Chapter 19 – Professional Conduct, Independence, and Quality Control
43. According to the ethical standards of the profession, which of the following acts is generally
prohibited?
44. According to the ethical standards of the profession, which of the following acts is generally
prohibited?
Chapter 19 – Professional Conduct, Independence, and Quality Control
45. In which of the following circumstances would a CPA who audits XM Corporation lack
independence?
46. Mavis, CPA, has audited the financial statements of South Bay Sales Incorporated for
several years and had always been paid promptly for services rendered. Last year’s audit
invoices have not been paid because South Bay is experiencing cash flow difficulties and the
current year’s audit is scheduled to commence in one week. With respect to the past due audit
fees, Mavis should
Chapter 19 – Professional Conduct, Independence, and Quality Control
47. In which of the following instances would the independence of the CPA not be considered
to be impaired? The CPA has been retained as the auditor of a
48. A CPA firm’s personnel partner periodically studies the CPA firm’s personnel advancement
experience to ascertain whether the individuals who were assigned increased degrees of
responsibility met predetermined criteria. This is evidence of the CPA firm’s adherence to
prescribed standards of
Chapter 19 – Professional Conduct, Independence, and Quality Control
49. A CPA firm would be reasonably assured of meeting its overall responsibility to provide
services that conform with professional standards by
50. Which of the following is an element of a CPA firm’s quality control system that should be
considered in establishing its quality control policies and procedures?
Chapter 19 – Professional Conduct, Independence, and Quality Control
51. What is the primary purpose of the acceptance and continuance of client relationships and
specific engagements element of quality control?
52. In order to achieve effective quality control, a firm of independent auditors should establish
policies and procedures for
Chapter 19 – Professional Conduct, Independence, and Quality Control
53. Within the context of quality control, the primary purpose of continuing professional
education and training activities is to enable a CPA firm to provide personnel within the firm
with
54. A CPA firm evaluates its personnel advancement experience to ascertain whether
individuals assigned to increased degrees of responsibility meet predetermined criteria. This
policy is evidence of the firm’s adherence to which of the following prescribed standards?
Chapter 19 – Professional Conduct, Independence, and Quality Control
55. The primary purpose of establishing quality control policies and procedures for deciding
whether to accept a new client is to
56. Following the issuance of a PCAOB draft report, how many days does the CPA firm have to
respond to accusations?
Chapter 19 – Professional Conduct, Independence, and Quality Control
57. A violation of the profession’s ethical standards would most likely occur when a CPA who
58. In determining estimates of fees, an auditor may take into account each of the following,
except the:
Chapter 19 – Professional Conduct, Independence, and Quality Control
19–26
59. An auditor is about to commence a recurring annual audit engagement. The continuing
auditor’s independence would ordinarily be considered to be impaired if the prior year’s audit
fee
60. In which of the following circumstances would a CPA be bound by ethics to refrain from
disclosing any confidential information obtained during the course of a professional
engagement?
Chapter 19 – Professional Conduct, Independence, and Quality Control
61. Under which of the following circumstances would the independence of a CPA be
considered impaired if the CPA, who also is an attorney, serves as auditor and provides legal
services to the same client?
62. According to the profession’s ethical standards, a CPA would be considered independent in
which of the following instances?
Chapter 19 – Professional Conduct, Independence, and Quality Control
63. When auditing a public company, which of the following impairs an auditor’s
independence?
64. Why do professions establish codes of conduct that define ethical behaviors for members of
the profession?
Chapter 19 – Professional Conduct, Independence, and Quality Control
19–29
65. Distinguish between the following theories of ethical behavior: utilitarianism, a
rights-based approach, and a justice-based approach.
66. Which professional and regulatory bodies establish the ethical and professional rules for
auditors of: (1) public companies and (2) private companies?
Chapter 19 – Professional Conduct, Independence, and Quality Control
67. Listed below are definitions of the six Principles of Professional Conduct. For each, identify
the principle being defined.
a. 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.
b. Members should exercise sensitive professional and moral judgments in all their activities.
c. A member should be free of conflicts of interest in discharging professional responsibilities.
d. A member in public practice should observe the Principles of the Code of Professional
Conduct in determining the type and extent of services to be provided.
e. Members should accept the obligation to act in a way that will honor the public trust and
demonstrate commitment to professionalism.
f. To maintain and broaden public confidence, members should perform all professional
responsibilities with the highest sense of ______________.
Chapter 19 – Professional Conduct, Independence, and Quality Control
68. Ms. Lembke is a partner for DTS, a CPA firm. She is the lead partner for the firm’s largest
client, The Grey Elephant. Ms. Zadina, who works in the same office as Ms. Lembke, has a
sister who is the controller for The Grey Elephant. Because of potential independence issues,
Ms. Zadina does no work for The Grey Elephant. Ms. Zadina is being considered for promotion
to partner. What independence issues should Ms. Lembke consider before promoting Ms.
Zadina?
69. The SEC’s rules with respect to services provided by auditors are predicated on three basic
principles of auditor objectivity and independence. What are the three basic principles?
Chapter 19 – Professional Conduct, Independence, and Quality Control
70. Identify the primary purposes of Rules 201-203 of the Rules of Conduct.
71. When can a CPA disclose confidential information without the client’s consent?
Chapter 19 – Professional Conduct, Independence, and Quality Control
72. Match each term below with its definition as provided by the AICPA Rules of Conduct.
Examples include financial statement audits, reviews, and
2. Professional
Any person or entity, other than the member’s employer,
that engages a member or a member’s firm to perform
3. Practice of
public
Any action initiated by a member that informs others of his
A proprietor, part owner, or any individual who assumes
the risks and benefits of firm ownership or who is otherwise
held out by the firm to be the equivalent of any of the
5. Attest
The performance for a client by a member or a member’s
firm while holding out as CPA(s) of the professional services
of accounting, tax, personal financial planning, litigation
All services performed by member while holding out as a