CA Ethics and Governance 5

Question 1

Which of the following scenarios represents a 'conflict of interest' for a CPA in a tax engagement?

Accepted Answer

Representing two clients in the same transaction with opposing positions

Answer

A conflict of interest arises when a CPA represents two clients with opposing interests in the same transaction without proper consent and safeguards.

Question 2

The Dodd-Frank Act whistleblower program incentivizes reporting securities violations by offering:

Accepted Answer

Monetary awards ranging from 10% to 30% of sanctions collected

Answer

Dodd-Frank provides financial awards of 10%–30% of monetary sanctions over $1 million to whistleblowers who voluntarily provide original information to the SEC.

Question 3

Which of the following is an example of a 'material weakness' in internal controls?

Accepted Answer

A significant deficiency that has a reasonable possibility of resulting in a material misstatement

Answer

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.

Question 4

Professional skepticism in auditing requires auditors to:

Accepted Answer

Question evidence critically and be alert to conditions indicating fraud

Answer

Professional skepticism means maintaining a questioning mind and critically assessing audit evidence throughout the engagement without assuming management dishonesty.

Question 5

An audit firm that performs both external audit and extensive internal audit services for the same public company likely violates which principle?

Accepted Answer

Independence, because the firm would be auditing its own work

Answer

Performing both external and internal audit services for the same public company creates a self-review threat that impairs the external auditor's independence.

(CA) Certified Accountant Practice Test

(CA) Certified Accountant Practice Test

CA Ethics and Governance 5