Which agency is in charge of issuing, renewing, suspending, or revoking a CPA’s license?
The state board, not the AICPA
What is the distinguishing mark of a profession according to the AICPA
That it accepts a high degree of responsibility toward serving the public
What are the 3 separate “performance by members” categories of responsibility for which the Code of Ethical Conduct is expected.
Members in public practice
Members in business
Other members (e.g., retired but still holding their license)
What are the Principles of the Code of Professional Conduct and a brief description
Responsibilities: exercise sensitive professional and moral judgments
Public Interest: service the public interest with professionalism
Integrity: integrity addresses the question of what is right and just
Objectivity and Independence: where objectivity is when a person is free of conflicts of interest, and independence is free of financial or business influences
Due Care: discharge responsibilities to the best of the member’s ability
Scope and Nature of Services: ensure these are provided within the Code’s framework
True / False: Independence is required for all services rendered.
False
Independence is required for attestation services only, that include audits, special reports, reviews, and to examine the financial forecast
True / False: Objectivity is required for all services rendered.
True
Which rules of the Code of Professional Conduct are expected for CPAs who practice as a Member in Business
Integrity and Objectivity
General Standards
Compliance With Standards
Accounting Principles
Acts Discredible Rule
Which rules of the Code of Professional Conduct are expected for CPAs who work in public practice
All of them
Which rules of the Code of Professional Conduct are expected for CPAs who are retired or unemployed by hold a CPA license
Acts Discredible Rule
Which section of the Code (numeric reference) covers CPAs who work in public practice.
1.xxx
Which section of the Code (numeric reference) covers CPAs who work as a member in business.
2.xxx
Which section of the Code (numeric reference) covers CPAs who work are not currently employed but hold a license.
3.xxx
True / False: The Independence Rule is applicable to CPAs who work as a member in business, as well as the unemployed but holding a license.
False
Independence is only applicable to CPAs who work in public practice.
Which categories of people are subject to the Independence Rule
Covered Member: audit team and office/boss – someone who can influence the “chain of command”
Immediate Family: spouse and dependents (people living under your roof)
Close Relative: parent, sibling, adult kids
Independence is not required for which types of accounting services
Compilation (but must be disclosed if not independent)
Non-attest services (tax services, consulting)
Define direct financial interest that impairs independence
Stock ownership, even if owned in a blind trust
Financial interest in a client through a partnership in which the member is a general partner
Financial interest in a trust when the member is a trustee
Define indirect financial interest that impairs independence
Member owns shares in a mutual fund that invests in the attestation client
Members owns direct financial interest in CoA, and CoA has a direct financial interest in the attestation client
An immediate family member has a loan with an attestation client. What type of loan does and does not impair independence?
Any loan impairs independence except when a client that is a financial institution
** Fully collateralized car loans
** Cash advance or credit card balance not to exceed $10,000
** A bank account fully insured by the government (FDIC)
** A passbook loan
What types of employment relationships impair independence
Client officer joins the CPA firm
Family works for the client
CPA firm employee joins the client as an executive
CPA is discussing a new job with the client
What types of business relationships impair independence
Any position or service for which the CPA acts in a management capacity for the entity
** bookkeeping that includes authorization of a form, or the creation of an originating form
** having custody of any of the client’s assets
** supervising client employees
** appraisal valuation, or actuarial services
** managing internal audit activities
** particular litigation services
** expert witness services
True / False: The CPA is an honorary trustee for a not-for-profit charitable religious group. This CPA’s independence is impaired for this group.
False
Because the position is purely honorary
True / False: The CPA is a member of the same country club as his attest client. This CPA’s independence is impaired for this client.
False
True / False: The CPA is a member of the same trade association and provides management decisions within industry. This CPA’s independence is impaired for all clients in this industry.
True
A client has an invoice that is 13 months overdue. The client promises to pay the invoice within the month. How should the auditor handle this situation.
The auditor’s independence is impaired
And, the auditor should not issue this year’s audit report until the invoice is paid in full
True / False: Your client has threatened your firm with a lawsuit due to audit deficiencies for issuing an adverse opinion. You believe the client is capable of and might actually file the suit. Your independence is now impaired due to the threat of the lawsuit.
True
True / False: The CPA accidently bumps into and dents one of the client’s delivery trucks. The client’s insurance won’t cover the loss and they threaten to sue the CPA for compensation. The lawsuit now threatens the CPA’s independence.
False
The services were unrelated to an attestation service