AICPA Communication with Teachers & Parents 3 — Questions and Answers
Question 1: A CPA in public practice receives a subpoena requesting client records. What is the first communication step the CPA should take?
- Immediately deliver all records to the requesting authority
- Notify the client so they may seek legal counsel (Correct answer)
- Destroy the records to protect client confidentiality
- Refuse to acknowledge the subpoena exists
Correct answer: Notify the client so they may seek legal counsel
When served with a subpoena, the CPA should promptly notify the client so the client can consult legal counsel and potentially seek to limit the scope of disclosure.
Question 2: Under the AICPA Code of Professional Conduct, when may a CPA disclose confidential client information without the client's consent?
- Whenever a business contact requests the information for competitive research
- When required by a validly issued and enforceable subpoena or summons (Correct answer)
- To impress a prospective client with prior engagement experience
- When the CPA believes disclosure would benefit the public
Correct answer: When required by a validly issued and enforceable subpoena or summons
The AICPA Code ET Section 1.700.001 permits disclosure without consent when compelled by a validly issued and enforceable legal process such as a subpoena.
Question 3: A CPA reviewing a staff accountant's draft management letter comment finds it vague and unsupported. What is the appropriate supervisory response?
- Sign off on the comment to avoid conflict with the staff member
- Return the draft with specific instructions for additional evidence and clearer language (Correct answer)
- Delete the comment entirely from the management letter
- Submit the comment as-is to meet the reporting deadline
Correct answer: Return the draft with specific instructions for additional evidence and clearer language
Supervisory review requires providing constructive, specific guidance so staff can learn and produce documentation that meets professional standards.
Question 4: Which element is NOT required in a compilation engagement communication under SSARS No. 21?
- A statement that no audit or review was performed
- An expression of limited assurance on the financial statements (Correct answer)
- Identification of the entity and the financial statements
- The date or period of the financial statements
Correct answer: An expression of limited assurance on the financial statements
A compilation report does not provide any assurance — expressing limited assurance would make it a review, which requires different procedures.
Question 5: When a CPA discovers a likely illegal act by a client during an audit, which communication sequence is most appropriate under AU-C Section 250?
- Notify the SEC before informing management to avoid evidence destruction
- Inform management or those charged with governance, then evaluate the effect on the audit (Correct answer)
- Immediately withdraw without any communication
- Document the finding privately and issue an unmodified opinion
Correct answer: Inform management or those charged with governance, then evaluate the effect on the audit
AU-C 250 requires the auditor to first communicate the illegal act to management at the appropriate level and those charged with governance, then assess its effect on the audit.
Question 6: A CPA training partner emphasizes that audit documentation must be sufficient to enable an experienced auditor to understand the work performed. This standard is found in which pronouncement?
- AU-C Section 230 (Correct answer)
- SSARS No. 25
- Circular 230
- SAS No. 59
Correct answer: AU-C Section 230
AU-C Section 230 (Audit Documentation) establishes the 'experienced auditor' standard for evaluating the sufficiency of audit documentation.
Question 7: In an academic or firm training context, what is the primary reason CPAs are taught to use plain language in client communications?
- Plain language reduces the CPA's legal liability regardless of content accuracy
- Plain language helps non-accountant clients understand findings and make informed decisions (Correct answer)
- AICPA standards explicitly prohibit technical terminology in all written reports
- Plain language communications are exempt from peer review requirements
Correct answer: Plain language helps non-accountant clients understand findings and make informed decisions
Communicating clearly in plain language ensures clients can understand findings, recommendations, and risks, enabling them to make well-informed business decisions.
AICPA Communication with Teachers & Parents 3
A CPA in public practice receives a subpoena requesting client records.
What is the first communication step the CPA should take?