AICPA Part 3

Question 1

SOX rules govern nonaudit services to

Answer 1

publicly held audit clients

Question 2

AICPA code of professional conduct rules govern non audit services to

Answer 2

privately-held audit clients

Question 3

MIBs ________ attest work and therefore _______ have to worry about ________

Answer 3

do NOT do, do NOT, independence threat

Question 4

members doing attest work…

Answer 4

may not advocate for their attest clients

Question 5

covered members include:

Answer 5

1. members of the attest engagement team
2. individuals in a PTI (position to influence) the attest engagement
3. partners, partner equivalents or managers providing 10 hours or more of non-attest services to the attest client
4. partners or partner equivalents in the same office where the lead engagement
   partner for the attest engagement practices
5. the firm or the firm’s employee benefit plan
6. any entity controlled by any of the above OR two or more of the above acting together

Question 6

covered member doesnt need to be independent for:

Answer 6

1. compilations (lack of independence must be disclosed)
2. taxes
3. consultations
4. F/S preparation engagements
5. other nonattest services (bookkeeping or PR)

Question 7

what are some examples of auditors participating in management?

Answer 7

1. supervising client personnel
2. hiring or firing employees
3. approving client transactions
4. having custody of client assets
5. having responsibility for designing, implementing or maintaining internal controls

Question 8

to depart from GAAP:

Answer 8

1. you need to demonstrate that compliance would mislead investors
2. describe the departure, its approximate effects and the reasons why compliance would mislead
3. new legislation arises
4. the evolution of a newform of business transaction

Question 9

what are the requirements of an objective state of mind?

Answer 9

1. impartiality
2. intellectual honesty
3. freedom from conflicts of interest

Question 10

in order for firms to be a part of a network, they must share these 6 things:

Answer 10

1. common control
2. common business strategy
3. common quality control policies and procedures
4. sharing of profits or costs
5. use of professsional resources
6. common brand

Question 11

What are some examples of absence of due care from a CPA?

Answer 11

1. Non-disclosure of information to the client (ie. Internal control weakness)
2. Errors previously discovered but not corrected
3. Contract specifications not followed
4. Professional standards not followed:
   -State and federal law
   -GAAS, GAAP, etc.
   -Customs of the profession

Question 12

The AICPA code addresses…

Answer 12

Quality control standards as safeguards to ensure quality auditor performance

Question 13

GAAS and PCAOB provide guidance…

Answer 13

For gathering evidence on which to base an audit opinion

Question 14

Professional standards require payment is made…

Answer 14

Prior to issuance of the following year audit report; fieldwork can be started

Question 15

Referral fees are permissible when the client is…

Answer 15

NOT an attest client

Question 16

By disclosing lack of independence,

Answer 16

You can charge a contingent fee for services to the same client

Question 17

According to code of professional conduct’s independence conceptual framework, the safeguards used to mitigate or eliminate threats to independence are those:

Answer 17

1. created by the profession, legislation or regulation.
2. implemented by the client.
3. implemented by the CPA firm.

Question 18

Gifts to the firm team, members, or people in a position to influence PTIs should ask themselves…

Answer 18

Is it clearly insignificant?

Question 19

Entertainment to the firm, team members or PTI (people in a “position to influence”) should ask themselves regarding the acceptance of the entertainment….

Answer 19

Is it reasonable under the circumstances?

Question 20

POPEs

Answer 20

Professional employees of the audit firm

Question 21

How do POPEs impair independence?

Answer 21

Professionally employees of the audit firm, who are not covered members may not own more than 5% of a clients ownership interests

Question 22

Referral fees and commissions are _________ for attest clients

Answer 22

PROHIBITED
Even if they are related to non-attest services

Question 23

It is prohibited for a CPA to charge contingency fees when:

Answer 23

1. preparing a TR or refund claim
2. auditing or reviewing financial statements
3. compiling of financial statements used by a third party
4. examining prospective financial information

Question 24

what is the purpose of the American Institute of Certified Public Accountants (AICPA)?

Answer 24

provides auditing standards, accounting education and CPA Exam
covers nonpublic entities

Question 25

SOX does not require the use of…

Answer 25

the COSO internal control or ERP framework