Regers Questions

Question 1

Services that a CPA my perform in carrying out CONSULTING engagement service for a client

Answer 1

A CPA can 1) Review business plan and 2) Assistance in obtaining a loan, 3) Analysis on clients accounting system

Question 2

Per SOX title II- which non audit serves are not prohibited from being perfumed by a registered public accounting firm

Answer 2

SOX ACT specifically prohibits any registered public firm from providing NON AUDIT services to the client. Tax services are permissible IF PRE-APPROVED by the audit committee and DISCLOSED to the SEC-
_________________
Prohibited services include: Bookkeeping, Financial info system design, actuarial services, internal audit outsoursing services, management , Broker or Dealer or investment banking serves, legal and expert services unrelated to the audit

Question 3

During the course of an audit under International Auditing Standards ISA, Auditor while performing the test on a sample detects a misstatement that is an anomaly. How should he account for the misstatement in relation to the sample it is drawn on:

Answer 3

UNDER ISA, the auditor will obtain a high degree of uncertainty that it is an anomaly by performing additional audit procedures. upon obtaining the appropriate high degree of uncertainty the auditor will adjust for the misstatement without projecting to the remainder of the population.
UNDER GAAS, the auditor is required to subject the misstatement to the entire population, even if anomaly

Question 4

CPA obtains 100,000 personal loan from a financial institution from whom the CPA provided compilation serves. The Loan was FULLY SECURED and considered Material to His Net WORTH.
Loan obtained : Jun 1, 200X
Loan Paid off: Dec 32 200X
CPA engaged : Apr 3 20!X for Dec 31 201X statements
Is the auditor considered independent

Answer 4

YES because he was not required to be Independent by the time the loan was granted

Question 5

Auditor is required to comply with applicable ethical requirements: i.e. remain independent.
Under US GAAS the auditor ‘Conveys compliance with the independent requirement by indicating in the TITLE to the report of the independent auditor’
How is conveyance done under International standards:

Answer 5

ISA: the auditor indicates compliance by indicating in the TITLE to the report & Auditors responsibility paragraph

Question 6

EDP System implementation services are in which category

Answer 6

Standards of Consulting Services

Question 7

What is the definition of professional services

Answer 7

Professional services are a measure of the Quality of the auditors performance NOT the procedures used to gather evidence

Question 8

A CPA in public practice must be independent in both FACT and APPEARANCE when performing which of the following services

Answer 8

INDEPENDENCE is required in ATTEST engagement, where the CPA is drawing conclusions about a CLIENTS assertions .
________________
COMPILATION involves no opinion, assurance or findings by CPA
Therefore not required for :
1. Compilation of FS
2. Preparation of Tax Returns
3. Compilation of Financial Forecast

Question 9

Example of a way under ethical standards of profession likely to impair an auditors independence

Answer 9

CLOSE FAMILY MEMBER employed as key person by the client

Question 10

Working papers, who owns and how is information disclosed?

Answer 10

1. The Accountant owns the work papers.

2. Disclosed via: a) Client permission b) Peer Review c) Court order

Question 11

IF a CPA is owed payment from last years audits, when can he begin work?

Answer 11

if client commits to pay past due fees in FULL before the audit report is ISSUED

Question 12

Number 1 Rule regarding document retainment after the client has requested:

Answer 12

CPA is required to return docs whether payment has been issued or not. Cannot withhold docs

Question 13

Under which of the following in regards to ethical standards is NOT considered direct financial interest

a) Investment in a blind trust
b) Investment held through a non client investment club
c) Investment held through a non client regulated mutual fund
d) Investment held through a trustee of a trust

Answer 13

c) Investment held through a non client regulated mutual fund

Question 14

Under the Statements on Standards for Consulting Services, which of the following best reflects a CPA’s responsibility when undertaking consulting Services

Answer 14

A CPA must Inform the client on reservations concerning the benefits of engagement

Question 15

Under ethical standards of professional engagement, which of the following situations involving Non dependent members would impair the auditor

Answer 15

INDEPENDENCE RULES apply to Immediate Family of a CPA which includes spouse and dependents –CPA’s spouse employment by client for example. Same rules do not apply to close relatives e.g. parents siblings or non dependent kids…FIRST COUSIN isn’t part of immediate Family

Question 16

Can a CPA partnership hand in work papers to without a lawful subpoena or clients consent to FASB or IRS

Answer 16

NO

Question 17

Under which circumstances can a CPA charge fees that are contingent upon finding a specific result

Answer 17

IF FIXED BY COURTS or OTHER PUBLIC Authorities or Tax Matters or based on Judicial proceedings

Question 18

Per SOX TITLE II, which non audit services is not prohibited from performing by registered public accounting firm (With pre-approvals from the audit committee and disclosure to the FS)

Answer 18

Tax Services:
____________________________________________________________________
NOT ALLOWED: Bookkeeping, Financial information design, Appraisal, Valuation

Question 19

According to professional ethical standards, A CPA TAX PREPARER may rely upon unsupported information provided by the client without examining underlying information

Answer 19

Unless it appears to be inaccurate or incomplete

Question 20

Consulting Services DO NOT Require Independence. What does that mean?

Answer 20

An accountant with a conflict of interest that is fully disclosed to the client may perform such services
. A written understanding concerning the scope of the engagement is not a requirement …CAN BE ORAL

Question 21

Why has the CPA profession found it essential to promulgate ethical standards and ensure a means to measure their observance

Answer 21

CPA profession establishes Ethical Standards to emphasize the professional responsibilities to the PUBLIC….Not client or colleagues

Question 22

Under ISA, if an audit report by the component auditor is not restricted use, can the group auditor make reference to the component auditor

Answer 22

UNDER ISA, a group auditor may not make reference to the component auditor unless REQUIRED to DO SO BY LAW or REGULATIONS
__________________________
UNDER GAAS, the group auditor may make reference to the component auditor but should perform certain procedures including reading the components Financial Statements

Question 23

Which investment is considered INDIRECT FINANCIAL INTEREST under ethical standards

Answer 23

Investments held in a Mutual Fund
_______________________________
FYI: Not Blind Trust, ***Retirement Plan or Investment Club.

Question 24

Disclosures of confidential information to another CPA is not generally permitted without client consent. One exception is:

Answer 24

Quality control program conducted by CPA society

Question 25

Following the completion of an engagement, the ethical reason why would a CPA leave with information contained in a clients files

Answer 25

Working papers are the property of a CPA firm. Taking copies contained in the Files would not be appropriate for any reason without permission …CPA cannot take these files to another CPA firm, they contain client information

Question 26

Which report is issued by an independent auditor

Answer 26

Standard Report on examination of Financial Statement since it requires the expression of an opinion, therefore Independence

Question 27

According to professional standards, which of the following statements is correct regarding the standards a cpa should follow when recommending TAX Return poisions

Answer 27

The Standards for adoption, of a position is that there is realistic of it being sustained if challenged

Question 28

What type of Loan may be obtained from a Financial institution client without impairing A CPA’s independence

Answer 28

Automobile loans collateralized by cash proceeds surrender proceeds of a life insurance policy, loans filly collateralized by cash deposits at the same institutions and credit card and overdraft that do not exceed over $10,000.00.
____________
Home Mortgage loans, student loans and personal loans would impair the independence of the auditor

Question 29

An auditor performs certain bookkeeping services and non attest services that are not prohibited by Rule 101 of the AICPA code of conduct, The auditor and the client has documented and have come to an understanding that the management will assume all responsibility to oversee and designate adequate services, which of the following is true

Answer 29

The auditor may conduct audit under GAAS without meeting any additional requirements
____________________
The auditor may perform certain non attest services for an attest client provided the auditor establishes and DOCUMENTS an understanding with the client which the client assumes all management responsibilities, oversee services and designate appropriately to individuals…no additional requirement is needed.

Question 30

Which of the following would impair CPA independence

Answer 30

Auditor is contracted to supervise client personelle .

CPA cannot assume a management role without impairing his independence .

Question 31

An auditor who is not in public practice is obliged to follow which rules

a) independence
b) commission
c) integrity and objectivity
d) contingent fees

Answer 31

c) integrity and objectivity

Question 32

Which of the following IS REQUIRED for a CPA to perform in a personal financial planning engagement

Answer 32

Assist the client identify tasks that are essential in order to act on decision making.
________________\
CPA may help in monitoring progress, archiving goals, update recommendations and revise planning decision. BUT is Not required

Question 33

Under what circumstances may a CPA accept a commission

Answer 33

only if it from a client which the CPA does not provide attest services and it is disclosed to the client…

Question 34

under ISA when is an auditor required to give a disclaimer of opinion:

Answer 34

1) When the auditor is unable to give sufficient and appropriate evidence to be able to express and option on the finical statement as a whole , or when faced with contingencies that due to their potential interaction or cumulative effect, prevent the auditor from performing or expressing an opinion.
2) When the auditor concludes that the misstatements area pervasive and material to the FS the auditor issues an adverse opinion, not a disclaimer.

Question 35

Professional rules and ethics for CPA Tax practitioners that are merely advisory rather than having formal admin include

Answer 35

AICPA Statements on Responsibilities in Tax

Question 36

When not operating in PUBLIC a CPA is required to act

Answer 36

Objectively not INDEPENDENCE

Question 37

Two examples that allow departure from GAAP under statements of Financial Accounting standard issued by FASB are

Answer 37

I. New legistlation

II. Evolution of a new form of business transaction