B. Acy Bachelor of Accountancy Ethics and Professional Responsibility 1 — Questions and Answers
Question 1: The AICPA Code of Professional Conduct's principle of objectivity requires CPAs to:
- Prioritize client interests over all others
- Be free from conflicts of interest and not subordinate judgment to others (Correct answer)
- Avoid all forms of advertising
- Accept all client engagements offered
Correct answer: Be free from conflicts of interest and not subordinate judgment to others
Objectivity requires CPAs to be impartial, intellectually honest, and free from conflicts that could compromise professional judgment.
Question 2: Under the Sarbanes-Oxley Act, the audit committee of a public company must:
- Be composed entirely of company executives
- Include at least one financial expert and consist of independent directors (Correct answer)
- Be appointed by the external auditors
- Prepare the company's financial statements
Correct answer: Include at least one financial expert and consist of independent directors
SOX requires audit committees to include independent directors and at least one financial expert to provide effective oversight.
Question 3: The ethical concept of 'professional skepticism' requires auditors to:
- Assume all management representations are false
- Maintain a questioning mind and critically assess audit evidence (Correct answer)
- Verify every single transaction
- Avoid working with management on financial matters
Correct answer: Maintain a questioning mind and critically assess audit evidence
Professional skepticism means neither assuming management is dishonest nor assuming unquestioned honesty, but critically evaluating evidence.
Question 4: Which body issues ethical standards for CPAs in the United States?
- SEC
- FASB
- AICPA and state CPA societies (Correct answer)
- PCAOB only
Correct answer: AICPA and state CPA societies
The AICPA issues the Code of Professional Conduct, and individual state CPA societies adopt and enforce ethical rules for licensees.
Question 5: Confidentiality under the AICPA Code prohibits CPAs from disclosing client information EXCEPT when:
- A competitor requests it
- Required by a validly issued subpoena or court order (Correct answer)
- The client is publicly traded
- Another CPA asks as a courtesy
Correct answer: Required by a validly issued subpoena or court order
CPAs may disclose confidential client information when compelled by a court order, subpoena, or other legal process.
Question 6: The Foreign Corrupt Practices Act (FCPA) prohibits US companies from:
- Trading with foreign competitors
- Bribing foreign government officials to obtain or retain business (Correct answer)
- Hiring foreign nationals as employees
- Recording transactions in foreign currencies
Correct answer: Bribing foreign government officials to obtain or retain business
The FCPA makes it illegal for US persons and companies to bribe foreign government officials for business advantages.
B. Acy Bachelor of Accountancy Ethics and Professional Responsibility 1
The AICPA Code of Professional Conduct's principle of objectivity requires CPAs to: