AICPA members are bound by the AICPA Code of Professional Conduct. Rule 201 requires that members provide professional services with competency. In the delivery of personal financial planning services, a member shall adhere to the following Principles of Professional Conduct.
ET Section 52 – Article I – Responsibilities
In carrying out their responsibilities as professionals, members should exercise sensitive professional and moral judgments in all their
activities.
Section ET 53 – Article II – The Public Interest
Members should accept the obligation to act in a way that will serve the public interest, honor the public trust and demonstrate commitment to professionalism.
Section ET 54 – Article III - Integrity
To maintain and broaden public confidence, members should perform all professional responsibilities with the highest sense of integrity.
Section ET 55 – Article IV
– Objectivity and Independence
A member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities. A member in public practice should be independent in fact and appearance when providing auditing and other attestation services.
Section ET 56 – Article V – Due Care
A member should observe the profession's technical and ethical standards, strive continually to improve competence and the
quality of services, and discharge professional responsibility to the best of the member's ability.
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| Read 'Chapter 1: Ethics And Ethical Reasoning' & answer the following question(s): | |
| 1. | Ethics in business is influenced directly by: cultural differences, ability of leaders to motivate subordinates, and |
| By power leaders have over the behavior decisions of subordinates. | |
| Through corporate policy statements. | |
| Academic business foundations. | |
| Business instincts. | |
| 2. | Historically and traditionally ethics has been the domain of all the following except |
| Philosophers. | |
| Business leaders. | |
| Academics. | |
| Social critics. | |
| 3. | Ethical problems that managers must deal with on a daily basis can include: potential conflicts of interest, wrongful use of resources and |
| Religious dilemmas. | |
| Philosophical issues. | |
| Mismanagement of contracts. | |
| Legal issues in the workplace. | |
| 4. | Managing ethics in the workplace can be beneficial for substantially improving society, helping to maintain a moral course in turbulent times and |
| Developing technical training programs. | |
| Developing legal options in the workplace. | |
| Negotiating fair wage and benefit packages. | |
| Cultivating strong team work and productivity units. | |
| 5. | Which of the following statements best explains why the accounting profession has found it essential to promulgate ethical standards and to establish means for ensuring their observance? |
| Vigorous enforcement of an established code of ethics is the best way to prevent unscrupulous acts. | |
| Ethical standards that emphasize excellence in performance over material rewards establish a reputation for competence and character. | |
| A distinguishing mark of a profession is its acceptance of responsibility to the public. | |
| A requirement for a profession is to establish ethical standards that stress primarily a responsibility to clients and colleagues. | |
| 6. | The concept of materiality is least important to an auditor when considering the |
| Adequacy of disclosure of a client's illegal act. | |
| Discovery of weaknesses in a client's internal control. | |
| Effects of a direct financial interest in the client on the CPA's independence. | |
| Decision whether to use positive or negative confirmations of accounts receivable. | |
| 7. | According to the profession's ethical standards, an auditor would be considered independent in which of the following instances? |
| The auditor's checking account, which is fully insured by a federal agency, is held at a client financial institution. | |
| The auditor is also an attorney who advises the client as its general counsel. | |
| A member donates service as treasurer of a charitable organization that is a client during the period covered by the financial statements. | |
| The client owes the auditor fees for two consecutive annual audits. | |
| 8. | In which of the following circumstances would a CPA who audits XM Corporation lack independence? |
| The CPA is a director of, but does not control, YN Corporation, which has a loan from XM. | |
| The CPA and XM's president each owns 25% of FOB Corporation, a closely held company. | |
| The CPA has an automobile loan from XM, a financial institution. The loan is collateralized by the automobile. | |
| The CPA reduced XM's usual audit fee by 40% prior to the audit because XM's financial condition was unfavorable. | |
| 9. | On June 1, 2006, a CPA obtained a $100,000 personal loan from a financial institution client for whom the CPA provided compilation services. The loan was fully secured and considered material to the CPA's net worth. The CPA paid the loan in full on December 31, 2006. On April 3, 2007, the client asked the CPA to audit the client's financial statements for the year ended December 31, 2005. Is the CPA considered independent with respect to the audit of the client's December 31, 2007, financial statements? |
| Yes, because the loan was fully secured. | |
| Yes, because the CPA was not required to be independent at the time the loan was granted. | |
| No, because the CPA had a loan with the client during the period of a professional engagement. | |
| No, because the CPA had a loan with the client during the period covered by the financial statements. | |
| 10. | According to the profession's ethical standards, which of the following events may justify a departure from a Statement of Financial Accounting Standards? New Legislation Evolution of a New Form of Business Transaction |
| No Yes | |
| Yes No | |
| Yes Yes | |
| No No | |
| 11. | Which of the following actions by a CPA most likely violates the profession's ethical standards? |
| Arranging with a financial institution to collect notes issued by a client in payment of fees due. | |
| Compiling the financial statements of a client that employed the CPA's spouse as a bookkeeper. | |
| Retaining client records after the client has demanded their return. | |
| Purchasing a segment of an insurance company's business that performs actuarial services for a client's employee benefit plans. | |
| 12. | The CPA firm of Lennon & Lennon has been subpoenaed to testify and produce its correspondence and working papers in connection with a lawsuit brought by a third party against one of its clients. Lennon considers the subpoenaed documents to be privileged communication and therefore seeks to avoid admission of such evidence in the lawsuit. Which of the following is correct? |
| Federal law recognizes no such privilege. | |
| In the absence of a specific statutory provision, the law does not recognize the existence of privileged communication between a CPA and client. | |
| The privilege is available regarding the working papers because the CPA is deemed to own them. | |
| The privileged communication rule as it applies to the CPA-client relationship is the same as that of attorney-client. | |
| 13. | Adams is the executive partner of Adams & Co., CPAs. One of its smaller clients is a large nonprofit charitable organization. The organization has asked Adams to be on its board of directors, which consists of a large number of the community's leaders. Membership on the board is honorary. Adams & Co. would be considered to be independent |
| Under no circumstances. | |
| As long as Adams's directorship was disclosed in the organization's financial statements. | |
| As long as Adams was not directly in charge of the audit. | |
| As long as Adams does not perform or give advice on management functions of the organization. | |
| 14. | Which of the following most completely describes how independence has been defined by the accounting profession? |
| Performing an audit from the viewpoint of the public. | |
| Avoiding the appearance of significant interests in the affairs of an audit client. | |
| Possessing the ability to act with integrity and objectivity. | |
| Accepting responsibility to act professionally and in accordance with a professional code of ethics. | |
| 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 |
| Charitable organization in which the spouse of the CPA serves as treasurer. | |
| Municipality in which the CPA owns $25,000 of the $2,500,000 indebtedness of the municipality. | |
| Credit union of which the CPA is a member. | |
| Company in which the CPA's investment club owns a 10% interest. | |
| 16. | A violation of the profession's ethical standards would most likely have occurred when a CPA in public practice |
| Used a records-retention agency to store the CPA's working papers and client records. | |
| Served as an expert witness in a damage suit and received compensation based on the amount awarded to the plaintiff. | |
| Referred life insurance assignments to the CPA's spouse, who is a life insurance agent. | |
| Serves on a municipal board of income tax appeals, discloses that status to concerned parties, participates as a board member in a tax appeal involving a client, but does not receive the client's consent for such action | |
| 17. | 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? |
| "It was a misunderstanding." | |
| "I suggest you get the client's permission for us to discuss all matters freely." | |
| "I suggest you ask the client." | |
| "I found irregularities in the tax return that the client would not correct." | |
| 18. | Which action is not considered a discreditable act? |
| Negligently permitting another to sign a document containing materially false and misleading information. | |
| Being finally determined by a court of competent jurisdiction to have violated any of the federal antidiscrimination laws. | |
| Having a bank collect notes received from a client in payment of fees. | |
| Failing to follow standards and procedures established by governmental agencies in audits of grants by those agencies. | |
| 19. | According to the ethical standards of the profession, which of the following acts is generally prohibited? |
| Issuing a modified report explaining a failure to follow a governmental regulatory agency's standards when conducting an attest service for a client. | |
| Revealing confidential client information during a quality review of a professional practice by a team from the state CPA society. | |
| Accepting a contingent fee for representing a client in an examination of the client's federal tax return by an IRS agent. | |
| Retaining client records after an engagement is terminated prior to completion and the client has demanded their return. | |
| 20. | The profession's ethical standards most likely are violated when a CPA represents that specific services will be performed for a stated fee and it is apparent at the time of the representation that the |
| Actual fee would be substantially higher. | |
| Actual fee would be substantially lower than the fees charged by other CPAs for comparable services. | |
| CPA would not be independent. | |
| Fee was a competitive bid. | |
| Read 'Chapter 2: Ethical Reasoning and Accountants' & answer the following question(s): | |
| Read 'Chapter 3: Conclusions and Implications' & answer the following question(s): | |
| Read 'Chapter 4: Definitions' & answer the following question(s): | |
| Read 'Chapter 5: Historical Foundations of Law and Ethics' & answer the following question(s): | |
| Read 'Chapter 6: Select Development of Law and Ethic' & answer the following question(s): | |
| Read 'Chapter 7: Ethical Reasoning and Accountants' & answer the following question(s): | |
| Read 'Chapter 8: Standards of Ethical Conduct for Practitioners' & answer the following question(s): | |
| Read 'Chapter 9: Cash Flow Software' & answer the following question(s): | |
| Read 'Chapter 10: Culture, Motivation, Power, and Business Ethics' & answer the following question(s): |
Which of the following acts by a CPA is a violation of professional standards?
Which of the following acts by a CPA is a violation of professional standards regarding the confidentiality of client information? Releasing financial information to a local bank with the approval of the client's mail clerk.
Which of the following acts by a CPA who is not in public practice is most likely to be a violation of the ethical standards of the profession?
Which of the following acts by a CPA who is not in public practice is most likely to be a violation of the ethical standards of the profession? Using the CPA designation without disclosing employment status in connection with financial statements issued for external use by the CPA's employer.
In which of the following situation is there a violation of client confidentiality under the aicpa code of professional conduct?
In which of the following situations is there a violation of client confidentiality under the AICPA Code of Professional Conduct? A member whose practice is primarily bankruptcy discloses a client's name.
Which of the following is prohibited by the aicpa code of professional conduct?
The AICPA Code of Professional Conduct prohibits direct solicitation of clients by CPAs.