AICPA ETHICS CODE EXAM SCRIPT
COMPLETE ANSWERS GRADED A+
◉ a. Providing corporate finance services to a client seeking to
acquire an audit client of the firm, when
the firm has obtained confidential information during the course
of the audit that may be relevant
to the transaction
b. Advising two clients at the same time who are competing to
acquire the same company when the
advice might be relevant to the parties' competitive positions
c. Providing services to both a vendor and a purchaser who are
clients of the firm in relation to the
same transaction
f. Providing a report for a licensor on royalties due under a license
agreement while at the same time
advising the licensee of the correctness of the amounts payable
under the same license agreement
h. Providing strategic advice to a client on its competitive position
while having a joint venture or
similar interest with a competitor of the client
i. Advising a client on the acquisition of a business which the firm
is also i
Answer: examples of situations where a conflict of interest may
come up
,◉ a. Implementing mechanisms to prevent unauthorized
disclosure of confidential information when
performing professional services related to a particular matter for
two or more clients whose interests
with respect to that matter are in conflict. This could include
i. using separate engagement teams who are provided with clear
policies and procedures on
maintaining confidentiality;
ii. creating separate areas of practice for specialty functions
within the firm, which may act as
a barrier to the passing of confidential client information from
one practice area to another
within a firm;
iii. establishing policies and procedures to limit access to client
files, the use of confidentiality
agreements signed by employees and partners of the firm and the
physical and electronic
separation of confidential information.
b. Regularly reviewing the application of safeguards by a senior
individual not involved with the client
engage
Answer: safeguards for conflicts of interest
◉ (a) decline to perform or discontinue the professional services
that would result in the conflict
, of interest; or (b) terminate the relevant relationships or dispose
of the relevant interests to eliminate the
threat or reduce it to an acceptable level.
Answer: In cases where an identified threat may be so significant
that no safeguards will eliminate the threat or
reduce it to an acceptable level, or the member is unable to
implement effective safeguards, the member
should
◉ a. makes, or permits or directs another to make, materially false
and misleading entries in an entity's
financial statements or records;
b. fails to correct an entity's financial statements or records that
are materially false and misleading
when the member has the authority to record the entries; or
c. signs, or permits or directs another to sign, a document
containing materially false and misleading
information. [Prior reference: paragraph .02 of ET section 102]
Answer: Preparing and Reporting Information
◉ An advocacy threat to compliance with the "Integrity and
Objectivity Rule" [1.100.001] may exist when a
member or the member's firm is engaged to perform nonattest
services, such as tax and consulting services,
that involve acting as an advocate for the client or to support a
client's position on accounting or financial
COMPLETE ANSWERS GRADED A+
◉ a. Providing corporate finance services to a client seeking to
acquire an audit client of the firm, when
the firm has obtained confidential information during the course
of the audit that may be relevant
to the transaction
b. Advising two clients at the same time who are competing to
acquire the same company when the
advice might be relevant to the parties' competitive positions
c. Providing services to both a vendor and a purchaser who are
clients of the firm in relation to the
same transaction
f. Providing a report for a licensor on royalties due under a license
agreement while at the same time
advising the licensee of the correctness of the amounts payable
under the same license agreement
h. Providing strategic advice to a client on its competitive position
while having a joint venture or
similar interest with a competitor of the client
i. Advising a client on the acquisition of a business which the firm
is also i
Answer: examples of situations where a conflict of interest may
come up
,◉ a. Implementing mechanisms to prevent unauthorized
disclosure of confidential information when
performing professional services related to a particular matter for
two or more clients whose interests
with respect to that matter are in conflict. This could include
i. using separate engagement teams who are provided with clear
policies and procedures on
maintaining confidentiality;
ii. creating separate areas of practice for specialty functions
within the firm, which may act as
a barrier to the passing of confidential client information from
one practice area to another
within a firm;
iii. establishing policies and procedures to limit access to client
files, the use of confidentiality
agreements signed by employees and partners of the firm and the
physical and electronic
separation of confidential information.
b. Regularly reviewing the application of safeguards by a senior
individual not involved with the client
engage
Answer: safeguards for conflicts of interest
◉ (a) decline to perform or discontinue the professional services
that would result in the conflict
, of interest; or (b) terminate the relevant relationships or dispose
of the relevant interests to eliminate the
threat or reduce it to an acceptable level.
Answer: In cases where an identified threat may be so significant
that no safeguards will eliminate the threat or
reduce it to an acceptable level, or the member is unable to
implement effective safeguards, the member
should
◉ a. makes, or permits or directs another to make, materially false
and misleading entries in an entity's
financial statements or records;
b. fails to correct an entity's financial statements or records that
are materially false and misleading
when the member has the authority to record the entries; or
c. signs, or permits or directs another to sign, a document
containing materially false and misleading
information. [Prior reference: paragraph .02 of ET section 102]
Answer: Preparing and Reporting Information
◉ An advocacy threat to compliance with the "Integrity and
Objectivity Rule" [1.100.001] may exist when a
member or the member's firm is engaged to perform nonattest
services, such as tax and consulting services,
that involve acting as an advocate for the client or to support a
client's position on accounting or financial
