Gleim Flashcards
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.
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 bankrupty discloses a client’s name. Can only disclose information if:
(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
(4) initiate a complaint with or respond to any inquiry made by an appropriate investigative or disciplinary body.
A CPA purchased stock in an audit client corporation and placed it in a revocable educational trust for the CPA’s dependent minor child. The trust securities were not material to the CP but were material to the child’s personal net worth. Is the independence of the CPA considered to be impaired with respect to the client?
Yes, because the stock is considered a direct financial interest and, consequently, materiality is not a factor.
When is the independence of the CPA auditor of a client company’s financial statements most likely to be impaired because of involvement in litigation?
Shareholders of the client bring a class action against the client, its management, and the CPA. The CPA files a cross-claim against management alleging fraud.
Fact Pattern: A CPA firm was purchased by a public company. The acquirer performs other professional services and has banking, insurance, and brokerage subsidiaries. The owners and employees became employees of a subsidiary. Also, the previous owners formed a new CPA firm that provides attest services. It leases employees, offices, and equipment from the parent, which also provides advertising, billing, and collection services.
In the alternative practice structure (APS) of which the new firm is a part, covered members are closely aligned with other persons and entities. Who is subject to the same independence rules as covered members?
An employee leased by the firm from the parent.
A violation of the profession’s ethical standards is most likely to occur when a CPA who
Maintains a separate, distinct practice forms an association with other CPAs for joint advertising, and the group practices public accounting under the association’s name.
In which of the following circumstances would a covered member’s independence be impaired with respect to a nonissuer client?
The member owns municipal utility bonds issued by a client, and the bonds are not material to the member’s wealth.
Adams is the executive partner of Adams & Co., CPAs. One of its smaller clients is a large nonprofit charitable organization. The organization has asked Adams to be on its board of directors, which consists of a large number of the community’s leaders. Membership on the board is honorary. Adams & Co. would be considered to be independent
As long as Adams does not perform or give advice on management functions of the organization.
Fenn & Co., CPAs, has time available on a computer that it uses primarily for its own internal recordkeeping. Aware that the computer facilities of Delta Equipment Co., one of Fenn’s audit clients, are inadequate for the company’s needs, Fenn offers to maintain on its computer certain routine accounting records for Delta. If Delta were to accept the offer and Fenn were to continue to function as independent auditor for Delta, Fenn most likely would be in violation of
Both SEC and AICPA provisions pertaining to auditors independence.
The profession’s ethical standards most likely are violated when a CPA represents that specific consulting services will be performed for a stated fee and it is apparent at the time of the representation that the
A representation that specific services will be performed for a stated fee, when it is likely at the time that the actual fee will be substantially higher, is a prohibited form of solicitation.
Sarbanes-Oxley Act of 2002 provisions are:
- Auditors may not provide specific nonaudit services for their audit clients.
- The act provides criminal penalties for fraud.
- Executives must certify the appropriateness of the financial statements.
The Code of Professional Conduct contains Principles that guide all members of the AICPA. A commitment to act for the benefit of clients, creditors, investors, and others is most directly embodied in which Principle?
The public interest.
The AICPA’s Code of Professional Conduct includes a Form of Organization and Name Rule. It states that a member may practice public accounting only in a form or organization allowed by law or regulation that conforms with resolutions of the AICPA Council. Assume that a CPA firm is part of an alternative practice structure (APS) in which the firm is a subsidiary of another entity. Which attribute prevents a member of the AICPA from practicing public accounting in the APS?
Non-CAs own a majority of the firm’s financial interests.
Which of the following areas of professional responsibility should be observed by a CPA not in public practice?
1) Objectivity - Yes
2) Independence - No
A CPA who is employed by a manufacturing corporation performs financial services for the employer. Reports issued with respect to such activities are distributed with the CPA’s name and CPA designation appearing on the corporate letterhead. These reports should
Not refer to GAAS.
