A6 - Professional Responsibilities

Question 1

T/F: Employment of the CPA’s spouse as a client’s internal auditor impairs the auditor’s independence

Answer 1

True

Question 2

In the audit of an issuer, how long are the lead and concurring partners allowed to be engaged on any certain client?

Answer 2

Five years and are subject to a five year timeout period; other audit partners must rotate off after seven years and are subject to a two year timeout

Question 3

T/F: Failure to return records to a client after the client makes a demand is considered to be an act discreditable to the profession, and as such violates the profession’s ethical standards

Answer 3

True; the CPA must return records to the client upon request, even if the client is not up to date on payments

Question 4

What is a contingent fee and is it appropriate?

Answer 4

A contingent fee is a fee that is charged contingent upon the outcome of the engagement (i.e. tax refund obtained or audit opinion reached) and it is (usually) not allowed under professional standards

Question 5

T/F: An immaterial, indirect financial interest in a client doe not impair the auditor’s independence

Answer 5

True

Question 6

A CPA who is not in public practice is still obligated to follow which of the rules of conduct?

Answer 6

Objectivity and integrity

Question 7

Under SOX, how long must the auditor retain the client records?

Answer 7

Seven years

Question 8

Under SOX, how long is the cool-off period for an auditor before such person may become employed as the client’s CEO, CFO, etc?

Answer 8

One year

Question 9

How many audits of public companies per year does a CPA firm that is registered with the Public Company Accounting Oversight Board (PCAOB) have to perform before it receives an annual inspection from the PCAOB?

Answer 9

Over 100 audits of issuers

Question 10

Section 404 of the Sarbanes-Oxley Act of 2002 deals with what?

Answer 10

Management’s assessment of internal control over financial reporting