CH 8 - ethics

Question 1

What is an example of self review threat?

Answer 1

If the firm performed book keeping service for a client then asked to perform attestation bc they are auditing own work

Question 2

What is an example advocacy?

Answer 2

If member provides forensic accounting services to a client in a lawsuit since client and member are now on same team an company can no longer act with integrity

Question 3

What veto power do clients have regarding outsourcing services?

Answer 3

Clients have veto power over client confidential information

Question 4

When is a contingent fee allowable?

Answer 4

1. When member is representing client before revenue agent examining client’s income tax (independent judge is involved)
2. Compilations lacking independence
3. Private letter rulings

Question 5

What are the safeguards that will reduce the threat of noncompliance with the code?

Answer 5

Safeguards implemented the client and firm

Question 6

When is work product retention permitted from client?

Answer 6

If client owes money to the firm for its work related to this work product

Question 7

When is it allowable for a member to depart from GAAP?

Answer 7

To account for new transaction that GAAP has not provided guidance on yet

Question 8

According to SOX, what are the fundamental notions for publicly traded companies? (3)

Answer 8

1. Accounting firms should not audit their own work
2. Auditors should no advocate for their clients
3. auditors should not serve as their clients’ managers

Question 9

According to ACIPA, what is considered an “other member”?

Answer 9

An unemployed CPA looking for work in public accounting or CPA not working in the accounting field (uber driver)

Question 10

What is the threat when a member in business fails to give information she knows the other party needs?

Answer 10

Advocacy threat

Question 11

In accordance with the AICPA, which type of members need to be independent in fact and appearance and not commit an act discreditable to the profession?

Answer 11

Members in the public practice

Question 12

what is the threat of advocacy?

Answer 12

When the member in business holds back material information that a third party needs to make a deision about the employer

Question 13

What are considered threats to integrity and objectivity for a member in the business?

Answer 13

Advocacy and self review