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
Which of the following scenarios represents a 'conflict of interest' for a CPA in a tax engagement?
Answer: Representing two clients in the same transaction with opposing positions
A conflict of interest arises when a CPA represents two clients with opposing interests in the same transaction without proper consent and safeguards.
The Dodd-Frank Act whistleblower program incentivizes reporting securities violations by offering:
Answer: Monetary awards ranging from 10% to 30% of sanctions collected
Dodd-Frank provides financial awards of 10%–30% of monetary sanctions over $1 million to whistleblowers who voluntarily provide original information to the SEC.
Which of the following is an example of a 'material weakness' in internal controls?
Answer: A significant deficiency that has a reasonable possibility of resulting in a material misstatement
A material weakness is a deficiency in internal control where there is a reasonable possibility that a material misstatement will not be prevented or detected on a timely basis.
Professional skepticism in auditing requires auditors to:
Answer: Question evidence critically and be alert to conditions indicating fraud
Professional skepticism means maintaining a questioning mind and critically assessing audit evidence throughout the engagement without assuming management dishonesty.
An audit firm that performs both external audit and extensive internal audit services for the same public company likely violates which principle?
Answer: Independence, because the firm would be auditing its own work
Performing both external and internal audit services for the same public company creates a self-review threat that impairs the external auditor's independence.
Under the FCPA (Foreign Corrupt Practices Act), facilitation payments (grease payments) are:
Answer: Allowed for routine governmental actions but not for obtaining business
The FCPA provides a narrow exception allowing small facilitation payments to foreign officials only to expedite routine, non-discretionary governmental actions.
A CPA who knowingly signs a tax return with fraudulent information may face which of the following consequences?
Answer: Criminal prosecution, civil penalties, and loss of CPA license
Knowingly participating in tax fraud can result in criminal charges under federal law, IRS civil penalties, and professional disciplinary action including license revocation.