AICPA ETHICS CORE MAIN QUESTIONS AND
ANSWERS SURE A+
✔✔Rogers CPA is engaged to perform bookkeeping services (a non attest service) for
an attest client. Which activity will impair Roger's independence?
A. Supervise the client's employees as they perform their normal activities
B. Post client-approve entries to the client's trial balance
C. Advise the client on current accounting issues
D. None of these would impair independence - ✔✔A. Supervise the client's employees
as they perform their normal activities
See slide 10. Supervising client employees in the performance of their normal recurring
activities impairs a member's independence. Posting entries is fine as long as the client
approves the entry (you're just transferring numbers to the trial balance) and advising
the client on issues is a typical nonattest service that wouldn't impair independence.
✔✔Which activity would be least likely to create unacceptable threats to a member's
independence?
A. Consummate a translation on behalf of the client with potential investors
B. Prepare financial statements based on the client's trial balance
C. Prepare source documents for the client - ✔✔B. Prepare financial statements based
on the client's trial balance
A member may prepare financial statements from a client's trial balance without
impairing independence. It's simply taking financial statement data the client prepared
and approved and organizing it into the four statements. The other two options were
mentioned on previous slides as activities a member should not do, since those would
impair the CPA's independence. So B would be the least likely to impair independence.
✔✔Mermaid Co. engages Olsen CPAs to help improve the operating effectiveness of
certain internal controls. Olsen also audits Mermaid's financial statements. Which of
these creates an unacceptable management participation threat to Olsen's
independence?
A. Provide research materials to Mermaid's management
B. Make recommendations to Mermaid
, C. Set policy for Mermaid - ✔✔C. Set policy for Mermaid
Setting policy is considered a management responsibility that the CPA must not perform
for an attest client.
✔✔Deen's CPA accepts a commission from Lara Corp, a financial statement review
client, for referring Lara to an insurer. Which statement is accurate regarding
commissions?
A. The commission is prohibited because a review client paid the fee for Deen's referral
of business to a third party
B. The commission is prohibited if the fee structure is material to Deen and will be paid
to Deen over a period of time
C. The commission is permitted if Deen discloses to Lara that I will e receiving the fee
D. The commission is permitted because Deen does not perform an audit of Lara's
financial statements - ✔✔A. The commission is prohibited because a review client paid
the fee for Deen's referral of business to a third party
Since Lara is a review client, Deen is prohibited from receiving a commission for either
(a) recommending to Lara services or products that a third party will provide, or (b)
recommending Lara's services or products to others. See slide 34 and 36.
✔✔Which statement about the application of SEC independence rules to the audit of an
SEC registrant is true?
A. If a circumstance is not specifically addressed in the rules, you must assume that
independence is impaired
B. The four basic principles should be considered, in addition to the specific rules
C. The rules do not apply to auditors of nonpublic broker-dealers or investment advisers
D. If try AICPA and state board rules apply, the SEC rules would not also apply - ✔✔B.
The four basic principles should be considered, in addition to the specific rules
You should always consider the four basic principles, in addition to the specific rules
✔✔Which choice is one of the fundamental principles that the SEC may look to in
evaluating independence in a particular situation?
A. Whether the firm acts as an advocate of the client
B. Whether the firm has a recent history of independence violations
C. Whether the firm has adequate independence training for its personnel
D. Whether the firm is competent to complete the work - ✔✔A. Whether the firm acts as
an advocate of the client
This is one of the four principles mentioned by the SEC. The other are whether the firm
(1) has a manual or conflicting interest with the client, (2) audits its own work, or (3) acts
as management or an employee.
✔✔Under the SEC rules, with relationships between a covered person and an SEC
audit client are NOT prohibited?
A. Joint business ventures
B. Agreements to share costs or profits
C. Immaterial landlord-tenant relationships
ANSWERS SURE A+
✔✔Rogers CPA is engaged to perform bookkeeping services (a non attest service) for
an attest client. Which activity will impair Roger's independence?
A. Supervise the client's employees as they perform their normal activities
B. Post client-approve entries to the client's trial balance
C. Advise the client on current accounting issues
D. None of these would impair independence - ✔✔A. Supervise the client's employees
as they perform their normal activities
See slide 10. Supervising client employees in the performance of their normal recurring
activities impairs a member's independence. Posting entries is fine as long as the client
approves the entry (you're just transferring numbers to the trial balance) and advising
the client on issues is a typical nonattest service that wouldn't impair independence.
✔✔Which activity would be least likely to create unacceptable threats to a member's
independence?
A. Consummate a translation on behalf of the client with potential investors
B. Prepare financial statements based on the client's trial balance
C. Prepare source documents for the client - ✔✔B. Prepare financial statements based
on the client's trial balance
A member may prepare financial statements from a client's trial balance without
impairing independence. It's simply taking financial statement data the client prepared
and approved and organizing it into the four statements. The other two options were
mentioned on previous slides as activities a member should not do, since those would
impair the CPA's independence. So B would be the least likely to impair independence.
✔✔Mermaid Co. engages Olsen CPAs to help improve the operating effectiveness of
certain internal controls. Olsen also audits Mermaid's financial statements. Which of
these creates an unacceptable management participation threat to Olsen's
independence?
A. Provide research materials to Mermaid's management
B. Make recommendations to Mermaid
, C. Set policy for Mermaid - ✔✔C. Set policy for Mermaid
Setting policy is considered a management responsibility that the CPA must not perform
for an attest client.
✔✔Deen's CPA accepts a commission from Lara Corp, a financial statement review
client, for referring Lara to an insurer. Which statement is accurate regarding
commissions?
A. The commission is prohibited because a review client paid the fee for Deen's referral
of business to a third party
B. The commission is prohibited if the fee structure is material to Deen and will be paid
to Deen over a period of time
C. The commission is permitted if Deen discloses to Lara that I will e receiving the fee
D. The commission is permitted because Deen does not perform an audit of Lara's
financial statements - ✔✔A. The commission is prohibited because a review client paid
the fee for Deen's referral of business to a third party
Since Lara is a review client, Deen is prohibited from receiving a commission for either
(a) recommending to Lara services or products that a third party will provide, or (b)
recommending Lara's services or products to others. See slide 34 and 36.
✔✔Which statement about the application of SEC independence rules to the audit of an
SEC registrant is true?
A. If a circumstance is not specifically addressed in the rules, you must assume that
independence is impaired
B. The four basic principles should be considered, in addition to the specific rules
C. The rules do not apply to auditors of nonpublic broker-dealers or investment advisers
D. If try AICPA and state board rules apply, the SEC rules would not also apply - ✔✔B.
The four basic principles should be considered, in addition to the specific rules
You should always consider the four basic principles, in addition to the specific rules
✔✔Which choice is one of the fundamental principles that the SEC may look to in
evaluating independence in a particular situation?
A. Whether the firm acts as an advocate of the client
B. Whether the firm has a recent history of independence violations
C. Whether the firm has adequate independence training for its personnel
D. Whether the firm is competent to complete the work - ✔✔A. Whether the firm acts as
an advocate of the client
This is one of the four principles mentioned by the SEC. The other are whether the firm
(1) has a manual or conflicting interest with the client, (2) audits its own work, or (3) acts
as management or an employee.
✔✔Under the SEC rules, with relationships between a covered person and an SEC
audit client are NOT prohibited?
A. Joint business ventures
B. Agreements to share costs or profits
C. Immaterial landlord-tenant relationships
