Exam (elaborations)

audit 87 chapter 2 Questions With Answers| Test Your Knowledge

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Course
Audit

Institution
Audit

Which of the following statements is true? A. A covered member can own one share of an attest client because it is immaterial. B. A covered member cannot own a mutual fund which contains attest client shares, as long as the investment in the mutual fund is not material to the covered member. C. ...

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audit chapter 2

Institution Audit
Course Audit

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audit 87 chapter 2 Questions With
Answers
Which of the following statements is true?

A. A covered member can own one share of an attest client because it is immaterial.

B. A covered member cannot own a mutual fund which contains attest client shares, as long as the
investment in the mutual fund is not material to the covered member.

C. A covered member can be an executor of an estate, which invests in an attest client, as long as the
investment is not material.

D. A CPA firm as an entity is prohibited from the same activities as a covered member of the firm. - ✔
✔ D. A CPA firm as an entity is prohibited from the same activities as a covered member of the firm.

Which of the following statements is true?

A. It is possible for a CPA firm to rely solely on safeguards implemented by the client to eliminate or
reduce significant threats to an acceptable level.

B. There are five basic safeguards to assist CPAs with threats to compliance with the accounting
profession's ethical rules.

C. If a CPA concludes that threats are at an acceptable level after applying the identified safeguards,
then the CPA may proceed with the professional service.

D. To evaluate the significance of a threat, CPAs should evaluate identified threats in aggregate. - ✔ ✔
C. If a CPA concludes that threats are at an acceptable level after applying the identified safeguards,
then the CPA may proceed with the professional service.

Which section of the AICPA Code of Professional Conduct includes ethical rules for members in
business?

A. Part I

B. Part II

C. Part III

D. Some other section - ✔ ✔ B. Part II

Which section of the AICPA Code of Professional Conduct includes ethical rules for members in public
practice?

,A. Part I

B. Part II

C. Part III

D. Some other section - ✔ ✔ A. Part I

Which section of the AICPA Code of Professional Conduct includes ethical rules for other members, like
non-CPA members of the AICPA?

A. Part I

B. Part II

C. Part III

D. Some other section - ✔ ✔ C. Part III

A CPA works at a firm and also maintains a private practice as an expert witness for intellectual property
cases. While at an audit client's office, he overhears a telephone conversation about a patent dispute
and offers his services. When he takes the expert witness job, this position creates what type of threat
to his professional ethics?

A. Familiarity threat

B. Advocacy threat

C. Self-interest threat

D. Self-review threat - ✔ ✔ B. Advocacy threat

A threat that a CPA could benefit, financially or otherwise, from an interest in, or relationship with, a
client or persons associated with the client is a(n) _______.

A. familiarity threat

B. management participation threat

C. self-interest threat

D. self-review threat - ✔ ✔ C. self-interest threat

A threat that a CPA will allow a third party to coerce his/her judgment about a client is known as a(n):

A. familiarity threat

, B. advocacy threat

C. self-interest threat

D. undue influence threat - ✔ ✔ D. undue influence threat

A threat that a CPA will not act with objectivity because the CPA's interests are opposed to the client's
interests is a(n) _______.

A. familiarity threat

B. advocacy threat

C. self-interest threat

D. adverse Interest Threat - ✔ ✔ D. adverse Interest Threat

A threat that a CPA will not appropriately evaluate the results of a previous judgment made by, or
service performed by, an individual in the CPA's firm is a(n) _______.

A. familiarity threat

B. advocacy threat

C. self-interest threat

D. self-review threat - ✔ ✔ D. self-review threat

A threat that a CPA will promote a client's interests or position to the point that his or her objectivity is
compromised is a(n) _______.

A. familiarity threat

B. advocacy threat

C. self-interest threat

D. self-review threat - ✔ ✔ B. advocacy threat

A threat that a CPA will take on the role of client decision making or assume associated responsibilities is
a(n) _______.

A. familiarity threat

B. management participation threat

C. self-interest threat

D. self-review threat - ✔ ✔ B. management participation threat

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