CA Ethics and Governance 4

Question 1

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

Accepted Answer

Consequentialism (Utilitarianism)

Answer

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

Question 2

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

Accepted Answer

A direct impairment of independence requiring withdrawal or divestiture

Answer

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

Question 3

The PCAOB was created primarily to:

Accepted Answer

Oversee audits of public companies to protect investors

Answer

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

Question 4

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

Accepted Answer

Fiduciary duty

Answer

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

Question 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:

Accepted Answer

Maintain confidentiality and not use the information for any other client

Answer

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

(CA) Certified Accountant Practice Test

(CA) Certified Accountant Practice Test

CA Ethics and Governance 4