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Ethics and Governance Flashcards

7 cards from real CA 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 and Governance flashcards as text

  1. Which ethical framework evaluates the morality of an action based solely on its consequences and overall outcomes?

    Answer: Consequentialism (Utilitarianism)

    Consequentialism judges actions by their results, seeking the greatest good for the greatest number, regardless of the method used.

  2. A CPA discovers their audit firm has a material financial interest in an audit client. Under the AICPA Code, this creates:

    Answer: A direct impairment of independence requiring withdrawal or divestiture

    A financial interest in an audit client directly impairs independence and cannot be mitigated — the CPA must divest or withdraw from the engagement.

  3. The PCAOB was created primarily to:

    Answer: Oversee audits of public companies to protect investors

    The Public Company Accounting Oversight Board was established by SOX to oversee audits of public companies and protect the interests of investors.

  4. Which governance principle holds that directors and officers must act in good faith and in the best interest of the corporation?

    Answer: Fiduciary duty

    Fiduciary duty obligates directors and officers to act in the corporation's and shareholders' best interests with loyalty and care.

  5. When a CPA in public practice becomes aware of a former client's confidential information that is relevant to a current client, they should:

    Answer: Maintain confidentiality and not use the information for any other client

    Confidentiality obligations persist after the client relationship ends; a CPA must not disclose or use former client information for the benefit of other clients.

  6. A 'tone at the top' in corporate governance primarily refers to:

    Answer: Senior leadership's commitment to ethical conduct that sets organizational culture

    Tone at the top describes how senior executives' ethical attitudes and behaviors shape the entire organization's ethical culture.

  7. Under the AICPA conceptual framework approach to ethics, when a CPA identifies a threat, the next step is to:

    Answer: Evaluate whether safeguards can reduce the threat to an acceptable level

    After identifying a threat, a CPA must evaluate if available safeguards can eliminate or reduce the threat to an acceptable level before proceeding.