CPA CFE Ethics and Professional Responsibility 3

Question 1

A CPA who audited a client's financial statements for three years is now asked to perform a tax reorganization review of the same client's prior-year financial results.
This situation most likely creates a:

Accepted Answer

Self-review threat

Answer

Self-interest threat

Answer

Advocacy threat

Answer

Intimidation threat

Question 2

A CPA is asked by a client to actively promote the client's position in a dispute before a tax tribunal. This situation most likely creates which type of threat to independence?

Accepted Answer

Advocacy threat

Answer

Familiarity threat

Answer

Self-interest threat

Answer

Self-review threat

Question 3

A CPA firm has provided bookkeeping services to an audit client for 15 years and the lead audit partner has developed a close personal friendship with the client's CFO. This situation most likely creates a:

Accepted Answer

Familiarity threat

Answer

Intimidation threat

Answer

Self-review threat

Answer

Advocacy threat

Question 4

A client threatens to report a CPA to their provincial regulator unless the CPA provides a favourable audit opinion. This is an example of which threat to independence?

Accepted Answer

Intimidation threat

Answer

Self-interest threat

Answer

Advocacy threat

Answer

Familiarity threat

Question 5

A CPA member has been found guilty of conduct unbecoming a CPA. Under the CPA Canada disciplinary process, which of the following penalties can the disciplinary body impose?

Accepted Answer

Reprimand, fine, suspension, or cancellation of CPA membership

Answer

Revocation of the member's university degree in accounting

Answer

Mandatory referral to law enforcement in all cases

Answer

Automatic civil liability to affected third parties

Question 6

The CPA Canada Code of Professional Conduct states that CPAs owe their primary duty to the public interest. This means that when a client's interests conflict with the public interest, the CPA must:

Accepted Answer

Prioritize the public interest and refuse to subordinate their professional judgment to the client

Answer

Always prioritize the paying client's interests to maintain the business relationship

Answer

Seek a compromise that partially satisfies both the client and public interest requirements

Answer

Defer to the client's legal counsel on how to balance these competing interests

Question 7

Professional skepticism, which is particularly important during an audit engagement, is best described as:

Accepted Answer

An attitude that includes a questioning mind and critical assessment of audit evidence

Answer

Assuming all client representations are false until proven otherwise

Answer

Refusing to rely on any client-provided documentation

Answer

Conducting all audit procedures at the highest level of assurance possible