24. Which one of the following statements is not true?

a. The auditor could communicate information about the clients expected cash flows to an agent representing bondholders without first obtaining client permission so long as the agent is duly appointed by a majority of the bondholders.

b. Information that a CPA obtains from a client is generally not privileged.

c. When a CPA firm conducts an AICPA-authorized peer review of the quality controls of another CPA firm, permission of the client is not needed in order to examine the working papers.

d. A CPA firm which observes substandard working papers of another firm can initiate a complaint of substandard performance with the AICPA Ethics Division trial board notwithstanding the confidentiality of the working papers.

25. A CPA is allowed to accept a referral fee for recommending a client to another CPA if

a. the client approves of the transaction either before or after the event.

b. the client pre-approves the transaction.

c. payment of the referral fee is disclosed to the client.

d. None of the above are true. Referrals are never acceptable.

26. Rule 505 of the AICPAs Code of Professional Conduct permits CPA firms to organize as

a. proprietorships or partnerships only.

b. proprietorships, partnerships, or professional corporations.

c. proprietorships, general partnerships, general corporations, professional corporations, limited liability partnerships and limited liability companies if permitted by state law.

d. single proprietorships, partnerships, professional corporations if permitted by state law, or regular corporations.

27. According to the professions ethical standards, an auditor would be considered independent in which of the following instances?

a. The auditors checking account, which is fully insured by a federal agency, is held at a client financial institution.

b. The auditor is also an attorney who advises the client as its general counsel.

c. An employee of the auditor donates service as treasurer of a charitable organization that is a client.

d. The client owes the auditor fees for two consecutive annual audits.

28. If a nonpublic company asks an accountant to perform a review engagement, and the accountant has an immaterial direct financial interest in the company, the accountant is

a. independent because the financial interest is immaterial.

b. not independent and, therefore, may not issue a review report.

c. not independent and, therefore, may not issue audit opinion but may issue review report.

d. able to conduct the review as long as the financial interest in the client is disposed of prior to the issuance of the review report.

29. Mayfield is a CPA, but not a partner at Jones and Montero, CPAs. Mayfield owns 50 shares of stock in a company audited by her firm. Mayfield does not take part in the audit. The 50 shares are not material to her net worth. Is this a violation of independence rules?

a. Yes

b. No

30. Motichek is a CPA, but not a partner at Naquin and Rios, CPAs. Motichek owns 50 shares of stock in a company audited by his firm. Moticheck takes part in the audit. The 50 shares are not material to his net worth. Is this a violation of independence rules?

a. Yes

b. No

31. Thies is a CPA, but not a partner at Sholmire and Toussaint, CPAs. Thies owns 5000 shares of stock in a company audited by his firm. Thies does not take part in the audit. The 5000 shares are material to his net worth. Is this a violation of independence rules?

a. Yes

b. No

32. Vallare is a CPA, but not a partner at Waddell and Walpole, CPAs. Vallares spouse owns 50 shares of stock in a company audited by her firm. Vallare takes part in the audit. The 50 shares are not material to her net worth. Is this a violation of independence rules?

a. Yes

b. No

33. Zimmerle is a CPA, but not a partner at Whitfield and Wingo, CPAs. Zimmerles non-dependent grandfather owns 5000 shares of stock in a company audited by his firm. Zimmerle does take part in the audit. The 5000 shares are material to his net worth. Is this a violation of independence rules?

a. Yes

b. No

34. Rule 201 - General Standards explicitly requires which of the following

a. due professional care

b. infallibility.

c. adequate technical training and proficiency.

d. all of the above

e. Both a. and c. above.