FAC FAC Ethics, Compliance & Professional Standards 1

Question 1

Which organization establishes and maintains the Code of Professional Conduct governing U.S. Certified Public Accountants (CPAs)?

Accepted Answer

AICPA

Answer

The American Institute of CPAs (AICPA) establishes the Code of Professional Conduct that governs CPA ethical behavior in the United States.

Question 2

What does auditor independence fundamentally require?

Accepted Answer

Freedom from bias or conflicts of interest affecting professional judgment

Answer

Auditor independence requires both independence in fact (actual freedom from bias) and independence in appearance (appearing unbiased to reasonable observers).

Question 3

Under the Sarbanes-Oxley Act (SOX), which section requires management to assess and report on the effectiveness of internal controls over financial reporting?

Accepted Answer

Section 404

Answer

SOX Section 404 requires management to assess internal controls over financial reporting and the external auditor to attest to that assessment.

Question 4

Which ethical principle requires a CPA to be straightforward and honest in all professional and business relationships?

Accepted Answer

Integrity

Answer

Integrity requires CPAs to be honest and not allow bias, conflicts of interest, or undue influence to override professional judgment.

Question 5

If a CPA discovers that a client has a material misstatement in previously issued financial statements, what is the appropriate action?

Accepted Answer

Advise the client to correct the misstatement and consider informing appropriate parties

Answer

Professional standards require CPAs to advise correction of material misstatements and potentially disclose to regulatory authorities if the client refuses.

(FAC) Finance and Accounting Certification Practice Test

(FAC) Finance and Accounting Certification Practice Test

FAC FAC Ethics, Compliance & Professional Standards 1