12.17.18 Flashcards
Personal financial planning services include those that are limited to
Assisting the client to act on personal financial planning decisions.
“Personal financial planning engagements are only those that involve developing strategies and making recommendations to assist a client in defining and achieving personal financial goals.” However, unless they are undertaken by specific agreement with the client, the CPA is not responsible for other services. These services include (1) assisting the client to act on planning decisions, (2) monitoring progress in achieving goals, and (3) updating recommendations and revising planning decisions (PFP 100).
Which of the following reports may be issued only by an accountant who is independent of a client?
Standard report on an examination of a financial forecast.
A member in public practice must be independent in the performance of professional services as required by standards issued by bodies designated by the AICPA Council. These standards include Statements on Standards for Attestation Engagements, which apply to, among other things, prospective financial statements (forecasts and projections). Thus, the Independence Rule and the SSAEs require a practitioner to be independent when performing an examination of a financial forecast.
Which of the following situations would not impair objectivity, integrity, or independence with respect to an audit client?
An out-of-town client takes the audit engagement team out to dinner at a renowned local restaurant.
Independence is impaired unless the value of the gift or entertainment from the attest client is clearly insignificant to the recipient(s). Objectivity is impaired unless the gift or entertainment is reasonable in the circumstances. Integrity is impaired if the gift or entertainment violates (1) member or client policies or (2) laws or regulations. A restaurant meal is clearly insignificant to the recipient(s), reasonable in the circumstances, and unlikely to violate policies, laws, or regulations.
Under which of the following circumstances may a CPA charge fees that are contingent upon finding a specific result?
If fixed by courts, other public authorities, or in tax matters if based on the results of judicial proceedings.
A contingent fee is established as part of an agreement under which the amount of the fee is dependent upon the finding or result. Fees are not deemed to be contingent if fixed by courts or other public authorities, or in tax matters, if they are based on the results of judicial proceedings or the finding of governmental agencies.
Kar, CPA, is a staff auditor participating in the audit engagement of Fort, Inc. Which of the following circumstances most likely impairs Kar’s independence?
Kar’s sibling is the director of internal auditing for Fort.
Independence is impaired if an individual participating in the audit engagement has a close relative who has a key position with the client. A close relative is a parent, sibling, or independent child. A key position is one in which an individual has (1) primary responsibility for significant accounting functions that support material components of the financial statements, (2) primary responsibility for the preparation of the financial statements, or (3) the ability to exercise influence over the contents of the financial statements. Thus, because Kar’s sibling is the director of internal auditing for Fort, Inc., auditor independence is impaired.
An audit of the financial statements of Camden Corporation is being conducted by an external auditor. The external auditor is expected to
Express an opinion as to the fairness of Camden’s financial statements.
Auditing standards require the auditor to express an opinion regarding the financial statements as a whole or to assert that an opinion cannot be expressed. An opinion states whether the financial statements are presented fairly, in all material respects, in accordance with an applicable financial reporting framework.
Ann Covington, CPA, has been asked to perform a consulting services engagement concerning the analysis of a potential merger. She has little experience with the industry involved. What is her most appropriate action?
Accept the engagement and perform additional research or consult with others to obtain sufficient competence.
The CPA may accept the engagement but should conduct research or consult with others to obtain a sufficient level of knowledge about the subject of the engagement. An AICPA member should undertake only those professional services that the member or the member’s firm can reasonably expect to be completed with professional competence.
The Confidential Client Information Rule is violated when a member in public practice
Provides client profit and loss percentages to a trade association without the client’s consent.
Prior to disclosing confidential client profit and loss percentages to a trade association, the CPA must have specific client consent.
The AICPA Code of Professional Conduct requires compliance with accounting principles promulgated by the bodies designated by the AICPA Council to establish such principles. The literature considered officially established accounting principles includes
The FASB Accounting Standards Codification.
The FASB Accounting Standards Codification is the source of authoritative guidance for all public and nonpublic nongovernmental entities.
According to the standards of the profession, which of the following activities may be required in exercising due professional care?
Consulting with others:
Obtaining specialty accreditation:
Yes
No
A CPA should undertake only those services that (s)he reasonably expects to complete with professional competence and should exercise due professional care in performing those services. Additional research or consultation with others may be necessary to gain sufficient competence to complete a service in accordance with professional standards. However, professional standards do not require specialty accreditation, although many CPAs choose to specialize in specific services.
An accountant can perform, with preapproval of the audit committee of the board of directors, which of the following non-audit services during the audit of an issuer?
Tax Planning Services
Audit firms are prohibited from offering certain nonaudit services to their attest clients. Preapproved compliance tax engagements are not prohibited.
In which of the following situations is there a violation of client confidentiality under the AICPA Code of Professional Conduct?
A member whose practice is primarily bankruptcy discloses a client’s name.
A member shall not disclose confidential client information without the client’s consent unless it is disclosed to (1) comply with a valid subpoena or summons or with applicable laws and regulations, (2) discharge his or her professional obligations, (3) cooperate in an official review of his or her professional practice, or (4) initiate a complaint with or respond to any inquiry made by an appropriate investigative or disciplinary body. In a bankruptcy case, the implication that a client is in financial difficulty may make his or her name confidential information. If no exception applies, client confidentiality has been violated.
Assurance and advisory services differ from consulting services because
Assurance and advisory services usually involve situations in which one party wants to monitor another and focus on improving information.
Assurance and advisory services do not include consulting services. Assurance and consulting services often are similar because they are delivered using a similar body of knowledge and skills. However, assurance and advisory services differ from consulting services because assurance services focus on improving information, whereas consulting services strive to provide advice. Also, assurance and advisory services often involve monitoring of one party by another (often within the same company) rather than the two-party arrangements common in consulting engagements.
Which of the following statements is (are) true regarding a CPA employee of a CPA firm taking copies of information contained in client files when the CPA leaves the firm?
I. A CPA leaving a firm may take copies of information contained in client files to assist another firm in serving that client.
II. A CPA leaving a firm may take copies of information contained in client files as a method of gaining technical expertise.
Neither I nor II.
The Acts Discreditable Rule states that a member shall not commit an act discreditable to the profession. After the relationship of a member who is not an owner of the firm is terminated, the member may not take or retain copies or originals from the firm’s client files or proprietary information without permission.
A member of the AICPA owns an interest in a separate business that performs tax services. If the member does not control the business, who must comply with the Code of Professional Conduct?
The member only.
A member in public practice may own an interest in a separate business that performs the services for which standards are established, e.g., if the member, individually or with his or her firm or members of the firm, controls the separate business (as defined by the FASB Codification), the entity and all its owners and employees must comply with the Code. Absent such control, the member, but not the separate business, its other owners, and its employees, would be subject to the Code.
