    If management refuses to correct a material fraud, the CPA should withdraw from the engagement to avoid association with fraudulent financial statements.

  7. Under agency law, which type of authority is created when a principal's words or conduct reasonably lead a third party to believe the agent has authority to act?

    Answer: Apparent authority

    Apparent authority (also called ostensible authority) arises when the principal's representations cause a third party to reasonably believe the agent is authorized.