MIPPs Introduction and Conceptual Framework Flashcards
Which of the following types of relationships is not one of the primary threats to auditor independence? Financial relationships Dysfunctional relationships Family relationships Employee relationships
Dysfunctional relationships
Correct! This answer is not one of the four major categories, though it sounds dangerous. Consulting relationships are the fourth major category of threats to independence.
The Conceptual Framework for evaluating independence turns on which of the following: Threats and Menaces Threats and Safeguards Worries and Solutions Problems and Solutions.
Threats and Safeguards
Correct! It is threats and safeguards.
In an attest relationship, during which of the following periods are the independence rules applicable?
The period covered by the financial statements.
The period of the professional engagement.
The period covered by the financial statements and by the professional relationship.
The 90 days before an engagement letter is signed.
The period covered by the financial statements and by the professional relationship.
Correct! These are the two periods during which the independence rules must be met.
Which of the following are not covered members who must comply with independence rules during an attest engagement?
Attest team members.
People in a position to influence the attest engagement team.
People in a position to be influenced by the attest engagement team.
Partner equivalents who provide more than 10 hours of nonattest services to an attest client within any fiscal year.
People in a position to be influenced by the attest engagement team.
Correct! People in a position to be influenced by the attest engagement team are a category we just made up.
The BCD Accounting Firm audits WXY Corporation. Owning stock in an audit client generally creates an independence problem. Which of the following entities could own stock in WXY without impairing BCD’s independence?
BCD’s employee benefit plan.
BCD’s reviewing partner on the WXY engagement.
A BCD partner who provides 5 hours of tax service per fiscal year to WXY.
An investing fund established by several senior BCD partners.
A BCD partner who provides 5 hours of tax service per fiscal year to WXY.
Correct! Any number of hours under 10 will generally leave the person outside the category of a “covered member.” But this partner should not own more than 5% of WXY’s stock.
Which of the following is not a source of guidance included in the AICPA Code of Professional Conduct? Principles. Interpretations. Rules. Conduct factors.
Conduct factors.
This answer is incorrect because Interpretations of the Rules of the Code of Professional Conduct provide guidance to CPAs.
Which of the following is not considered a threat to independence in the Code of Professional Conduct's Independence Conceptual Framework? Self-review threat. Familiarity threat. Public interest threat. Self-interest threat.
Public interest threat
This answer is correct because this concept is not a potential threat to independence.
Which of the following is not a safeguard to mitigate or eliminate threats to independence according to Code of Professional Conduct’s Independence Conceptual Framework?
Those created by the profession, legislation or regulation.
Those implemented by the CPA involved.
Those implemented by the client.
Those implemented by the CPA firm.
Those implemented by the CPA involved.
This answer is correct because safeguards cannot be effectively implemented by the CPA involved.
The AICPA Code of Professional Conduct's Internal Control Conceptual Framework suggests that CPAs evaluate whether a particular threat would lead which type of person to conclude that an unacceptable risk of non-independence exists? AICPA peer reviewer. Peer. SEC inspector. Reasonably informed third party.
Reasonably informed third party.
This answer is correct because the AICPA framework requires that a reasonably informed third party’s viewpoint be considered.
AICPA independence requirements suggest that a CPA should evaluate whether a particular threat to independence would lead a reasonable person, aware of all the relevant facts, to conclude that:
There is substantial cause for a legal finding of non-independence.
A questioning mind reveals doubt as to independence.
An unacceptable risk of non-independence exists.
The accountant is definitely not independent.
An unacceptable risk of non-independence exists.
This answer is correct because the requirement simply asks one to consider whether a reasonable person would consider the risk to independence unacceptable.
Which of the following is not a broad category of safeguards that mitigate or eliminate threats to independence?
Safeguards created by the profession, legislation, or regulation.
Safeguards created by peers who performed the audit in the preceding year.
Safeguards implemented by the firm, including policies and procedures to implement professional and regulatory requirements.
Safeguards implemented by the attest client.
Safeguards created by peers who performed the audit in the preceding year.
This answer is correct because while those who performed the audit in the prior year should have considered threats and safeguards, they are less likely to establish broad safeguards for the subsequent year audit.
When a threat to independence arises that is not specifically considered in the Code of Professional Conduct an auditor should consider
Alternative threats to a lack of independence.
Available safeguards to independence.
Global independence rules.
Required lack of independence approaches.
Available safeguards to independence.
This answer is correct because for threats, auditors are required by the AICPA independence framework to consider safeguards.
Which of the following are sources of safeguards that might reduce a threat of noncompliance with the code to an acceptable level? Safeguards created by the profession. Safeguards implemented by the client. Safeguards implemented by the firm. All three choices provided.
All three choices provided.
Because the three chocies provided are all examples of sources of safeguards, this is the best answer.
Which of the following is not a key concept in the code's Conceptual Framework? Threats. Safeguards. Unusual danger. Acceptable level.
Unusual danger.
Unusual danger is not part of the Conceptual Framework.
A CPA acting as an auditor must honor professional rules regarding: Integrity. Objectivity. Independence. All of the above.
All of the above.
Because the first three choices are all correct, D is the best answer.
