CPA Ethics Exam Questions And Answers
Updated 2024/2025
What are ethics? - answer✔A general pattern or "way of life", a set of rules of conduct or
"moral code", and inquiry about ways of life and rules of conduct
Normative Ethics - answer✔address the issues of right and wrong actions, this type of theory
makes claims or offer guidelines or norms about how to discern the right action
Applied Ethics - answer✔investigates how a normative system plays out in a practical situation -
business and accounting ethics are a type of applied ethics
Normative Ethical Theories - answer✔consequentialism, deontological theory, and virtue ethics
Consequentialism - answer✔focuses on choosing the right action, which is determined by
looking at the consequences of that action
Utilitarianism - answer✔theory from Jeremy Bentham that states that the correct action is the
one that maximizes good (pleasure).
Major shortcoming of Consequentialism - answer✔sometimes the full extent of the outcome is
not always known at the time the act occurs
Deontology - answer✔espouses the maxim that one should do the right thing based solely on
the fact that it is right, irrespective of the consequences of the action
Downside to deontology - answer✔there can be over focus on merely doing one's duty or
"following the rules" without considering the bigger picture
Virtue Ethics - answer✔espouses that the most important aspect of morality is having the right
character - in other words, possessing the right set of virtues is central to morality because
what makes an action right is that it is one that a virtuous person would take
Preamble of Texas Rules of Professional Conduct for CPAs - answer✔practitioner is expected to
"establish and maintain high standards of competence and integrity in the practice of public
accountancy and to insure that the conduct and competitive practices of licensees serve the
purposes of the [Public Accountancy] Act and the best interest of the public
ALL RIGHTS RESERVED.
Rules of Professional Conduct obligate the CPA to: - answer✔maintaining independence in fact
and appearance, continuously improving professional skills, holding the affairs of clients in
confidence, maintaining high standards of personal and professional conduct in all matters, and
refrain from committing acts discreditable to the profession
AICPA Code of Professional Conduct components - answer✔Principles, Rules, and
interpretations and other guidance
AICPA Code's 4 sections - answer✔The Preface - applicable to all members, Part I - covers the
rules for members in public practice, Part II - details rules for members in business/industry,
Part III - applies to members other than those in public practice or industry (ex. individual who
are retired or not currently employed)
Integrity and Objectivity Rule - answer✔In the performance of any professional service, a
member shall maintain objectivity and integrity, shall be free of conflicts of interest, and shall
not knowingly misrepresent facts or subordinate his or her judgment to others
Objectivity - answer✔a state of mind, a quality that lends value to a member's services, this
principle imposes the obligation to be impartial, intellectually honest, and free of conflicts of
interest
Independence - answer✔precludes relationships that may appear to impair a member's
objectivity in rendering activities
Independence of mind - answer✔state of mind that permits a member to perform an attest
service without being affected by influences that compromise professional judgment, thereby
allowing an individual to act with integrity and exercise objectivity and professional skepticism
Independence in appearance - answer✔is the avoidance of circumstances that would cause a
reasonable and informed third party who has knowledge of all relevant information, to
reasonably conclude that the integrity, objectivity, or professional skepticism is compromised
7 categories of threats to independence - answer✔Adverse interest, advocacy, familiarity,
management participation, self-interest, self-review, and undue influence
Adverse interest threat - answer✔The threat that a member will not act with objectivity
because the member's interests are opposed to the client's interests
ex - an external auditor being sued by its client
Advocacy threat - answer✔The threat that a member will promote a client's interests or
position to the point that his or her objectivity is compromised.
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