Michigan CPA Ethics Exams Practice
Questions And Correct Answers
(Verified Answers) Plus Rationale 2026
Q&A| Instant Download Pdf
1. Which of the following best describes the primary purpose of the AICPA
Code of Professional Conduct?
A. To provide detailed tax guidance for clients
B. To establish accounting procedures for all businesses
C. To guide CPAs in maintaining integrity, objectivity, and
professionalism
D. To regulate CPA salaries across firms
The AICPA Code of Professional Conduct exists to ensure that CPAs
adhere to ethical
standards, maintain public trust, and act with integrity and objectivity in
professional matters.
2. A CPA discovers that a client has been materially misstating financial
statements. The
CPA’s ethical duty requires:
A. Ignoring the misstatement if it is minor
B. Reporting the client to law enforcement immediately
C. Communicating the issue to management and, if unresolved,
considering withdrawal from the engagement
D. Correcting the financial statements without informing management
Ethical guidelines require CPAs to address material misstatements, starting
with management,
,and to consider resignation if the issue is not resolved, maintaining
independence and
professional
responsibility.
3. Independence in fact and independence in appearance differ in that:
A. Independence in fact relates only to financial interest
B. Independence in appearance is not required by the AICPA
C. Independence in fact is the actual ability to act objectively, while
independence in appearance relates to public perception of
objectivity D. Independence in appearance applies only to internal
audits
A CPA may be factually independent but if the public perceives a
conflict of interest,
independence in appearance is compromised; both are critical for
professional credibility.
4. When a CPA provides non-attest services to an audit client, which of the
following safeguards helps maintain independence?
A. Sharing in the client’s profits
B. Engaging a separate partner to oversee the attest function
C. Allowing management to dictate accounting policies
D. Providing significant loans to the client
Segregating responsibilities between non-attest services and attest
services reduces threats to
independence and ensures ethical
compliance.
5. Which principle of the AICPA Code emphasizes that CPAs should avoid
conflicts of interest and act with fairness?
A. Due care
B. Objectivity
C. Integrity
D. Confidentiality
,Integrity requires CPAs to be honest, fair, and avoid actions that could
discredit the profession
or create conflicts of
interest.
6. A CPA learns that a client has engaged in illegal activity. The CPA’s duty
under professional ethics is to:
A. Disclose immediately to the public
B. Ignore it if it does not affect the financial statements
C. Consult legal counsel and consider the requirement to report while
maintaining confidentiality
D. Correct the client’s actions without informing authorities
CPAs must balance legal obligations with ethical responsibilities,
including confidentiality
and reporting illegal acts when
required.
7. The concept of “due care” in accounting ethics requires a CPA to:
A. Work only for high-paying clients
B. Perform professional services competently and diligently
C. Avoid any client that might create extra work
D. Follow management instructions without question
Due care obligates CPAs to apply skill, competence, and diligence, ensuring
that services meet
professional
standards.
8. Which action could create a self-review threat under the AICPA ethics
rules?
A. Accepting a new audit client
B. Auditing financial statements the CPA previously prepared
C. Consulting on a tax matter
D. Participating in peer review
A self-review threat arises when a CPA audits work they previously
performed, as this may
, impair objectivity and professional
judgment.
9. A CPA discovers a material misstatement after issuing the audit report.
The first ethical step is to:
A. Notify regulatory authorities
B. Ignore the error if the client is small
C. Inform the client and request correction, issuing a revised report if
necessary
D. Publicly disclose the error immediately
CPAs are obligated to address errors in financial statements by
alerting the client and
correcting reports to maintain professional integrity
and compliance.
10. Confidential client information may be disclosed without client consent
in which circumstance?
A. When required by law or a valid legal authority
B. To advertise CPA services
C. To family members of the client
D. To other clients for comparison
The ethical standard allows disclosure of confidential information
only when legally
mandated, protecting client privacy while complying
with the law.
11. Which of the following best illustrates a threat to independence due to
financial interests?
A. Owning a small, diversified mutual fund
B. Owning a significant amount of stock in an audit client
C. Receiving a minor gift from a client
D. Participating in a charity fundraiser for a client
Significant financial interests in a client compromise independence
both in fact and
Questions And Correct Answers
(Verified Answers) Plus Rationale 2026
Q&A| Instant Download Pdf
1. Which of the following best describes the primary purpose of the AICPA
Code of Professional Conduct?
A. To provide detailed tax guidance for clients
B. To establish accounting procedures for all businesses
C. To guide CPAs in maintaining integrity, objectivity, and
professionalism
D. To regulate CPA salaries across firms
The AICPA Code of Professional Conduct exists to ensure that CPAs
adhere to ethical
standards, maintain public trust, and act with integrity and objectivity in
professional matters.
2. A CPA discovers that a client has been materially misstating financial
statements. The
CPA’s ethical duty requires:
A. Ignoring the misstatement if it is minor
B. Reporting the client to law enforcement immediately
C. Communicating the issue to management and, if unresolved,
considering withdrawal from the engagement
D. Correcting the financial statements without informing management
Ethical guidelines require CPAs to address material misstatements, starting
with management,
,and to consider resignation if the issue is not resolved, maintaining
independence and
professional
responsibility.
3. Independence in fact and independence in appearance differ in that:
A. Independence in fact relates only to financial interest
B. Independence in appearance is not required by the AICPA
C. Independence in fact is the actual ability to act objectively, while
independence in appearance relates to public perception of
objectivity D. Independence in appearance applies only to internal
audits
A CPA may be factually independent but if the public perceives a
conflict of interest,
independence in appearance is compromised; both are critical for
professional credibility.
4. When a CPA provides non-attest services to an audit client, which of the
following safeguards helps maintain independence?
A. Sharing in the client’s profits
B. Engaging a separate partner to oversee the attest function
C. Allowing management to dictate accounting policies
D. Providing significant loans to the client
Segregating responsibilities between non-attest services and attest
services reduces threats to
independence and ensures ethical
compliance.
5. Which principle of the AICPA Code emphasizes that CPAs should avoid
conflicts of interest and act with fairness?
A. Due care
B. Objectivity
C. Integrity
D. Confidentiality
,Integrity requires CPAs to be honest, fair, and avoid actions that could
discredit the profession
or create conflicts of
interest.
6. A CPA learns that a client has engaged in illegal activity. The CPA’s duty
under professional ethics is to:
A. Disclose immediately to the public
B. Ignore it if it does not affect the financial statements
C. Consult legal counsel and consider the requirement to report while
maintaining confidentiality
D. Correct the client’s actions without informing authorities
CPAs must balance legal obligations with ethical responsibilities,
including confidentiality
and reporting illegal acts when
required.
7. The concept of “due care” in accounting ethics requires a CPA to:
A. Work only for high-paying clients
B. Perform professional services competently and diligently
C. Avoid any client that might create extra work
D. Follow management instructions without question
Due care obligates CPAs to apply skill, competence, and diligence, ensuring
that services meet
professional
standards.
8. Which action could create a self-review threat under the AICPA ethics
rules?
A. Accepting a new audit client
B. Auditing financial statements the CPA previously prepared
C. Consulting on a tax matter
D. Participating in peer review
A self-review threat arises when a CPA audits work they previously
performed, as this may
, impair objectivity and professional
judgment.
9. A CPA discovers a material misstatement after issuing the audit report.
The first ethical step is to:
A. Notify regulatory authorities
B. Ignore the error if the client is small
C. Inform the client and request correction, issuing a revised report if
necessary
D. Publicly disclose the error immediately
CPAs are obligated to address errors in financial statements by
alerting the client and
correcting reports to maintain professional integrity
and compliance.
10. Confidential client information may be disclosed without client consent
in which circumstance?
A. When required by law or a valid legal authority
B. To advertise CPA services
C. To family members of the client
D. To other clients for comparison
The ethical standard allows disclosure of confidential information
only when legally
mandated, protecting client privacy while complying
with the law.
11. Which of the following best illustrates a threat to independence due to
financial interests?
A. Owning a small, diversified mutual fund
B. Owning a significant amount of stock in an audit client
C. Receiving a minor gift from a client
D. Participating in a charity fundraiser for a client
Significant financial interests in a client compromise independence
both in fact and
