Certified Public Accountant Professional Standards & Competencies 5 — Questions and Answers
Question 1: The AICPA's 'Integrity' principle requires CPAs to be:
- Technically proficient in all areas of practice
- Free from financial interests in client entities
- Honest and candid, even when it disadvantages the CPA or client (Correct answer)
- Compliant with all applicable federal tax laws
Correct answer: Honest and candid, even when it disadvantages the CPA or client
Integrity requires honest and candid communication within the constraints of confidentiality, even when the truth is inconvenient.
Question 2: Which of the following best describes the 'attestation risk' in an attestation engagement?
- The risk that the CPA will be sued by the client
- The risk that the practitioner expresses an inappropriate conclusion (Correct answer)
- The risk that the subject matter is not measurable
- The risk that the engaging party cannot pay the fee
Correct answer: The risk that the practitioner expresses an inappropriate conclusion
Attestation risk is the risk that the practitioner expresses an inappropriate opinion or conclusion on subject matter that is materially misstated.
Question 3: A CPA must retain audit documentation for a minimum of how many years under AICPA standards for a nonpublic company audit?
- 3 years
- 5 years
- 7 years (Correct answer)
- 10 years
Correct answer: 7 years
AU-C Section 230 requires retention of audit documentation for at least five years from the report release date — though seven years is common in practice and required by PCAOB for public companies.
Question 4: Under the AICPA Code, a CPA is permitted to disclose confidential client information without client consent in which scenario?
- When a prospective buyer of the client's business requests it
- In response to a valid subpoena or court order (Correct answer)
- When another CPA asks for peer benchmarking purposes
- When the client's lender makes a formal request
Correct answer: In response to a valid subpoena or court order
ET Section 1.700 permits disclosure without client consent when required by a valid legal process such as a court order or subpoena.
Question 5: The 'competence' general standard requires that a CPA undertake only engagements that the firm can complete with:
- Absolute certainty and zero error rate
- Professional competence through training, education, or consultation (Correct answer)
- Prior experience in the exact same industry
- A minimum staff-to-partner ratio of 5:1
Correct answer: Professional competence through training, education, or consultation
A CPA may accept an engagement in a new area if they can attain competence through education, training, or consultation with qualified specialists.
Question 6: An emphasis-of-matter paragraph in an audit report is used to:
- Qualify the auditor's opinion on a specific account
- Draw users' attention to a matter disclosed in the financial statements (Correct answer)
- Disclaim an opinion on part of the financial statements
- Replace a going-concern explanatory paragraph
Correct answer: Draw users' attention to a matter disclosed in the financial statements
An emphasis-of-matter paragraph (AU-C Section 706) highlights a matter already properly disclosed in the financials without modifying the audit opinion.
Question 7: Under the PCAOB's AS 2605, a principal auditor who uses the work of another auditor must:
- Always issue a shared opinion referencing the other auditor
- Decide whether to refer to the other auditor or assume full responsibility (Correct answer)
- Require the other auditor to be PCAOB-registered
- Obtain the other auditor's working papers in full
Correct answer: Decide whether to refer to the other auditor or assume full responsibility
AS 2605 gives the principal auditor the choice to assume responsibility for the other auditor's work (no reference) or divide responsibility (with reference in the report).
Certified Public Accountant Professional Standards & Competencies 5
The AICPA's 'Integrity' principle requires CPAs to be: