Multiple Choice Questions
Select the best answer for each of the following. Explain the reasons for your selection.
a. Which of the following is not a covered member for an attest engagement under Rule 101 of the AICPA Code of Professional Conduct?
(1) An individual assigned to the attest engagement.
(2) A partner in the office of the partner in charge of the attest engagement.
(3) A manager who is in charge of providing tax services to the attest client.
(4) A partner in the national office of the firm that performs marketing services.

b. Which of the following is not prohibited by the AICPA Code of Professional Conduct?
(1) Advertising in newspapers.
(2) Payment of commission to obtain an audit client.
(3) Acceptance of a contingent fee for a review of financial statements.
(4) Engaging in discriminatory employment practices.

c. In which of the following situations would a public accounting firm have violated the AICPA Code of Professional Conduct in determining its fee?
(1) A fee is based on whether or not the public accounting firm’s audit report leads to the approval of the client’s application for bank financing.
(2) A fee is to be established at a later date by the Bankruptcy Court.
(3) A fee is based upon the nature of the engagement rather than upon the actual time spent on the engagement.
(4) A fee is based on the fee charged by the client’s former auditors.

d. A public accounting firm would least likely be considered in violation of the AICPA independence rules in which of the following instances?
(1) A partner’s checking account, which is fully insured by the Federal Deposit Insurance Corporation, is held at a financial institution for which the public accounting firm performs attest services.
(2) A manager of the firm donates services as vice president of a charitable organization that is an audit client of the firm.
(3) An attest client owes the firm fees for this and last year’s annual engagements.
(4) A covered member’s dependent son owns stock in an attest client.

e. Which of the following is implied when a CPA signs the preparer’s declaration on a federal income tax return?
(1) The return is not misleading based on all information of which the CPA has knowledge.
(2) The return is prepared in accordance with generally accepted accounting principles.
(3) The CPA has audited the return.
(4) The CPA maintained an impartial mental attitude while preparing the return.

f. The AICPA Code of Professional Conduct states that a CPA shall not disclose any confidential information obtained in the course of a professional engagement except with the consent of the client. This rule may preclude a CPA from responding to an inquiry made by:
(1) An investigative body of a state CPA society.
(2) The trial board of the AICPA.
(3) A CPA-shareholder of the client corporation.
(4) An AICPA quality review body.

g. Which of the following is most likely to be a violation of the AICPA rules of conduct by Bill Jones, a sole practitioner with no other employees?
(1) Jones performs consulting services for a percentage of the client’s savings; these are the only services provided for the client.
(2) Jones names his firm Jones and Smith, CPAs.
(3) Jones advertises the services he provides in an Internet set of telephone “yellow pages.”
(4) Jones, without client consent, makes available working papers for purposes of a peer review of his practice.
h. Bill Adams, CPA, accepted the audit engagement of Kelly Company. During the audit, Adams became aware of his lack of competence required for the engagement. What should Adams do?
(1) Disclaim an opinion.
(2) Issue an adverse opinion.
(3) Suggest that Kelly Company engage another CPA to perform the audit.
(4) Rely on the competence of client personnel.

i. Which of the following nonattest services may be performed by the auditors of a public company?
(1) Internal audit outsourcing.
(2) Tax planning for all company officers.
(3) Bookkeeping services.
(4) Preparation of the company’s tax return.

j. In providing nonattest services to an attest client, a CPA is allowed to perform which of the following functions?
(1) Maintaining custody of the client’s securities.
(2) Training client employees.
(3) Supervising client employees.
(4) Acting as the third approver of large client expenditures.

k. Rule 202—Compliance with Standards requires CPAs to adhere to all of the following applicable standards, except:
(1) Statements on Standards for Consulting Services.
(2) Statements on Auditing Standards.
(3) Statements on Standards for Attestation Engagements.
(4) Statements on Responsibilities for Assurance Services.

l. Which of the following provisions is not included in The Institute of Internal Auditors Code of Ethics?
(1) Performance of work with honesty, diligence, and responsibility.
(2) Prudence in the use and protection of information acquired in the course of their duties.
(3) Use of appropriate sampling methods to select areas for audit.
(4) Continual improvement in proficiency and effectiveness and the quality of services provided.
(AICPA, adapted)