Certified Public Accountant Ethics & Professional Responsibilities 2

Question 1

Under Circular 230, what is the minimum standard for a tax position a CPA can recommend to a client?

Accepted Answer

A realistic possibility of being sustained

Answer

Circular 230 requires that a tax practitioner have a reasonable basis for a position and, for signing a return, that the position have at least a realistic possibility (approximately 1-in-3 chance) of success.

Question 2

What does the AICPA's concept of 'due professional care' require of a CPA?

Accepted Answer

Exercise the skill and diligence of a reasonably competent professional

Answer

Due professional care requires CPAs to act diligently and competently, applying the skill level of a reasonably competent CPA — not guaranteeing perfect results.

Question 3

A CPA firm is being peer reviewed. Which type of peer review evaluates a firm's system of quality control for all its accounting and auditing engagements?

Accepted Answer

System review

Answer

A system review assesses a firm's system of quality control for its accounting and auditing practice, whereas an engagement review only examines selected work products.

Question 4

Which AICPA standard addresses a CPA's responsibility when they know a colleague has violated the Code of Professional Conduct?

Accepted Answer

There is no reporting obligation under the AICPA Code

Answer

The AICPA Code of Professional Conduct does not impose an affirmative duty on CPAs to report another member's violations, though members may choose to report them.

Question 5

What is the primary purpose of the Public Company Accounting Oversight Board (PCAOB)?

Accepted Answer

Oversee auditors of public companies to protect investors

Answer

The PCAOB was established by SOX to oversee the audits of public companies and broker-dealers in order to protect investors and the public interest.

Certified Public Accountant Practice Test

Certified Public Accountant Practice Test

Certified Public Accountant Ethics & Professional Responsibilities 2