pg. 1 CPA Ethics Newest 2024 Complete Exam 200+ Practice Questions with Correct Detailed Answers (Verified Answers) Graded A+
Ethics rules promulgated by the PCAOB must be approved by:
(a) The GAO (b) The SEC (c) The IRS (d) They do not need the approval of any other governmental agency. - Correct Answer
- (b). The SEC must approve PCAOB ethics rules.
In the member's practice, he or she is bound by (a) only the rules of the AICPA.(b) the rules of more than one group.(c) only the ml es of the Securities and Exchange Commission. - Correct Answer - (b). A member must follow the rules of more than one group such as PCAOB, SEC and GAO.
Stemper & Associates, LLP are the auditors of Cotter & Co. The financial statements of Cotter & Co. do not conform in one area with generally accepted accounting principles.The partners in Stemper agree that to use generally accepted accounting principles in this area would make the financial statements misleading. In this situation, the auditors
(a) may in their report describe the departure from generally accepted accounting principles, its approximate effects and reasons why compliance with the principle would result in misleading statements.(b) cannot express an opinion on the financial statements. - Correct Answer - (a) A member may depart from generally accepted accounting principles (GAAP) if the member believes that complying with GAAP would make the financial statements misleading. The member must disclose the departure, its approximate effect and why compliance would make the statements misleading (Rule 203). 1 / 4
pg. 2
Mass, a member, is the treasurer of Brown's Auto. In connection with Brown's bank loan, she sends a copy of Brown's quarterly financial statements to the bank. Her transmittal letter to the bank says that the statements are not audited, her staff has prepared them and that they are in conformity with GAAP.The statements are, however, not in conformity with GAAP. Mass violated the Code of Professional Conduct.(a) has (b) has not - Correct Answer - (a). A member stating that financial statements are in conformity with generally accepted accounting principles (GAAP) when they do not comply, has violated the Code of Professional Conduct (Interpretation 203-4).
Which of the following is not one of the general standards?(a) Planning and supervision (b) Professional competence (c) Independence (d) Due professional care (e) Significant relevant data - Correct Answer - (c) . Independence is not one of the General Standards (Rule 204).(a) Planning and Supervision, (b) Professional Competence, (d) Due Professional Care and (e) Significant Relative Data are General Standards (Rule 204).
The Code of Professional Conduct says that with respect to the acts of others:
(a) a member may be held responsible for compliance with the rule by all persons associated with him in the practice of public accounting who the member has the authority or capacity to control.(b) a member has no responsibility for the acts of anyone but himself.(c) it is silent on the matter. - Correct Answer - (a). (Interpretation addressing the Applicability of the AICPA Code of Professional Conduct) says a member may be held responsible for the acts of others that he has the authority to control.
A member wishes to take an action but is told that it would be against the rules in the Code of Professional Conduct. His secretary then offers to take the action saying to the 2 / 4
pg. 3 member, "I will do it since I am not a member of the AI CPA and their rules do not apply to me." The member makes no comment and the secretary does carry out the action.Has the member violated the Code of Professional Conduct?(a) Yes.(b) No. - Correct Answer - (a) (Interpretation addressing the Applicability of the AI CPA Code of Professional Conduct) says a member shall not knowingly let a person whom the member can control do something for the member that if the member did the same thing would be a violation of the code.
Which, if any, of the following is not classified as a loan?(a) letter of credit (b) guarantee of a loan (c) line of credit (d) loan commitment (e) all are classified as loans - Correct Answer - (e). (Loan) says that loans includes (a) letter of credit, (b) guarantee of a loan, (c) line of credit and (d) loan commitment.
Daman & Co. is a one-office public accounting firm. In each of the following situations state whether the work Daman & Co. is doing would be classified as an attest
engagement:
Preparing a review report on the financial statements of Blakely Mfg. Co. for the calendar year.(a) This is an attest engagement (b) This is not an attest engagement - Correct Answer - (a). (Attest engagement) is an engagement that requires independence. Since review reports require the member to be independent, preparing the review report for Blakely Mfg. Co. is an attest engagement
- / 4
pg. 4 Daman & Co. is a one-office public accounting firm. In each of the following situations state whether the work Daman & Co. is doing would be classified as an attest
engagement:
Reviewing prior year's tax returns of Heft & Co. and reporting to Heft's board of directors the results of such a review. The tax returns were prepared by another accounting firm.This is the first work that Daman & Co. will do for Heft & Co. Daman's partners hope that this engagement will lead to annual audits or reviews and preparation of tax returns for this company.(a) This is an attest engagement (b) This is not an attest engagement - Correct Answer - (b) (Attest engagement) is an engagement that requires independence. Since reviewing tax returns does not require independence, this is not an attest engagement.
Daman & Co. is a one-office public accounting firm. In each of the following situations state whether the work Daman & Co. is doing would be classified as an attest
engagement:
Preparing income tax returns and a compilation report for Bower's Restaurant for the calendar year. The compilation report will not disclose a lack of independence.(a) This is an attest engagement (b) This is not an attest engagement - Correct Answer - (a) (Attest engagement) is an engagement that requires independence. Preparing tax returns does not require independence. Preparing a compilation report requires independence, unless the report discloses a lack of independence, which this one doesn't. This then is an attest engagement with Bower's Restaurant.
Carson is a partner in a one-office public accounting firm that is located in Illinois. In each of the following cases state whether the individual would be considered a close relative of Carson?Carson's sister who lives in California (a) The sister is a close relative (b) The sister is not a close relative - Correct Answer - (a) (Close relative) says that siblings are close relatives. Carson's sister is his sibling and thus a close relative.
- / 4