Chapter 19 Professional Conduct, Independence, and Quality C

With respect to ethics, the rights-based approach:

• suggests that auditors should always verify ownership of a client's material tangible assets.

• is primarily concerned with equity and impartiality.

• suggests that an individual's actions should not violate the rights of any individual.

• recognizes that decisions involve trade-offs between costs and benefits.

With respect to ethics, the utilitarian theory:

• suggests that auditors should always verify ownership of a client's material tangible assets.

• is primarily concerned with equity and impartiality.

• suggests that an individual's actions should not violate the rights of any individual.

• recognizes that decisions involve trade-offs between costs and benefits.

With respect to ethics, the justice-based approach:

A)

B)

C)

D)

• suggests that auditors should always verify ownership of a client's material tangible assets.

• is primarily concerned with equity and impartiality.

• suggests that an individual's actions should not violate the rights of any individual.

• recognizes that decisions involve trade-offs between costs and benefits.

In auditing a publicly held company, an auditor must follow the professional standards established by all of the following except:

• the AICPA's Auditing Standards Board.

• the SEC Independence Rules.

• the PCAOB Code of Professional Conduct.

• the PCAOB Auditing Standards.

Which of the following is not a Principle of Professional Conduct as defined by the Code of Professional Conduct?

• Integrity.

• Due care.

• Reporting.

• Scope and nature of services.

For private companies, accounting firms are prohibited from providing:

• outsourced internal audit services.

• audit services.

• review services.

• none of these.

A violation of the profession's ethical standards would most likely have occurred when a CPA:

• purchased a bookkeeping firm's practice of monthly write-ups for a percentage of fees received over a three-year period.

• made arrangements with a bank to collect notes issued by a client in payment of fees due.

• named Smith formed a partnership with two other CPAs and used "Smith & Co." as the firm name.

• issued an unqualified opinion on the 2011 financial statements when fees for the 2010 audit were unpaid.

Which of the following is required for a firm to designate itself as a "Member of the American Institute of Certified Public Accountants" on its letterhead?

• At least one of the partners must be a member.

• The partners whose names appear in the firm name must be members.

• All CPA owners must be members of the institute.

• The firm must be a dues-paying member.

A violation of the profession's ethical standards would least 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.

• failed to file his personal tax return.

According to the Code of Professional Conduct, which of the following individuals is not in a position to influence an attest engagement (i.e., not a covered member)?

• The office's managing partner (or partner equivalent) who determines the compensation of the attest engagement partner.

• The office's IT expert partner, who consulted with the engagement partner (or partner equivalent) regarding the client's IT system and spent 15 hours on the engagement.

• The partner (or partner equivalent) in another office in a nearby city who regularly plays golf with the engagement partner (or partner equivalent) and does not work on the engagement or have any interaction with the client.

• The office's partner (or partner equivalent) who monitors quality control over the attest engagement.