Module B Class

Question 1

six principles of professional conduct

Answer 1

1. responsibilities
2. the public interest
3. integrity
4. objectivity and independence
5. due care
6. scope

Question 2

which rules apply to members in business?

Answer 2

1. Integrity and Objectivity
2. General Standards
3. Compliance with Standards
4. Accounting Principles
5. Acts Discreditable

Question 3

which rule applies to every member, even if not employed?

Answer 3

Acts Discreditable

Question 4

independence and _______ ________ are what gives audit its value

Answer 4

unbiased opinion

Question 5

independence of mind (aka independence of fact)

Answer 5

reflects the auditor’s state of mind

Question 6

independence in appearance

Answer 6

reflects other’s perceptions of the auditor’s independence

Question 7

independence is required for __________ but not for ________

Answer 7

attestations; tax

Question 8

“Covered Members”

Answer 8

any individual who might be in a position to compromise the integrity of an audit

Question 9

which noncovered members are still subject to independence requirements?

Answer 9

1. they individually, or in combination w immediate family, own more than 5% of an audit client’s stock
2. they hold a key position that influences financial reporting

Question 10

immediate family members (under the same restrictions as the auditor) include:

Answer 10

spouses
spousal equivalent
dependents

Question 11

what is a key financial position?

Answer 11

primary responsibility for financial statement preparation or significant accounting functions

Question 12

close family members include:

Answer 12

parents
siblings
self-supporting children

Question 13

close family members cannot:

Answer 13

own stock material to the family member’s net worth, or the client stock gives your relative significant influence over the client

Question 14

Adverse-Interest Threat

Answer 14

there is actual or threatened litigation between the accounting firm and client
- it’s fine if the litigation is immaterial and unrelated to the attestation service

Question 15

Undue Influence Threat

Answer 15

client overreaches in its attempts to entice an auditor to subordinate its best judgement to conform the client wishes

Question 16

2 main types of undue influence threats

Answer 16

1. pressure from the client
2. gifts and entertainment

Question 17

Advocacy Threat

Answer 17

a CPA promoting a client’s interests or position impairs the CPA’s ability to remain an impartial arbiter of facts