WGU D550 Ethics for Accountants OA Final Exam
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1. Under the AICPA Code of Professional Conduct, which principle requires an
accountant to be impartial and intellectually honest?
a) Integrity
b) Objectivity and Independence
c) Due Care
d) Confidentiality
Correct Answer: b) Objectivity and Independence
Explanation: Objectivity is the principle that requires CPAs to maintain an impartial
mental attitude and avoid bias, conflicts of interest, or undue influence of others that could
compromise professional judgment. While "Integrity" (a) relates to honesty, "Objectivity"
specifically targets impartiality and intellectual honesty.
2. A CPA is offered tickets to a sold-out concert by the CFO of an audit client. The
tickets have a face value of $500 but are being scalped for $2,000. According to
AICPA independence rules, the CPA should:
a) Accept the tickets if used for personal enjoyment
b) Decline the gift because it is a prohibited gift from a client
c) Accept if disclosed in footnotes
d) Accept and report as income
Correct Answer: b) Decline the gift because it is a prohibited gift from a client
Explanation: Under AICPA rules, accepting a significant gift from an attest client creates a
self-interest threat to independence. The fair market value or scarcity of the item (e.g.,
sold-out concert) impairs objectivity regardless of the face value. The safest ethical
response is to decline the gift.
,3. Which threat to independence is created when a CPA’s spouse owns direct
equity in an audit client?
a) Advocacy threat
b) Self-interest threat
c) Self-review threat
d) Familiarity threat
Correct Answer: b) Self-interest threat
Explanation: Financial interests (such as stock ownership) held by the CPA or their
immediate family (spouse) in an audit client create a self-interest threat. The CPA may
benefit financially from the client's performance, which jeopardizes their impartiality.
4. Under AICPA rules, independence is not required for:
a) Audits
b) Reviews
c) Compilations
d) Agreed-upon procedures
Correct Answer: c) Compilations
Explanation: Compilation engagements involve presenting financial information without
providing any assurance. Therefore, the CPA is not required to be independent of the
client, though the lack of independence must be disclosed in the compilation report.
5. A CPA discovers a material misstatement in last year’s audit that was missed.
The appropriate first step under the AICPA Code is:
a) Ignore it
b) Inform the client and recommend disclosure to users
c) Withdraw immediately
d) Report to SEC only
Correct Answer: b) Inform the client and recommend disclosure to users
Explanation: According to professional standards, the CPA's first step upon discovering a
material misstatement in previously issued financial statements is to inform the client and
advise them to make appropriate disclosures to the users of those statements.
6. Which AICPA principle requires CPAs to act in good faith and be truthful?
a) Integrity
b) Confidentiality
,c) Professional Behavior
d) Due Care
Correct Answer: a) Integrity
Explanation: Integrity requires accountants to be honest, candid, and to adhere to moral
and ethical principles. It requires members to perform all professional responsibilities with
the highest sense of integrity to maintain public trust.
7. Jane finds a material misstatement while auditing a client's accounts
receivables. Her senior tells her to ignore it. Jane wants to be viewed as a team
player to advance, so she ignores it. Which ethical theory did Jane use?
a) Virtue Ethics
b) Utilitarianism
c) Egoism
d) Deontology
Correct Answer: c) Egoism
Explanation: Ethical egoism is the theory that actions are morally right if they maximize
one's own self-interest. Jane chose to ignore the error to advance her career and avoid
upsetting her senior, prioritizing personal gain over professional standards.
8. What is the primary purpose of the AICPA Code of Professional Conduct?
a) To maximize CPA firm profits
b) To guide accountants in ethical decision-making
c) To ensure all clients pay minimum taxes
d) To compete with the SEC
Correct Answer: b) To guide accountants in ethical decision-making
Explanation: The Code provides a framework for resolving ethical dilemmas and outlines
the profession's responsibilities to the public, clients, and colleagues. It serves as a
roadmap for maintaining professionalism and integrity.
9. A CPA would violate the Due Care Principle if he/she:
a) Maintains confidentiality
b) Undertook an engagement without the requisite background and knowledge
c) Charges fees based on the outcome of a review
d) Advertises services
, Correct Answer: b) Undertook an engagement without the requisite background and
knowledge
Explanation: The Due Care principle imposes an obligation to perform professional
services with competence and diligence. Accepting an engagement that the CPA is not
qualified to perform violates this principle because it risks harming the client through
incompetence.
10. Ethical relativism can best be described as:
a) The belief that morals are absolute
b) The view that morality is relative to the norms of one's culture
c) The golden rule
d) Maximizing shareholder wealth
Correct Answer: b) The view that morality is relative to the norms of one's culture
Explanation: Ethical relativism posits that moral standards are not absolute but are
defined by the context of the culture, society, or individual circumstances. What is
considered "right" in one culture may be considered "wrong" in another.
11. An example of a self-review threat is:
a) Having a financial interest in a client
b) Being a close friend of the client's CEO
c) Preparing source documents used to generate the client's financial statements
d) Acting as an advocate for the client in litigation
Correct Answer: c) Preparing source documents used to generate the client's financial
statements
Explanation: A self-review threat occurs when a CPA evaluates evidence that results from
their own previous work. If the CPA helps prepare the records, they may be unable to
objectively audit those same records later.
12. Which of the following is a "red flag" that fraud may exist?
a) Consistent revenue growth
b) One-time sources of income
c) Low employee turnover
d) High audit fees
Correct Answer: b) One-time sources of income
Newest Version 2025-2026 UP-TO-DATE EXAM
QUESTIONS AND 100% ACCURATE SOLUTIONS |
Question And VERIFIED ANSWERS - INSTANT PDF
DOWNLOAD.
1. Under the AICPA Code of Professional Conduct, which principle requires an
accountant to be impartial and intellectually honest?
a) Integrity
b) Objectivity and Independence
c) Due Care
d) Confidentiality
Correct Answer: b) Objectivity and Independence
Explanation: Objectivity is the principle that requires CPAs to maintain an impartial
mental attitude and avoid bias, conflicts of interest, or undue influence of others that could
compromise professional judgment. While "Integrity" (a) relates to honesty, "Objectivity"
specifically targets impartiality and intellectual honesty.
2. A CPA is offered tickets to a sold-out concert by the CFO of an audit client. The
tickets have a face value of $500 but are being scalped for $2,000. According to
AICPA independence rules, the CPA should:
a) Accept the tickets if used for personal enjoyment
b) Decline the gift because it is a prohibited gift from a client
c) Accept if disclosed in footnotes
d) Accept and report as income
Correct Answer: b) Decline the gift because it is a prohibited gift from a client
Explanation: Under AICPA rules, accepting a significant gift from an attest client creates a
self-interest threat to independence. The fair market value or scarcity of the item (e.g.,
sold-out concert) impairs objectivity regardless of the face value. The safest ethical
response is to decline the gift.
,3. Which threat to independence is created when a CPA’s spouse owns direct
equity in an audit client?
a) Advocacy threat
b) Self-interest threat
c) Self-review threat
d) Familiarity threat
Correct Answer: b) Self-interest threat
Explanation: Financial interests (such as stock ownership) held by the CPA or their
immediate family (spouse) in an audit client create a self-interest threat. The CPA may
benefit financially from the client's performance, which jeopardizes their impartiality.
4. Under AICPA rules, independence is not required for:
a) Audits
b) Reviews
c) Compilations
d) Agreed-upon procedures
Correct Answer: c) Compilations
Explanation: Compilation engagements involve presenting financial information without
providing any assurance. Therefore, the CPA is not required to be independent of the
client, though the lack of independence must be disclosed in the compilation report.
5. A CPA discovers a material misstatement in last year’s audit that was missed.
The appropriate first step under the AICPA Code is:
a) Ignore it
b) Inform the client and recommend disclosure to users
c) Withdraw immediately
d) Report to SEC only
Correct Answer: b) Inform the client and recommend disclosure to users
Explanation: According to professional standards, the CPA's first step upon discovering a
material misstatement in previously issued financial statements is to inform the client and
advise them to make appropriate disclosures to the users of those statements.
6. Which AICPA principle requires CPAs to act in good faith and be truthful?
a) Integrity
b) Confidentiality
,c) Professional Behavior
d) Due Care
Correct Answer: a) Integrity
Explanation: Integrity requires accountants to be honest, candid, and to adhere to moral
and ethical principles. It requires members to perform all professional responsibilities with
the highest sense of integrity to maintain public trust.
7. Jane finds a material misstatement while auditing a client's accounts
receivables. Her senior tells her to ignore it. Jane wants to be viewed as a team
player to advance, so she ignores it. Which ethical theory did Jane use?
a) Virtue Ethics
b) Utilitarianism
c) Egoism
d) Deontology
Correct Answer: c) Egoism
Explanation: Ethical egoism is the theory that actions are morally right if they maximize
one's own self-interest. Jane chose to ignore the error to advance her career and avoid
upsetting her senior, prioritizing personal gain over professional standards.
8. What is the primary purpose of the AICPA Code of Professional Conduct?
a) To maximize CPA firm profits
b) To guide accountants in ethical decision-making
c) To ensure all clients pay minimum taxes
d) To compete with the SEC
Correct Answer: b) To guide accountants in ethical decision-making
Explanation: The Code provides a framework for resolving ethical dilemmas and outlines
the profession's responsibilities to the public, clients, and colleagues. It serves as a
roadmap for maintaining professionalism and integrity.
9. A CPA would violate the Due Care Principle if he/she:
a) Maintains confidentiality
b) Undertook an engagement without the requisite background and knowledge
c) Charges fees based on the outcome of a review
d) Advertises services
, Correct Answer: b) Undertook an engagement without the requisite background and
knowledge
Explanation: The Due Care principle imposes an obligation to perform professional
services with competence and diligence. Accepting an engagement that the CPA is not
qualified to perform violates this principle because it risks harming the client through
incompetence.
10. Ethical relativism can best be described as:
a) The belief that morals are absolute
b) The view that morality is relative to the norms of one's culture
c) The golden rule
d) Maximizing shareholder wealth
Correct Answer: b) The view that morality is relative to the norms of one's culture
Explanation: Ethical relativism posits that moral standards are not absolute but are
defined by the context of the culture, society, or individual circumstances. What is
considered "right" in one culture may be considered "wrong" in another.
11. An example of a self-review threat is:
a) Having a financial interest in a client
b) Being a close friend of the client's CEO
c) Preparing source documents used to generate the client's financial statements
d) Acting as an advocate for the client in litigation
Correct Answer: c) Preparing source documents used to generate the client's financial
statements
Explanation: A self-review threat occurs when a CPA evaluates evidence that results from
their own previous work. If the CPA helps prepare the records, they may be unable to
objectively audit those same records later.
12. Which of the following is a "red flag" that fraud may exist?
a) Consistent revenue growth
b) One-time sources of income
c) Low employee turnover
d) High audit fees
Correct Answer: b) One-time sources of income
