CPA Ethics Exam
A financial institution has agreed to consult Hecht its customers
who want earnings tax advice and coaching of tax
returns. The financial institution will obtain a referral price from
Hecht for every purchaser he obtains. Has Hecht, a member,
violated the Code of Professional Conduct by using
paying those prices?
(a) Yes, he has violated the Code with the aid of paying such
a charge to someone no longer in the practice of public
accounting.
(b) No, he has not violated the code if he tells these
new clients that he paid a referral fee to achieve
their work. - ANS-(b) is accurate. He may additionally pay a referral price to acquire a
patron. He need to expose the referral charge to the customer (Rule 503 C and Staff
Responses to Inquires).
A branch supervisor instructs his controller, a member,
to boom the recorded fee of the branch's year stop
stock with the aid of $50,000, an quantity this is cloth
to the firm's consolidated economic statements. There
isn't any basis for such an boom; but, it'll raise
the branch's earnings sufficient so that the supervisor will
acquire an incentive bonus of$5,000. The controller,
terrified of being fired if he refuses, follows the
supervisor's instructions and increases the recorded
stock quantity by using $50,000. The controller
(a) has no longer violated the ethics code.
(b) has violated the ethics code. - ANS-(b) is accurate. The controller violated the ethics
code by using creating a materially fake entity inside the monetary data (Interpretation 102-1
(a).)
A calendar-yr privately held overview client of
Andrew & Co. CPAs, has paid simplest $15,000 of the
$25,000 fees billed to them in March 1996. Andrew
& Co. 's statistics display that $18,000 of the time
expenses and expenses had been incurred in 1995 and the
stability of $7 ,000 became time costs and prices for
January and February 1996. The paintings consisted of
assessment of the 1995 financial statements, 1995 federal
and kingdom earnings tax returns and some management
,consulting services. The unpaid balance of $10,000 is
now not good sized to Andrews & Co.
In May 1997, Andrews & Co. Commenced and finished
their paintings at the customer's 1996 economic statements.
They plan on issuing their record on those monetary
statements throughout the early part of June 1997. A personnel
person questions, in mild of the unpaid costs, whether or not
or not they're impartial. In solution to her query
which of the subsequent statements is actual?
(a) To maintain independence wit - ANS-(b) is correct. The overdue fee have to be paid
earlier than
the record is issued. Prior 12 months 's paintings that the customer
has no longer paid for turned into finished in February 1996.
Sixteen months later in June 1997 they will issue
the report at the modern paintings. A ruling says that
independence is impaired if prices for work completed multiple 12 months previous are
unpaid when the report for the present day 12 months is issued (Ruling fifty two).
(a) is incorrect. If the $10,000 is paid before the
document is issued in June there is no independence
impairment.
( c) is inaccurate because the significance to Andrew &
Co. CPAs of the amount of the unpaid fee does now not make any distinction.
( d) is incorrect because the ruling says billed or unbilled charges or a be aware receivable
springing up from such costs which are unpaid impair independence. An settlement to pay in
4 identical payments is equivalent to a word. (Ruling fifty two)
A CPA and his company were threatened, in writing,
with a lawsuit via an audit client who claims that his
previous year's stock turned into understated and as a end result
his firm became no longer able to obtain the financing it wished
to amplify operations. His letter states that he believes
defective auditing procedures were liable for the
alleged understatement of inventory. The amount of
understated inventory at difficulty is $50,000. In this situation
the CPA could be
(a) impartial with admire to his client since it
has not been established that the auditing tactics
had been at fault.
(b) no longer impartial with appreciate to his consumer considering
the allegation, although no longer demonstrated, has been made
that his audit became now not ok. - ANS-(b) is accurate. Independence is impaired because
of the chance of faulty auditing (Interpretation one hundred and one-6,
Litigation between purchaser and member 3).
A CPA company placed the subsequent advert in a news paper:
"We are thrilled to announce that Frank Jones who
spent the remaining twenty years with the Internal Revenue
,Service has joined our fum as a associate. The
influence of pals Mr. Jones has in the Internal
Revenue Service will prove beneficial in managing
investigations by using that department. Why no longer see us
with admire on your tax issues?"
This _______________ ad a violation of the Code of
Professional Conduct.
(a) is
(b) is not - ANS-(a) is accurate. This advert is not allowed because it
implies the capacity to persuade the IRS (Interpretation 502-2,2).
A CPA company gives a seminar on the trendy adjustments
within the federal earnings tax legal guidelines. Invitations to wait
the seminar are despatched by using letter to both customers and
non-clients. A part of the letter reads: "James
Smith of om company 's Washington, D.C. Workplace will
chair the seminar. He has been a associate in our firm
for more than twenty years and during that period has
specialized within the income tax place. Mr. Smith is a
recognized expert in the earnings tax field and has
given talks at the difficulty to many countrywide businesses.
Currently he's a member of the AICPA Federal
Taxation Executive Committee and Chairman of our
State CPA Society's Committee on Taxation." The
presentation of this sort of seminar a violation
of the Code of Professional Conduct.
(a) is
(b) isn't always - ANS-(b) is correct. There are not any prohibitions in opposition to
inviting non clients to seminars presented through a
member's company (Rule 502). The best prohibitions are
in opposition to false, misleading or misleading advertising and marketing or solicitation.
A CPA firm that hires from 15 to twenty new group of workers humans
a year obtains ninety percent of its new human beings from
the four schools inside the place. For the ultimate three years,
the graduating lessons of these colleges had been
composed of fifty percentage women and 50 percent
guys, with these chances conserving true for every
quartile of grade factor average of the graduating
magnificence. Finn employees interviewing on campus have
permit it's recognized that they do not wish to interview
girls candidates. The fum's expert personnel of
about one hundred forty human beings includes ten ladies. A
woman who became denied an interview with the firm's
recruiter files a complaint with the AICPA Ethics
Division charging discrimination by means of the company towards
ladies. The likely action by the Ethics Division
, would be to
(a) test to see if the problem have been litigated or
there has been a hearing on the matter before
an administrative company as the quick step in its
research. - ANS-(a) is correct. They would wait till a decision was
made via a government agency before beginning their research (Interpretation 501-2).
(b) is wrong because discrimination is an act
discreditable (Interpretation 501 -2).
A CPA firm turned into found to have knowingly organized
materially misleading financial statements, for the
2d time. What is the most administrative
penalty the firm can receive for this 2d offense?
(a) $ 50,000
(b) $ one hundred,000
(c) $ a million
(d) $5,000,000 - ANS-(d) $five,000,000. According to Section 5116.2, firms
violating Section 5110 (Unprofessional Conduct),
subsections a, c, i, j, or ok are problem to administrative consequences up to $1,000,000 for
a first offense and $5,000,000 for next offenses.
Incorrect Responses:
(a) $50,000 is the quantity of administrative penalty
for the first offense dedicated by a herbal individual.
(b) $ a hundred,000 is the amount of administrative penalty for subsequent offenses
dedicated through herbal men and women.
(c) $ one million is the quantity of administrative
penalty for the primary offense dedicated through a firm.
A CPA has been charged with bribing a metropolis inspector.
At her trial, the proof surely suggests that she
did pay a bribe to the inspector. However, the judge
dismisses the case due to a criminal technicality. In
this kind of state of affairs, which of the following statements
is accurate?
(a) Since a court docket has disregarded the rate against
the CPA, the Ethics Division can also do nothing
about the problem.
(b) The Ethics Division may also proceed with their
own research of the matter and, if the information
warrant it, carry the member before a Trial
Board. - ANS-(b) is correct. The Ethics Division may also check out
it even though the court disregarded the fee (Acts Discreditable to the Profession).
A CPA in public practice ______________ avoid running
underneath a code of professional ethics via choosing no longer
to join either the AICPA or any country CPA society.
A financial institution has agreed to consult Hecht its customers
who want earnings tax advice and coaching of tax
returns. The financial institution will obtain a referral price from
Hecht for every purchaser he obtains. Has Hecht, a member,
violated the Code of Professional Conduct by using
paying those prices?
(a) Yes, he has violated the Code with the aid of paying such
a charge to someone no longer in the practice of public
accounting.
(b) No, he has not violated the code if he tells these
new clients that he paid a referral fee to achieve
their work. - ANS-(b) is accurate. He may additionally pay a referral price to acquire a
patron. He need to expose the referral charge to the customer (Rule 503 C and Staff
Responses to Inquires).
A branch supervisor instructs his controller, a member,
to boom the recorded fee of the branch's year stop
stock with the aid of $50,000, an quantity this is cloth
to the firm's consolidated economic statements. There
isn't any basis for such an boom; but, it'll raise
the branch's earnings sufficient so that the supervisor will
acquire an incentive bonus of$5,000. The controller,
terrified of being fired if he refuses, follows the
supervisor's instructions and increases the recorded
stock quantity by using $50,000. The controller
(a) has no longer violated the ethics code.
(b) has violated the ethics code. - ANS-(b) is accurate. The controller violated the ethics
code by using creating a materially fake entity inside the monetary data (Interpretation 102-1
(a).)
A calendar-yr privately held overview client of
Andrew & Co. CPAs, has paid simplest $15,000 of the
$25,000 fees billed to them in March 1996. Andrew
& Co. 's statistics display that $18,000 of the time
expenses and expenses had been incurred in 1995 and the
stability of $7 ,000 became time costs and prices for
January and February 1996. The paintings consisted of
assessment of the 1995 financial statements, 1995 federal
and kingdom earnings tax returns and some management
,consulting services. The unpaid balance of $10,000 is
now not good sized to Andrews & Co.
In May 1997, Andrews & Co. Commenced and finished
their paintings at the customer's 1996 economic statements.
They plan on issuing their record on those monetary
statements throughout the early part of June 1997. A personnel
person questions, in mild of the unpaid costs, whether or not
or not they're impartial. In solution to her query
which of the subsequent statements is actual?
(a) To maintain independence wit - ANS-(b) is correct. The overdue fee have to be paid
earlier than
the record is issued. Prior 12 months 's paintings that the customer
has no longer paid for turned into finished in February 1996.
Sixteen months later in June 1997 they will issue
the report at the modern paintings. A ruling says that
independence is impaired if prices for work completed multiple 12 months previous are
unpaid when the report for the present day 12 months is issued (Ruling fifty two).
(a) is incorrect. If the $10,000 is paid before the
document is issued in June there is no independence
impairment.
( c) is inaccurate because the significance to Andrew &
Co. CPAs of the amount of the unpaid fee does now not make any distinction.
( d) is incorrect because the ruling says billed or unbilled charges or a be aware receivable
springing up from such costs which are unpaid impair independence. An settlement to pay in
4 identical payments is equivalent to a word. (Ruling fifty two)
A CPA and his company were threatened, in writing,
with a lawsuit via an audit client who claims that his
previous year's stock turned into understated and as a end result
his firm became no longer able to obtain the financing it wished
to amplify operations. His letter states that he believes
defective auditing procedures were liable for the
alleged understatement of inventory. The amount of
understated inventory at difficulty is $50,000. In this situation
the CPA could be
(a) impartial with admire to his client since it
has not been established that the auditing tactics
had been at fault.
(b) no longer impartial with appreciate to his consumer considering
the allegation, although no longer demonstrated, has been made
that his audit became now not ok. - ANS-(b) is accurate. Independence is impaired because
of the chance of faulty auditing (Interpretation one hundred and one-6,
Litigation between purchaser and member 3).
A CPA company placed the subsequent advert in a news paper:
"We are thrilled to announce that Frank Jones who
spent the remaining twenty years with the Internal Revenue
,Service has joined our fum as a associate. The
influence of pals Mr. Jones has in the Internal
Revenue Service will prove beneficial in managing
investigations by using that department. Why no longer see us
with admire on your tax issues?"
This _______________ ad a violation of the Code of
Professional Conduct.
(a) is
(b) is not - ANS-(a) is accurate. This advert is not allowed because it
implies the capacity to persuade the IRS (Interpretation 502-2,2).
A CPA company gives a seminar on the trendy adjustments
within the federal earnings tax legal guidelines. Invitations to wait
the seminar are despatched by using letter to both customers and
non-clients. A part of the letter reads: "James
Smith of om company 's Washington, D.C. Workplace will
chair the seminar. He has been a associate in our firm
for more than twenty years and during that period has
specialized within the income tax place. Mr. Smith is a
recognized expert in the earnings tax field and has
given talks at the difficulty to many countrywide businesses.
Currently he's a member of the AICPA Federal
Taxation Executive Committee and Chairman of our
State CPA Society's Committee on Taxation." The
presentation of this sort of seminar a violation
of the Code of Professional Conduct.
(a) is
(b) isn't always - ANS-(b) is correct. There are not any prohibitions in opposition to
inviting non clients to seminars presented through a
member's company (Rule 502). The best prohibitions are
in opposition to false, misleading or misleading advertising and marketing or solicitation.
A CPA firm that hires from 15 to twenty new group of workers humans
a year obtains ninety percent of its new human beings from
the four schools inside the place. For the ultimate three years,
the graduating lessons of these colleges had been
composed of fifty percentage women and 50 percent
guys, with these chances conserving true for every
quartile of grade factor average of the graduating
magnificence. Finn employees interviewing on campus have
permit it's recognized that they do not wish to interview
girls candidates. The fum's expert personnel of
about one hundred forty human beings includes ten ladies. A
woman who became denied an interview with the firm's
recruiter files a complaint with the AICPA Ethics
Division charging discrimination by means of the company towards
ladies. The likely action by the Ethics Division
, would be to
(a) test to see if the problem have been litigated or
there has been a hearing on the matter before
an administrative company as the quick step in its
research. - ANS-(a) is correct. They would wait till a decision was
made via a government agency before beginning their research (Interpretation 501-2).
(b) is wrong because discrimination is an act
discreditable (Interpretation 501 -2).
A CPA firm turned into found to have knowingly organized
materially misleading financial statements, for the
2d time. What is the most administrative
penalty the firm can receive for this 2d offense?
(a) $ 50,000
(b) $ one hundred,000
(c) $ a million
(d) $5,000,000 - ANS-(d) $five,000,000. According to Section 5116.2, firms
violating Section 5110 (Unprofessional Conduct),
subsections a, c, i, j, or ok are problem to administrative consequences up to $1,000,000 for
a first offense and $5,000,000 for next offenses.
Incorrect Responses:
(a) $50,000 is the quantity of administrative penalty
for the first offense dedicated by a herbal individual.
(b) $ a hundred,000 is the amount of administrative penalty for subsequent offenses
dedicated through herbal men and women.
(c) $ one million is the quantity of administrative
penalty for the primary offense dedicated through a firm.
A CPA has been charged with bribing a metropolis inspector.
At her trial, the proof surely suggests that she
did pay a bribe to the inspector. However, the judge
dismisses the case due to a criminal technicality. In
this kind of state of affairs, which of the following statements
is accurate?
(a) Since a court docket has disregarded the rate against
the CPA, the Ethics Division can also do nothing
about the problem.
(b) The Ethics Division may also proceed with their
own research of the matter and, if the information
warrant it, carry the member before a Trial
Board. - ANS-(b) is correct. The Ethics Division may also check out
it even though the court disregarded the fee (Acts Discreditable to the Profession).
A CPA in public practice ______________ avoid running
underneath a code of professional ethics via choosing no longer
to join either the AICPA or any country CPA society.
