Certified Public Accountant Ethics & Professional Responsibilities 3

Question 1

Under the Sarbanes-Oxley Act, which activity is prohibited for auditors of public companies?

Accepted Answer

Both B and C

Answer

SOX Section 201 prohibits auditors of public companies from providing financial information systems design/implementation and internal audit outsourcing to audit clients, among other non-audit services.

Question 2

What is the concept of 'professional skepticism' in the context of an audit?

Accepted Answer

Maintaining a questioning mind and critically assessing evidence

Answer

Professional skepticism requires auditors to maintain a questioning attitude, remain alert for conditions indicating possible misstatement, and critically assess audit evidence.

Question 3

Which action by a CPA would most likely be considered an 'act discreditable to the profession' under AICPA Rule 501?

Accepted Answer

Refusing to return a client's records after a fee dispute

Answer

Rule 501 prohibits acts discreditable to the profession, and withholding a client's records to which the client is entitled (due to a fee dispute) is specifically identified as a violation.

Question 4

Under AICPA standards, when can a CPA charge a contingent fee for services?

Accepted Answer

For tax matters if there is a reasonable expectation of IRS review

Answer

CPAs may charge contingent fees in tax matters where there is a reasonable expectation that the fee arrangement will not impair independence, such as representing a client in an IRS examination.

Question 5

What does the 'conceptual framework' approach in the AICPA Code require a CPA to do when facing an ethical conflict?

Accepted Answer

Identify threats to compliance, evaluate significance, and apply safeguards

Answer

The conceptual framework requires CPAs to identify and evaluate threats to fundamental principles, assess their significance, and apply safeguards to eliminate or reduce them to an acceptable level.

Certified Public Accountant Practice Test

Certified Public Accountant Practice Test

Certified Public Accountant Ethics & Professional Responsibilities 3