1. A CPA who performs primary actuarial services for a nonpublic client normally is precluded from expressing an opinion on the financial statements of that client if the A.CPA prepared an actuarial report using assumptions not approved by the client. B.Actuarial assumptions used are not in accordance with GAAS. C.Actuarial services are a major determinant of the pension expense. D.Fees for the actuarial services have not been paid. 2.Conduct Rule 501 states that a member of the AICPA shall not commit an act discreditable to the profession. Which of the following most likely is not considered such an act? A.After the relationship of a nonowner member with the firm is terminated, the member takes copies from the firms client files without permission. B.Retention of a clients records after a demand is made for them in a state that specifically grants the CPA a lien on all client records. C.Withholding as a result of nonpayment of fees for a completed engagement adjusting and closing journal entries not reflected in the clients books. D.Failure to provide the client with client records prepared by the member. 3. A violation of the professions ethical standards would most likely have occurred when a CPA in public practice A.Used a records-retention agency to store the CPAs working papers and client records. B.Served as an expert witness in a damage suit and received compensation based on the amount awarded to the plaintiff. C.Referred life insurance assignments to the CPAs spouse, who is a life insurance agent. D.Serves on a municipal board of income tax appeals, discloses that status to concerned parties, participates as a board member in a tax appeal involving a client, but does not receive the clients consent for such action. 4. A CPA is permitted to disclose confidential client information without the consent of the client to I.Another CPA firm if the information concerns suspected tax return irregularities II.A state CPA society voluntary peer review board A.I only. B.Neither I nor II. C.II only. D.Both I and II. 5. A violation of the professions ethical standards would most likely have occurred when a CPA A.Expressed an unqualified opinion on the Year 2 financial statements when fees for the Year 1 audit were unpaid. B.Made arrangements with a bank to collect notes issued by a client in payment of fees due. C.Joined an accounting firm made up of three non-CPA practitioners. D.Purchased a bookkeeping firms practice of monthly write-ups for a percentage of fees received over a 3-year period. 6. Which of the following legal situations would be considered to impair the auditors independence? A.Actual litigation by the client against the auditor for an amount not material to the auditor or to the financial statements of the client arising out of disputes as to billings for tax services. B.Actual litigation by the auditor against the client for an amount not material to the auditor or to the financial statements of the client arising out of disputes as to billings for consulting services. C.Actual litigation by the auditor against the current management alleging management fraud or deceit. D.An expressed intention by the current management to commence litigation against the auditor alleging deficiencies in audit work for the client, although the auditor considers that there is only a remote possibility that such a claim will be filed. 7. According to the standards of the accounting profession, which of the following sources of information should a member of the AICPA consider before signing a clients tax return? I. Information actually known to the member from the tax return of another taxpayer II.Information provided by the taxpayer that appears to be correct based on the taxpayers returns from prior years A.II only. B.I only. C.Both I and II. D.Neither I nor II. 8. A CPA firm was purchased by a public company. The acquirer performs other professional services and has banking, insurance, and brokerage subsidiaries. The owners and employees became employees of a subsidiary. Also, the previous owners formed a new CPA firm that provides attest services. It leases employees, offices, and equipment from the parent, which also provides advertising, billing, and collection services. Independence is not impaired when A.An indirect superior is a promoter of an attest client of the new CPA firm. B.An indirect superior has a material investment in an attest client of the new CPA firm. C.A bank subsidiary in the consolidated group provides asset custody services in the ordinary course of business to an attest client of the new CPA firm. D.The new CPA firm audits another subsidiary in the consolidated group. 9. Which of the following is an act discreditable to the accounting profession? A.Solicitation of Uniform CPA Examination questions without AICPA authorization. B.Not following applicable audit standards in a governmental audit although the report discloses the reasons for the failure. C.Becoming a defendant in an antidiscrimination lawsuit. D.Failure to comply with a clients request for working papers. 10. According to the standards of the profession, which of the following activities most likely does not impair a CPAs independence? A.Contracting with a client to supervise the clients office personnel. B.Providing extensive advisory services for a client. C.Accepting a luxurious gift from an attest client. D.Signing a clients checks in emergency situations. 11. In which of the following circumstances would a CPA who audits XM Corporation lack independence? A.The CPA and XMs president each owns 25% of FOB Corporation, a closely held company. B.The CPA has an automobile loan from XM, a financial institution. The loan is collateralized by the automobile. C.The CPA reduced XMs usual audit fee by 40% prior to the audit because XMs financial condition was unfavorable. D.The CPA is a director of, but does not control, YN Corporation, which has a loan from XM. 12. Under the ethical standards of the profession, which of the following positions would be considered a position of significant influence in an audit client? A.A senior position in the clients human resources division. B.A marketing position related to the clients primary products. C.A policy-making position in the clients finance division. D.A staff position in the clients research and development division. 13. Which entity has the authority to prohibit an individual from practicing public accounting? A.A state board of accountancy. B.A state CPA society. C.The Division for CPA Firms. D.A joint trial board of the AICPA. 14. When a CPA is associated with financial statements that do not comply with promulgated GAAP because the statements would be misleading without the departure, the CPA is not required to disclose A.The reasons compliance would have been misleading. B.The approximate effects of the departure in comparison to the application of GAAP. C.The reason the departure does not have a material effect on the statements. D.The departure. 15. AICPA Conduct Rule 301, Confidential Client Information, is violated when a member in public practice A.Provides client profit and loss percentages to a trade association without the clients consent. B.Performs consulting services for similar clients. C.Advises potential consulting services clients about previous problems on similar engagements. D.Uses outside computer services to process tax returns. 16. An accounting firms independence is most likely to be impaired when A.The firm has a material financial interest in a nonclient but does not know of the clients material financial interest in the investee. B.An immediate family member is employed by the client in other than a key position. C.The firm and the client have a material cooperative arrangement. D.In an agreed-upon procedures engagement, the firm is independent of the responsible party but not the party that engaged the firm. 17. Which of the following most completely describes how independence has been defined by the accounting profession? A.Avoiding the appearance of significant interests in the affairs of an audit client. B.Accepting responsibility to act professionally and in accordance with a professional code of ethics. C.Possessing the ability to act with integrity and objectivity. D.Performing an audit from the viewpoint of the public. 18. Which action is not considered an act discreditable to the accounting profession? A.Being finally determined by a court of competent jurisdiction to have violated any of the federal antidiscrimination laws. B.Having a bank collect notes received from a client in payment of fees. C.Failing to follow standards and procedures established by governmental agencies in audits of grants by those agencies. D.Negligently permitting another to sign a document containing materially false and misleading information. 19. According to the professions standards, which of the following statements is true regarding the standards a CPA should follow when recommending tax return positions and preparing tax returns? A.A CPA may recommend a position that the CPA concludes is frivolous as long as the position is adequately disclosed on the return. B.A CPA may sign a tax return as preparer knowing that the return takes a position that will not be sustained if challenged. C.A CPA will usually not advise the client of the potential penalty consequences of the recommended tax return position. D.A CPA may recommend a position in which the CPA has a good faith belief that the position has a realistic possibility of being sustained if challenged. 20. According to the Interpretations of Conduct Rule 102, Integrity and Objectivity, a member of the AICPA A.Is subject to Rule 102 when engaged in teaching but not research. B.Who has a dispute with his/her supervisor about statement preparation has an obligation to act if a material misstatement would otherwise result. C.Who has a dispute with his/her supervisor about recording of transactions has no obligation to act even if the supervisors position is not an acceptable alternative. D.Has no obligation to respond to inquiries by his/her employers external accountant. 21. The Securities Act of 1933 provides an exemption from registration for Bonds Issued by a Securities Issued Municipality for by a Not-for-Profit Governmental Charitable Purposes Organization A. No No B. Yes No C. Yes Yes D. No Yes 22. A major impact of the Foreign Corrupt Practices Act of 1977 is that registrants subject to the Securities Exchange Act of 1934 are required to A.Produce full, fair, and accurate periodic reports on foreign commerce and/or foreign political party affiliations. B.Prepare financial statements in accord with international accounting standards. C.Keep records that reflect the transactions and dispositions of assets and to maintain a system of internal accounting controls. D.Provide access to records by authorized agencies of the federal government. 23. Under the Securities and Exchange Act of 1934, which of the following penalties could be assessed against a CPA who intentionally violated the provisions of Section 10(b), Rule 10b-5 of the act? Civil Liability for Criminal Liability Monetary Damages for a Fine A. Yes No B. No Yes C. No No D. Yes Yes 24. Fashion Industries, Inc. manufactures dresses which it sells throughout the United States and South America. Among its 5,000 employees were 165 youngsters aged 14 and 15 who worked full-time during the day and were paid at a rate less than the minimum wage. Which statement is true in accordance with the general rules of the Fair Labor Standards Act? A.Fashion did not violate the law since both male and female youngsters were paid at the same rate and worked only on Saturdays. B.Fashion violated the law by employing children under 16 years of age. C.Fashion was exempt from regulation because fewer than 5% of its employees were children. D.Fashion was exempt from regulation if more than 10% of its sales were in direct competition with foreign goods. 25. An environmental impact statement (EIS) need not contain A.Alternatives to the proposed action. B.An independent opinion on the proposed action prepared by the Council on Environmental Quality. C.The environmental impact of the proposed action. D.Any adverse environmental effects that cannot be avoided. 26. Unemployment tax payable under the Federal Unemployment Tax Act (FUTA) is A.Paid to the Social Security Administration. B.A tax-deductible employers expense. C.Payable by all employers. D.Deducted from employee wages. 27. An employer having an experience-based unemployment tax rate of 3.2% in a state having a standard unemployment tax rate of 5.4% may take a credit against a 6.2% federal unemployment tax rate of A.5.4% B.6.2% C.0% D.3.2% 28. Which of the following statements about the National Environmental Policy Act (NEPA) is most likely to be false? A.The NEPA allows the federal government to bring suit against any private person who violates NEPAs provisions. B.Under the NEPA, federal agencies do not have to give environmental considerations priority over other concerns in their decision-making processes. C.The NEPA augments the power of existing agencies with respect to considering environmental consequences of proposed actions. D.The NEPA requires federal agencies to consider environmental consequences in their decision-making process. 29. Which of the following corporations are subject to the accounting requirements of the Foreign Corrupt Practices Act (FCPA)? A.All corporations whose securities are registered pursuant to the Securities Exchange Act of 1934. B.All corporations that have made a public offering under the Securities Act of 1933. C.All corporations engaged in interstate commerce. D.All domestic corporations engaged in international trade. 30. Pix Corp. is making a $6 million stock offering. Pix wants the offering exempt from registration under the Securities Act of 1933. Which of the following provisions of the act would Pix have to comply with for the offering to be exempt? A. Regulation D, Rule 504. B. Regulation A. C. Regulation D, Rule 505. D. Regulation D, Rule 506. 31. Workers have the right to strike but certain kinds of strikes are illegal. Which of the following statements is true? A.If the collective bargaining agreement is for an indefinite period, 30 days notice must be given to the employer. B.If the strike concerns an employers unfair labor practice, 60 days notice must be given. C.If the collective bargaining agreement is for a definite period, a strike may only be called within that period. D.If the collective bargaining agreement is for a definite period, 60 days notice must be given if the union wishes to strike to seek modification of the agreement. 32. Which of the following requirements must be met by an issuer of securities who wants to make an offering by using shelf registration? Original The Offeror Registration Must Be a Statement Must First-Time Issuer Be Kept Updated of Securities A. Yes Yes B. No No C. Yes No D. No Yes 33. Part D of a state implementation plan (SIP) is required to be submitted by a state that has not attained the NAAQS for any listed pollutant in one or more air quality control regions located within its borders. Which of the following is a provision that a Part D SIP must contain? A.Before full implementation of RACM, a requirement to use the best available control technology (BACT). B.A system for issuing permits to allow new or modified major stationary sources to emit air pollutants. C.Provision for the implementation of all reasonably available control measures (RACM) as expeditiously as possible. D.A mechanism for closing highways located in residential areas where the actual levels of pollution exceed primary and secondary NAAQSs. 34. When verifying a clients compliance with statutes governing employees wages and hours, an auditor should check the clients personnel records against relevant provisions of which of the following statutes? A.National Labor Relations Act. B.Taft-Hartley Act. C.Americans with Disabilities Act. D.Fair Labor Standards Act. 35. Which of the following is the true statement with regard to materiality under the antifraud provisions of federal securities law? A.Materiality is a function of whether a reasonable person would attach importance to the information and includes the balancing of both the probability that the event may occur and its potential impact relative to the total company activities. B.The courts have ruled that any event or information that the buyer or seller of securities took into account is material. C.Material information does not concern future earnings that cannot be estimated with accuracy. D.The SEC has ruled for administrative convenience that any event involving less than $100,000 is not material. 36. The Flick Corp. manufactured almost exclusively a gizmo that was sold throughout the United States. Flick required all purchasers to take at least two other Flick products to obtain the gizmo over which it has almost complete market control. As a result of this plan, gross sales of the other items increased by an amount that was a substantial portion of the total market for those items. Which of the following best describes the legality of the above situation? A.It is an illegal tying arrangement. B.It is illegal only if the products are patented products. C.It is legal if the retailers do not complain about purchasing the other products. D.It is legal as long as the price charged to retailers for the other products is competitive. 37. Gould Machinery builds bulldozers. Prior to this year, it sold a substantial amount of equipment to Mace Contractors on credit. Mace recently went into bankruptcy. To protect its investment, Gould took over Mace. Erhart Contractors now complains that the acquisition harms its business, alleging that its business would have improved had Gould not entered the market as a competitor. Erhart can A.Recover treble damages. B.Obtain injunctive relief ordering divestiture. C.Recover only its actual damages. D.Not recover damages under the antitrust laws. 38. Which of the following securities is exempt from registration under the Securities Act of 1933? A.Securities sold by a discount broker. B.Municipal bonds. C.Pre-incorporation stock subscriptions. D.One-year notes issued to raise working capital. 39. A requirement of a private action to recover damages for violation of the registration requirements of the Securities Act of 1933 is that A.The issuer or other defendants committed either negligence or fraud in the sale of the securities. B.The securities were purchased from an underwriter. C.The plaintiff acquired the securities in question. D.A registration statement was filed. 40. James Fisk recently acquired Valiant Corporation by purchasing all of its outstanding stock pursuant to a tender offer. Fisk demanded and obtained the resignation of the existing board of directors and replaced it with his own slate of nominees. Under these circumstances, A.The former shareholders of Valiant are parties to a tax-free reorganization. Hence, they are not subject to federal income tax on their gain, if any, on transferring their stock to Fisk. B.Fisk had no right to demand the resignation of the existing board members; their resignations are legally ineffective, and they remain as directors. C.If Valiant is engaged in interstate commerce, the acquisition is exempt under the antitrust laws because the SEC has jurisdiction. D.If Valiant is listed on a national stock exchange, Fisk must file his tender offer with the SEC