Ethics and Professional Responsibility Flashcards

Under Canada's Proceeds of Crime (Money Laundering) and Terrorist Financing Act, CPAs in certain roles are considered 'reporting entities.' Which of the following obligations does this impose on them?

Answer: Report suspicious transactions and large cash transactions to FINTRAC

Reporting entities must report suspicious transactions and cash transactions of $10,000 or more to FINTRAC, Canada's financial intelligence unit.

A CPA identifies a threat to their independence but concludes that safeguards can reduce it to an acceptable level. Which of the following is an example of a firm-level safeguard?

Answer: Quality control policies requiring partner review of independence assessments

Firm-level safeguards include quality control policies and procedures, such as independent partner reviews of independence and ethics compliance.

The principle of objectivity requires that a CPA's professional judgment must not be compromised by:

Answer: Bias, conflict of interest, or undue influence of others

Objectivity means that a CPA's professional judgment must be free from bias, conflict of interest, or undue influence that could override their professional or business judgments.

The principle of integrity under the CPA Code of Professional Conduct primarily means that a CPA must be:

Answer: Straightforward and honest in all professional and business relationships

Integrity requires that CPAs be straightforward and honest in all professional and business relationships, avoiding misleading statements or omissions.

A CPA discovers that their employer is engaged in material financial fraud. The CPA has raised the concern internally and been ignored. Under the CPA Code's guidance on responding to non-compliance with laws and regulations (NOCLAR), the CPA should:

Answer: Consider escalating the matter or, if necessary, reporting to an appropriate external authority

Under NOCLAR guidance, when internal escalation fails, the CPA should consider whether to report the non-compliance to an appropriate external authority to protect the public interest.

A CPA in public practice holds client funds in trust. The most fundamental rule governing trust accounts under the CPA Code of Professional Conduct is:

Answer: Client funds must be kept separate from the firm's own funds at all times

The fundamental rule is that client money held in trust must be kept completely separate from the firm's own money to protect client interests and maintain the integrity of the trust relationship.

Under the CPA Code of Professional Conduct, restrictions on advertising by CPAs are primarily designed to ensure that advertising:

Answer: Is not false or misleading and does not bring the profession into disrepute

Advertising by CPAs is permitted as long as it is not false, misleading, or deceptive, and does not discredit the profession — the goal is truthful communication rather than a blanket prohibition.