Certified Public Accountant Professional Standards & Competencies 4

Question 1

A CPA discovers during fieldwork that the client's CEO has been embezzling funds. The CPA's primary obligation is to:

Accepted Answer

Communicate the finding to those charged with governance

Answer

AU-C Section 265 and 240 require the auditor to communicate significant fraud findings to those charged with governance (e.g., the audit committee).

Question 2

Under the AICPA Code, a CPA firm that performs bookkeeping for an attest client creates a threat to independence classified as a:

Accepted Answer

Self-review threat

Answer

Providing bookkeeping services to an attest client creates a self-review threat because the CPA would be auditing their own work.

Question 3

Which AICPA standard governs review engagements for historical financial statements of nonpublic entities?

Accepted Answer

AR-C Section 90

Answer

AR-C Section 90 (part of SSARS) governs review engagements for nonpublic entities under the Accounting and Review Services standards.

Question 4

A CPA issues a report on prospective financial statements. If the statements are for general use, which type is appropriate?

Accepted Answer

Forecast

Answer

Forecasts (based on expected conditions) are appropriate for general distribution, while projections (based on hypothetical assumptions) are restricted to limited use.

Question 5

The 'due care' principle in AICPA General Standards requires CPAs to:

Accepted Answer

Discharge responsibilities with competence and diligence

Answer

Due care requires CPAs to perform services with competence, diligence, and adequate planning and supervision — not to guarantee outcomes.

Certified Public Accountant Practice Test

Certified Public Accountant Practice Test

Certified Public Accountant Professional Standards & Competencies 4