Professional Responsibilities Flashcards
What would be considered an instance in which the independence of the CPA most likely is not considered to be impaired?
When a CPA has been retained as an auditor of a Credit Union of which the CPA is a member
What is a CPA NOT required to disclose when associated with financial statements that do not comply with promulgated GAAP?
The reason why the departure does not have a material effect on the statements.
What service would an auditor of an issuer client NOT be able to provide without impairing independence and without obtaining the preapproval of the audit committee?
Nonaudit services to perform financial information systems design and implementation.
What is a new requirement of the SEC that has strengthened auditor independence?
The requirement that management report the nature of the disagreements with the former auditor.
What would be considered a violation of the profession’s ethical standards?
When a CPA is the sole shareholder in a professional accountancy corporation and uses the designation “and company” in their firm title.
Why? - Because a firm name may not be misleading and this may be considered misleading when a member is a sole owner
What would be considered a violation of the AICPA Code of Professional Conduct?
When a member begins a public accounting firm with the trade name “Pay Less Audit Service”
Why? - Because this may be considered a deceptive or misleading audit service.
True or False.
The Code of Professional Conduct prohibits solicitation of clients.
FALSE.
The Code of Professional Conduct does not prohibit solicitation of clients.
E.g. A CPA serving as a bank director does not need to be concerned with the compatibility of serving as a bank director and the possibility of soliciting clients.
Solicitation is permitted if it is not false, misleading, or deceptive.
What attribute would prevent a member of the AICPA from practicing public accounting in the APS?
WHEN non-CPAs own a majority of the firm’s financial interests
i.e. CPAs must own a majority of the firm in terms of financial interests and voting rights
WHO must comply with the Code of Professional Conduct if a member of the AICPA owns an interest in a separate business that performs tax services (and the member does NOT control the business)?
The member only.
Note: If the member had majority control the entity and the member would be subject to compliance with the code of Professional Conduct.
HOW many years is the “cool-off” period required before a member of an issuer’s audit engagement team may begin working for the registrant (in key position)?
1 YEAR
i.e. The SEC prohibits a member of an issuer’s audit engagement team from working in a key position within 1 year (for issuer).
