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

A self-review threat arises when a CPA reviews work they previously performed, as they may be reluctant to identify deficiencies in their own prior work.

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

An advocacy threat arises when a CPA promotes a client's position or opinion to the point where their objectivity may be compromised.

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

A familiarity threat arises when a CPA becomes too sympathetic or trusting of a client due to a close relationship over time, which may compromise their professional skepticism.

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

An intimidation threat arises when a CPA is deterred from acting objectively by actual or perceived threats or pressure from a client or other party.

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

The CPA disciplinary process can impose a range of penalties including reprimands, fines, conditions on practice, suspension, or cancellation of membership depending on the severity of the misconduct.

CPA CFE Practice Test

CPA CFE Practice Test

CPA CFE Ethics and Professional Responsibility 3