Question
15. In which of the following instances would the independence of the CPA most likely not be considered to be impaired? The CPA has been
15. In which of the following instances would the independence of the CPA most
likely not be considered to be impaired? The CPA has been retained as the auditor
of the financial statements of a:
a. Charitable organization in which the spouse of the CPA serves as treasurer
b. Municipality in which the CPA owns $25,000 of the $2,500,000
indebtedness of the municipality
c. Credit union of which the CPA is a member
d. Company in which the CPA's investment club owns a 10% interest
16. Upon discovering irregularities in a client's tax return that the client would not
correct, a CPA withdraws from the engagement. How should the CPA respond if
asked by the successor CPA why the relationship was terminated?
a. "It was a misunderstanding"
b. "I suggest you get the client's permission for us to discuss all matters
freely"
c. "I suggest you ask the client"
d. "I found irregularities in the tax return that the client would not correct"
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17. Which action is not considered a discreditable act?
a. Negligently permitting another to sign a document containing materially
false and misleading information
b. Being finally determined by a court of competent jurisdiction to have
violated any of the federal antidiscrimination laws
c. Having a bank collect notes received from a client in payment of fees
d. Failing to follow standards and procedures established by governmental
agencies in audits of grants by those agencies
18. According to the ethical standards of the profession, which of the following acts is
generally prohibited?
a. Issuing a modified report explaining a failure to follow a governmental
regulatory agency's standards when conducting an attest service for a
client
b. Revealing confidential client information during a quality review of a
professional practice by a team from the state CPA society
c. Accepting a contingent fee for representing a client in an examination of
the client's federal tax return by an IRS agent
d. Retaining client records after an engagement is terminated prior to
completion and the client has demanded their return
19. The profession's ethical standards most likely are violated when a CPA represents
that specific consulting services will be performed for a stated fee and it is
apparent at the time of the representation that the:
a. Actual fee would be substantially higher
b. Actual fee would be substantially lower than the fees charged by other
CPAs for comparable services
c. CPA would not be independent
d. Fee was a competitive bid
20. According to the ethical standards of the profession, which of the following acts is
generally prohibited?
a. Purchasing a product from a third party and reselling it to a client
b. Writing a financial management newsletter promoted and sold by a
publishing company
c. Accepting a commission for recommending a product to an audit client
without the clients knowledge
d. Accepting engagements obtained through the efforts of third parties
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