CPA Auditing and Attestation (AUD) : Ethics & Professional Responsibility

Study concepts, example questions & explanations for CPA Auditing and Attestation (AUD)

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Example Questions

Example Question #109 : Cpa Auditing And Attestation (Aud)

The Concept of “due care” requires

Possible Answers:

Best of ability

Perfection

None of the above

Continual improvement

Correct answer:

Best of ability

Explanation:

According to AU 230:  The auditor’s responsibility to exercise due care: “Due professional care requires the auditor to exercise professional skepticism. The auditor uses the knowledge, skill, and ability called for by the profession of public accounting to diligently perform, in good faith and with integrity, the gathering and objective evaluation of evidence. Under these guidelines, none of the answers suffice.

Example Question #110 : Cpa Auditing And Attestation (Aud)

“Responsibilities Principle” requires a member to:

Possible Answers:

All of the above

Provide information to those requesting 

maintain public confidence

uphold a client’s wishes

Correct answer:

maintain public confidence

Explanation:

Under the AICPA code of professional conduct, the responsibility principle refers to maintaining public trust.

Example Question #1 : Ethics Aicpa

Under the “Scope and nature of services principle; a member is required to:

Possible Answers:

be annually reviewed by the AICPA

maintain quality of control procedures

monitor other members

offer services on request

Correct answer:

maintain quality of control procedures

Explanation:

Under the AICPA code of professional conduct, the “scope and nature of services” principle requires that practitioners work in firms that maintain appropriate quality control procedures.

Example Question #2 : Ethics Aicpa

An independent auditor must have which of the following?

Possible Answers:

A background in many different disciplines

A pre-existing and well informed point of view with respect to the audit

Technical training that is adequate to meet the requirements of a professional

Experience in taxation that is sufficient to comply with GAAS

Correct answer:

Technical training that is adequate to meet the requirements of a professional

Explanation:

The General Standards Rule of the AICPA Code of Professional Conduct states that the auditor must have adequate technical training as an auditor.

Example Question #3 : Ethics Aicpa

A CPA who is not in public practice is obligated to follow which of the following rules of conduct?

Possible Answers:

Independence

Commissions

Integrity and objectivity

Contingent fees

Correct answer:

Integrity and objectivity

Explanation:

A CPA must maintain objectivity and integrity in the performance of any professional service.

Example Question #1 : Ethics Aicpa

A member of the AICPA performing an audit, review, compilation, or other professional services must abide by:

Possible Answers:

All of the answer choices are correct

PCAOB procedures

Strict audit procedures

Professional competence

Correct answer:

Professional competence

Explanation:

PCAOB procedures are to be obeyed for public company engagements. In addition to professional competence, there is due professional care, planning and supervision, and sufficient relevant data.

Example Question #1 : Ethics Sec & Pcaob

In order to maintain independence, a partner, principal, shareholder or professional employee of a firm may not hold more than ____% in a client's stock.

Possible Answers:

1%

25%

10%

5%

Correct answer:

5%

Explanation:

According to PCAOB guidelines:  “During the period of the professional engagement, a partner or professional employee of the firm, his or her immediate family, or any group of such persons acting together owned more than 5 percent of a client’s outstanding equity securities or other ownership interests.”

Example Question #2 : Ethics Sec & Pcaob

Independence is impaired by:

Possible Answers:

Association membership with client management

employment relationship with the client

Members in the same alumni association with the CEO of a client

Banking in an institution used by the client

Correct answer:

employment relationship with the client

Explanation:

Under AICPA and PCAOB guidelines, independence is impaired by an employment arrangement with a client.  Under ET Section 100:  Participated on the attest engagement team or was an individual in a position to influence the attest engagement for the client when the attest engagement covers any period that includes his or her former employment or association with that client.”

Example Question #3 : Ethics Sec & Pcaob

Ron Johnson is the lead audit partner on the engagement with Abco, Inc. (a public company). Mr. Johnson must be rotated from the engagement every:

Possible Answers:

Seven Years

Never

10 Years

Five Years

Correct answer:

Five Years

Explanation:

Under PCAOB standards for public companies, an audit lead is required to rotate every five years.  The guidance provided by the PCAOB includes the following: “Auditors have many rigorous standards that must be upheld that are supposed to create independence from the companies they audit.   One of the most important is the mandatory lead rotation every five years.    This is a much more cost-effective way of increasing independence between auditors and clients.  When the lead auditor changes, they must “start from scratch” with their client, which means no longstanding relationship is intact.  In addition, the audit firm will have to spend less time on the audit than if it were an entirely new company, which saves massive amounts of time, and most importantly, money.”

Example Question #4 : Ethics Sec & Pcaob

An issuer may hire an employee of a registered public accounting firm who served on the audit engagement team within the previous year for which of the following positions?

Possible Answers:

CFO

Controller

Staff accountant

CEO

Correct answer:

Staff accountant

Explanation:

SOX and SEC rules prohibit an accounting firm from auditing an issuer's financial statements if certain members of management of the issuer had been members of the firm's audit engagement team within the one year period preceding the beginning of audit procedures. These positions include CEO, CFO, and controller.

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