Members in Business

Question 1

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

Independence.
Integrity and objectivity.
Contingent fees.
Commissions.

Answer 1

Integrity and objectivity.

This answer is correct. All members must adhere to the Integrity and Objectivity Rule.

Question 2

Which of the following areas of professional responsibility should be observed by a CPA not in public practice?
Objectivity   Independence
Yes               Yes
Yes               No
No                 Yes
No               No

Answer 2

Objectivity Independence
Yes No

This answer is correct because a CPA not in public practice need not adhere to the independence standards but must adhere to the objectivity standards.

Question 3

Which of the following actions by a MIPP would not threaten integrity or objectivity standards, or both?

Jessie was an internal auditor for the privately-held Jonass Co. and on her birthday she accepted a gift from her company’s external auditor in the form of a coffee mug emblazoned with the PriceToucheHouse logo.

Surabi allowed her supervisor to pressure her into characterizing the tax implications of a transaction their company consummated in a manner that is completely erroneous in her view.

Rachel, who works in internal audit, hid some unflattering financial details from her employer’s external auditor.

Nicole, a staff accountant at Nickleby Corporation, ordered a subordinate to back-date an IRS document.

Answer 3

Jessie was an internal auditor for the privately-held Jonass Co. and on her birthday she accepted a gift from her company’s external auditor in the form of a coffee mug emblazoned with the PriceToucheHouse logo.

Correct! This gift is reasonable under the circumstances of Jessie’s birthday and threatens neither objectivity nor integrity.

Question 4

Which of the following is not true regarding application of the Conceptual Framework for members in business?

An adverse interest threat arises when a member in business sues her employer.

A familiarity threat arises when a member in business hires a relative to work for his employer.

A self-review threat arises when a member in business reviews some internal audit work that she herself performed before she was promoted to her current position.

A familiarity threat arises when a member in business has a long association with an employer.

Answer 4

A familiarity threat arises when a member in business has a long association with an employer.

This is not true—this is a problem for members in public practice who may not be able to be adequate watchdogs of attest clients if they become too familiar with them. But no compliance threat arises for a member in business who works for an employer for a long time.