Professional Ethics for CPAs (Exam for Candidates and Reissuance) | PETHOL18
Question 1
Bogart & Bacall, CPA's is a local CPA firm with approximately
... [Show More] one hundred clients. As a result of poor economic times, many of the firm's clients are behind in paying their bills to the firm. Precision Medical is a long-time client of the firm and, as a result of poor accounts receivable collections, is facing a severe cash crunch. The company has asked Bogart & Bacall to prepare a reviewed financial statement for the year ended December 31, 20X5 and to issue a report no later than February 15, 20X6. The firm anticipates that it will issue its report on February 8, 20X6 In order to maintain their independence, the firm has told Precision Medical that fees from work performed prior to which of the following dates must be paid?
Question 2
Clayborne, a member, practices in public accounting and has her own CPA firm. Due to some cash how issues, she has not paid her AICPA dues and is now 3 months overdue on such payment. For the same cash how reason, she has neither complied with the AICPA's practice monitoring program or the continuing education requirement for membership retention. Which of the following is correct concerning the action(s) the AICPA Board of Directors may take against Clayborne?
a) The Board may terminate Clayborne's membership for the three month delinquency in payment of her dues.
b) The Board may terminate Clayborne's membership for failure to comply with the practice monitoring program for membership retention.
c) The Board has no power to terminate Clayborne's membership for any of situations noted.
d) Both a. and b. are actions that the Board may take against Clayborne.
Question 3
Patel, a member, is a sole practitioner CPA who provides bookkeeping, financial statement, and tax preparation services to his clients. To assist Patel with his workload, he has hired a third-party service provider to enter client bookkeeping information (coded checks, deposits) and to do bank reconciliations for some of his clients. In addition, Patel uses a different third-party service provider to provide cloud based record storage, software application hosting, and e-file tax transmittal services. Which of the following statements is true regarding the disclosure(s), if any, that Patel is required to provide to his clients regarding the use of the aforementioned third-party service providers?
a) Patel is not required to disclose the use of either third-party service provider.
b) Regarding the third-party service provider performing bookkeeping services, Patel should inform the client(s) involved, prior to disclosing confidential client information and preferably in writing, that he may use a third-party service provider.
c) Regarding the third-party service provider hosting cloud based services, Patel should inform the client(s) involved, prior to disclosing confidential client information and preferably in writing, that he may use a third-party service provider.
d) Patel is required to disclose the use of both third-party service providers.
Question 4
Lazar, a member, is preparing a tax return for Polanski for 20X9. Lazar has prepared tax returns for Polanski for twenty years and a number of those returns have been audited, most recently for the year 20X7. There is a position on the 20X9 tax return that is at odds with a tax treatment consented to in an administrative proceeding conducted on Johnson's 20X7 tax return. Is Polanski bound to follow the tax treatment of an item as consented to in an earlier administrative proceeding?
a) Polanski is bound by the previous consent.
b) Polanski is not bound by the previous consent.
c) Polanski is not bound by the previous consent only if he receives permission from the IRS
d) None of the above.
Question 5
Which of the following is not considered to be a "cooperative arrangement" between a member firm and a client that would impair independence?
a) A joint venture to develop or market products or services where the arrangement is material to the client but not the member firm.
b) An arrangement to combine one or more services or products of the member firm with one or more services or products of the client and market the package with references to both parties. The arrangement is material to the member firm but not to the client.
c) A prime/subcontractor arrangement to provide services or products to a third party where the arrangement is not material to the firm or to the client.
d) All of the above are cooperative arrangements that would impair the member firm's independence.
Question 6
Raymond & Raymond, CPA's has offices in Kansas City and St. Louis. The Kansas City office of the firm performs an attest engagement for Luca Productions, Inc. which is located in Kansas City. Which of the following situations would impair the independence of Raymond & Raymond, CPA's with respect to Luca Productions, Inc.?
a) Romero, the lead engagement partner who works in the Kansas City office, has a brother who is a camera operator for Luca Productions, Inc.
b) Sands, who works in the Kansas City office and is a participant on the engagement team, has a sister who is a receptionist for Luca Productions, Inc.
c) Moore, a partner in the St. Louis office who does not have any ability to inhuence the attest engagement, has a non-dependent daughter who works at Luca Productions, Inc. as a controller.
d) Young is a partner in the Kansas City office who does not do any work on the attest engagement. Her mother is the CFO for Luca Productions, Inc.
Question 7
Warfield & Shoup, CPA's audited the financial statements of Siesta Publishing for the year ended December 31, 20X4 and issued their audit report on February 2, 20X5. After a dispute with the firm, Siesta Publishing decided to utilize the services of Danza & Zona, CPA's to audit their financial statements for the year ended December 31, 20X5. In conjunction with their audit, Danza & Zona, CPA's has requested copies of schedules supporting a number of adjusting entries related to the December 31, 20X4 audit. In addition, the request included the return of Siesta Publishing's records that had been given to Warfield & Shoup, CPA's but had yet to be returned. At the time of the request, Warfield & Shoup, CPA's had not been paid for the audit engagement for December 31, 20X4 and the firm has refused to provide Danza & Zona, CPA's with
the requested supporting documentation or the client's records until they are paid in full Is the firm's refusal to provide the requested documentation of adjusting entries, along with its refusal to return any of Siesta Publishing's records in its possession, an act discreditable to the profession?
a) The refusal to return client records is an act discreditable to the profession, but the refusal to provide copies of schedules supporting adjusting entries is not an act discreditable to the profession.
b) Only the refusal to provide copies of schedules supporting adjusting entries is an act discreditable to the profession.
c) Both the refusal to provide copies of schedules supporting adjusting entries and the refusal to return client records are acts discreditable to the profession.
d) Neither the refusal to provide copies of schedules supporting adjusting entries and the refusal to return client records are acts discreditable to the profession.
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