Chapter 19 Homework Flashcards
It is important to understand the structure of the auditor’s Code of Professional Conduct. Place the following descriptions into the appropriate category (Principles, Rules, Interpretations, or Ethics).
1) Overall framework for professional services.
2) Govern performance of professional services.
3) Provide guidelines as to scope and implementation.
4) Summarize applications in particular instances.
5) Several of these correspond to GAAS.
6) Each of these is called an Article (i.e., Article I, Article II, etc.)
Principles: Overall framework for professional services; Each of these is called an Article (i.e., Article I, Article II, etc.)
Rules: Govern performance of professional services; Several of these correspond to GAAS.
Interpretations: Provide guidelines as to scope and implementation.
Ethics Rulings: Summarize applications in particular instances.
It is important to understand the structure of the auditor’s Code of Professional Conduct. Place the following descriptions into the appropriate category. (Principles or Rules)
Principles: Responsibilities, The Public Interest, Integrity, Objectivity and Independence, Due Care, and Scope and Nature of Services.
Rules: Independence, Integrity and Objectivity, Compliance with Standards, General Standards, Accounting Principles, Confidential Client Information, Contingent Fees, Acts Discreditable, Advertising and Other Forms of Solicitation, Commissions and Referral Fees, Form of Organization and Name.
The question that follows is based on the Independence Rule of the AICPA Code of Professional Conduct as it relates to independence and family relationships. Select yes if the situation violates the rule, no if it does not.
A partner’s dependent parent is a 5 percent limited partner in an entity audited by the partner’s firm. Does the parent’s direct financial interest in the entity impair the firm’s independence?
Yes
The question that follows is based on the Independence Rule of the AICPA Code of Professional Conduct as it relates to independence and family relationships. Select yes if the situation violates the rule, no if it does not.
A partner assigned to a firm’s New York office is married to the president of an entity for which the firm’s Connecticut office performs audit services. If the partner does not perform services out of or for the Connecticut office, cannot exercise significant influence over the engagement, and has no involvement with the engagement, such as consulting on accounting or auditing issues, is the firm’s independence impaired?
No
The question that follows is based on the Independence Rule of the AICPA Code of Professional Conduct as it relates to independence and family relationships. Select yes if the situation violates the rule, no if it does not.
A CPA’s father acquired a 10 percent interest in a company that the CPA audits. The investment is material to the father’s net worth. If the son is aware of his father’s investment and the CPA participates in the audit engagement, is the firm’s independence impaired?
Yes
The question that follows is based on the Independence Rule of the AICPA Code of Professional Conduct as it relates to independence and family relationships. Select yes if the situation violates the rule, no if it does not.
An audit partner has a brother who owns a 60 percent interest in an entity for which the partner provides attest services. The interest is material to the brother’s net worth. If the partner participates in the audit engagement, but does not know about his brother’s investment because the investment is held by a corporation that obscures the brother’s investment, is the firm’s independence impaired?
No
The AICPA Code of Professional Conduct contains both general ethical principles that are aspirational in character and a:
A) Complete list of all the different kinds of crimes that would be considered as acts discreditable to the profession.
B) Description of a CPA’s procedures for responding to an inquiry from a trial board.
C) Set of specific, mandatory rules describing minimum levels of conduct a CPA must maintain.
D) List of violations that would cause the automatic suspension of a CPA’s license.
Set of specific, mandatory rules describing minimum levels of conduct a CPA must maintain.
Understanding of relationships is of primary importance to understanding the auditor’s Code of Professional Conduct regarding independence. Place the following relationships into the appropriate category. (Immediate Family, Close Relative, Other Relative or Friend).
Roommate - Sister - Dependent Parent - Cousin - College Friend - Spouse - Golf Partner - Nephew - Depend Child - Grandfather - Independent (i.e., grown) Child - Niece - Father - Spousal Equivalent (i.e., Domestic Partner) - Mother - Brother.
Immediate Family: Dependent Child, Spouse, Spousal Equivalent, Dependent Parent.
Close Relative: Father, Sister, Brother, Mother, Independent Child, Grandfather
Other Relative or Friend: Cousin, Golf Partner, Niece, Nephew, College Friend, Roommate.
Which of the following agencies/organizations govern the independence rules for audits of public companies?
A) Auditing Standards Board [ASB].
B) AICPA.
C) FASB.
D) Public Company Accounting Oversight Board.
Public Company Accounting Oversight Board.
One of a CPA firm’s basic objectives is to provide professional services that conform with professional standards. Reasonable assurance of achieving this basic objective is provided through:
A) A system of quality management.
B) Compliance with generally accepted reporting standards.
C) A system of peer review.
D) Continuing professional education.
A system of quality management.
