MULTIPLE CHOICE QUESTIONS 1. Which of the following statements b

MULTIPLE CHOICE QUESTIONS
1. Which of the following statements best explains why the CPA profession has found it essential to promulgate ethical standards and to establish means for ensuring their observance?
a. Vigorous enforcement of an established code of ethics is the best way to prevent unscrupulous acts.
b. Ethical standards that emphasize excellence in performance over material rewards establish a reputation for competence and character.
c. A distinguishing mark of a profession is its acceptance of responsibility to the public.
d. A requirement for a profession is to establish ethical standards that stress primarily a responsibility to clients and colleagues.
2. Which of the following is not a major threat to an auditor's independence?
a. Audit partner's compensation based on obtaining and retaining clients.
b. Becoming too friendly with the client's management.
c. Significant time pressures to get the audit done quickly.
d. Auditing records maintained by the public accounting firm.
e. All of the above are threats.
3. The PCAOB has prohibited public accounting firms from providing tax services to higher members of management of audit clients. The primary rationale for such a prohibition is likely to be:
a. CPAs are not experts in taking tax positions.
b. The fees paid by management were significant in comparison with audit fees.
c. The close personal relationship with management created a perceived loss of independence by the investing public.
d. Tax services always involve taking a proactive position for the client.
The close personal relationship with management created a perceived loss of independence by the investing public.
4. According to the AICPA's ethical standards, an auditor would be considered independent in which of the following instances?
a. The auditor has an automobile loan from a client bank.
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.
5. A violation of the profession's ethical standards would most likely have occurred when a CPA:
a. Purchased a bookkeeping firm's practice of monthly write-ups for a percentage of fees received over a three-year period.
b. Made arrangements with a bank to collect notes issued by a client in payment of fees due.
c. Whose name is Smith formed a partnership with two other CPAs and uses Smith & Co. as the firm name.
d. Issued an unqualified opinion on the 2006 financial statements when fees for the 2005 audit were unpaid.
6. A CPA is permitted to disclose confidential client information without the consent of the client to:
I. Another CPA who has purchased the CPA's tax practice.
II. Another CPA firm if the information concerns suspected tax return irregularities.
III. A state CPA society's voluntary quality control review board.
a. I and III
b. II and III
c. II
d. III
7. Manny Tallents is a CPA and a lawyer. In which of the following situations is Tallents violating the AICPA's Rules of Conduct?
a. He uses his legal training to help determine the legality of an audit client's actions.
b. He researches a tax question to help the client make a management decision.
c. He defends his audit client in a patent infringement suit.
d. He uses his legal training to help determine the accounting implications of a complicated contract of an audit client.
8. CPA firms performing management consulting services can accept contingent fee contracts when:
a. The amounts are not material in relationship to the audit billings.
b. The consulting services are for clients for whom the auditor does not provide any form of attestation services related to a company's financial statements.
c. The consulting services are non-attestation services for an audit client.
d. The consulting services are derived from a joint contract with an audit client to perform consulting services for an independent third party.
e. All of the above.
9. Applying utilitarianism as a concept in addressing ethical situations requires the auditor to perform all of the following except:
a. Identify the potential stakeholders that will be affected by the alternative outcomes.
b. Determine the effect of the potential alternative courses of action on the affected parties.
c. Choose the alternative that provides either the greatest good for the greatest number or the lowest cost (from a societal view) for the greatest number.
d. Examine the potential outcomes to see whether the results are inconsistent with the rights or justice theories.

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