Question No.1

Winstead has clashed with his manager regarding the proper treatment of an audit client's significant transaction. The manager says that the audit firm should approve the client's proposed treatment. Winstead's research tells him that the proposed treatment violates important accounting conventions. Which of the following istrueregarding how Winstead should handle this situation?

a)Because his manager has more experience, Winstead should simply defer to the manager's judgment.

b)If Winstead concludes that the manager is wrong, he must take action, such as reporting to the PCAOB, even if the threat of a material misrepresentation or legal violation is not significant.

c)If after significant research, Winstead still believes that he is right and the firm and client are wrong, he must resign from his firm.

d)If after significant research, Winstead still believes that he is right and the firm and client are wrong, he should consider resigning from his firm if the threat of a material misrepresentation or legal violation is significant.

Question No. 2

A violation of the profession's ethical standards least likely would have occurred when a CPA

a)Purchased another CPA's accounting practice and based the price on a percentage of the fees accruing from clients over a 3-year period.

b)Received a percentage of the amounts invested by the CPA's audit clients in a tax shelter with the client's knowledge and approval.

c)Had a public accounting practice and also was president and sole stockholder of a corporation that engaged in data processing services for the public.

d)Formed an association, not a partnership, with two other sole practitioners and called the association "Adams, Betts and Associates."