CGA Ethics & Professional Standards Flashcards

Which of the following best describes the concept of 'due professional care' in an audit?

Answer: Exercising the skill and diligence that a competent professional would apply

Due professional care means applying the same judgment, diligence, and competence that a reasonably skilled professional would bring to the engagement.

When a CGA member faces pressure from a supervisor to sign off on misleading financial statements, the appropriate first action is to:

Answer: Refuse and document objections, escalating internally if needed

The professional standards require documenting objections, refusing to sign off on misleading statements, and escalating through internal channels before external reporting.

Which of the following is an acceptable safeguard against a familiarity threat in an audit?

Answer: Rotating the lead audit partner after a set number of years

Partner rotation is a key safeguard against familiarity threats, ensuring that auditors don't become too comfortable with client management over time.

A contingent fee arrangement for a CGA providing tax services is generally:

Answer: Prohibited because it threatens objectivity and independence

Contingent fees create a self-interest threat that impairs objectivity, and are generally prohibited for tax and assurance services under professional standards.

The AICPA's conceptual framework for independence requires consideration of which two components?

Answer: Independence in fact and independence in appearance

Independence requires both independence in fact (actual freedom from bias) and independence in appearance (looking unbiased to a reasonable observer).

Referring a client to a third-party service provider and receiving a referral fee without disclosing it to the client violates which principle?

Answer: Integrity and objectivity

Undisclosed referral fees undermine integrity and objectivity because they create a hidden financial interest that may bias the accountant's recommendations.