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

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

varsity tutors app store varsity tutors android store

All CPA Auditing and Attestation (AUD) Resources

61 Practice Tests Question of the Day Flashcards Learn by Concept

Example Questions

Example Question #5 : Ethics Sec & Pcaob

Under the SOX 2002 provisions, registered public accounting firms are required to prepare and maintain audit work papers and other info related to any audit for a period of:

Possible Answers:

7 years

5 years

3 years

1 year

Correct answer:

7 years

Explanation:

Registered firms are required to maintain these work papers for a period of 7 years.

Example Question #6 : Ethics Sec & Pcaob

Of the following audit clients, which client's engagement would have to be conducted under SEC or PCAOB regulations and procedures?

Possible Answers:

ABC LP

A family owned and run electrician business

A governmental entity

A corporation listed on the New York Stock Exchange

Correct answer:

A corporation listed on the New York Stock Exchange

Explanation:

Only a public company or issuer would have to obey these procedures.

Example Question #1 : Ethics Gao And Dol

The GAO professional framework includes

Possible Answers:

Setting budgetary standards

Setting audit standards

Applying safeguards

Setting financial policy

Correct answer:

Applying safeguards

Explanation:

The GAO professional framework includes the application of appropriate safeguards.  As stated under Governmental Accounting Standards section 3.08, “Auditors should apply the conceptual framework at the audit organization, audit, and individual auditor levels to apply safeguards as necessary to eliminate the threats or reduce them to an acceptable level.”

Example Question #2 : Ethics Gao And Dol

A member is serving as an engagement partner. He invests heavily and has a portfolio of government bonds of a government client. This is an example of a:

Possible Answers:

Bias Threat

Structural Threat

Financial threat

Familiarity Threat

Correct answer:

Financial threat

Explanation:

The partner's investment in government bonds of a governmental client creates a financial threat.  This threat falls under the self-interest threat as expressed in the GAO Conceptual Framework Standards: “Self-interest threat - the threat that a financial or other interest will inappropriately influence an auditor’s judgment or behavior.”

Example Question #3 : Ethics Gao And Dol

Internal auditors are considered independent for internal reporting purposes:

Possible Answers:

never

If they are accountable to the government entity head

If employed by the audit firm

If they are an agency head

Correct answer:

If they are accountable to the government entity head

Explanation:

Internal auditors that are accountable to the government agency head are considered independent for internal reporting purposes.  Under section 3.31 of GAGAS; “Certain entities employ auditors to work for entity management. These auditors may be subject to administrative direction from persons involved in the entity management process. Such audit organizations are internal audit functions and are encouraged to use the Institute of Internal Auditors (IIA) International Standards for the Professional Practice of Internal Auditing in conjunction with GAGAS. In accordance with GAGAS, internal auditors who work under the direction of the audited entity’s management are considered independent.”

Example Question #4 : Ethics Gao And Dol

GAGAS specifically include all of the following ethics principles except:

Possible Answers:

Fraud detection

Serving the public interest

Proper use of government information

Integrity

Correct answer:

Fraud detection

Explanation:

GAGAS ethics do not include specific references to fraud detection. Ethics covers the public interest, integrity, and proper usage of information.

Example Question #5 : Ethics Gao And Dol

The GAGAS framework for independence identifies inappropriate influence on auditor judgment or behavior caused by a financial or other interest as a:

Possible Answers:

Self interest threat

Management participation threat

Bias threat

Self review threat

Correct answer:

Self interest threat

Explanation:

The self-interest threat is that a financial or other interest will influence an auditor's judgment or behavior inappropriately.

Example Question #6 : Ethics Gao And Dol

Of the following threats to independence identified by GAGAS related to a threat of external influence?

Possible Answers:

Structural threat

Self-interest threat

Familiarity threat

Undue influence threat

Correct answer:

Undue influence threat

Explanation:

The undue influence threat relates to how an external factor can impact an auditor's independence.

All CPA Auditing and Attestation (AUD) Resources

61 Practice Tests Question of the Day Flashcards Learn by Concept
Learning Tools by Varsity Tutors