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CPA ETHICS EXAM QUESTION BANK
2025/2026 ACTUAL EXAM QUESTIONS AND
CORRECT DETAILED ANSWERS (VERIFIED
ANSWERS)) ALL ANSWERED {200 Q & A}
ALREADY GRADED A+ | BRAND NEW!
A CPA firm presents a seminar on the latest changes in the
federal income tax laws. Invitations to attend the seminar are
sent by letter to both clients and non-clients. A portion of the
letter reads: "James Smith of om firm 's Washington, D.C. office
will chair the seminar. He has been a partner in our firm for
more than 20 years and during that period has specialized in the
income tax area. Mr. Smith is a recognized expert in the income
tax field and has given talks on the subject to many national
groups. Currently he is a member of the AICPA Federal Taxation
Executive Committee and Chairman of our State CPA Society's
Committee on Taxation." The presentation of such a seminar a
violation of the Code of Professional Conduct.
(a) is
(b) is not
(b) is correct. There are no prohibitions against
inviting non clients to seminars presented by a
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member's firm (Rule 502). The only prohibitions are
against false, misleading or deceptive advertising or solicitation.
A firm has been asked to perform a non-attest service for an
attest client. The client has only one employee capable of
overseeing the non-attest services. Due to lack of time,
management does not want the employee to accept that
responsibility; and therefore, there will be no such oversight by
the client. If the firm provides the non-attest service under these
conditions, independence with the client -----
impaired.
(a) will be
(b) will not be
(a) is correct. Interpretation 101-3, General Requirements for
Performing Non-attest Services, says that independence will be
impaired if a client will not oversee the non-attest services
provided.
Which of the following best describes the difference between a
direct financial interest and an indirect financial interest?
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(a) Ownership of 100 shares of stock would be a direct financial
interest whereas ownership of 5 shares of the same stock would
be an indirect financial interest.
(b) a $1,000 investment in a stock would be a direct financial
interest where a $50 investment in that stock would be an
indirect financial interest.
(c) A direct financial interest is one where the financial interest
is owned directly by the individual or by an entity which the
individual controls or where he/she can supervise or participate
in investment decisions. An indirect financial interest is one
where the financial interest is owned beneficially through an
intermediary and the beneficiary neither controls the
intermediary nor can he/she supervise or participate in the
investment decisions.
(c) is correct. Interpretation 101-15, Financial
Relationships under Definitions of Direct Financial
Interest and Indirect Financial Interest, states this.
(a) and (b) are both incorrect. The size of the investment does not
control whether it is a direct or indirect interest. Ownership of
just one share of stock would be a direct financial interest.
A public accounting fum uses an outside commercial storage
company to store prior years audit and tax files for current and
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prior clients. The storage company is considered a. third-party
service provider. The firm _________ required to inform the clients
whose records are so stored that they are using such a third-
party service provider.
(a) lS
(b) is not
(b) is correct. Ruling 112 says a member is not required to inform
a client that a third-patty service provider is being used for
storing records pertaining to them.
Hill, a member, performs some non attest services for his attest
client Smith & Co. In performing these services he complies with
the General Requirements for Performing Non-attest Services
contained in Interpretation 101-3, Performance of Non-attest
Services. The non-attest services performed do not impair Hill's
independence with Smith & Co. under the AICPA Code of
Professional Conduct. However, these services do impair Hill's
independence with Smith & Co. under the independence
regulations of the authoritative regulatory body where Smith &
Co. must file its audited financial statements. In performing these
non-attest services for Smith & Co. Hill has
CPA ETHICS EXAM QUESTION BANK
2025/2026 ACTUAL EXAM QUESTIONS AND
CORRECT DETAILED ANSWERS (VERIFIED
ANSWERS)) ALL ANSWERED {200 Q & A}
ALREADY GRADED A+ | BRAND NEW!
A CPA firm presents a seminar on the latest changes in the
federal income tax laws. Invitations to attend the seminar are
sent by letter to both clients and non-clients. A portion of the
letter reads: "James Smith of om firm 's Washington, D.C. office
will chair the seminar. He has been a partner in our firm for
more than 20 years and during that period has specialized in the
income tax area. Mr. Smith is a recognized expert in the income
tax field and has given talks on the subject to many national
groups. Currently he is a member of the AICPA Federal Taxation
Executive Committee and Chairman of our State CPA Society's
Committee on Taxation." The presentation of such a seminar a
violation of the Code of Professional Conduct.
(a) is
(b) is not
(b) is correct. There are no prohibitions against
inviting non clients to seminars presented by a
,2|Page
member's firm (Rule 502). The only prohibitions are
against false, misleading or deceptive advertising or solicitation.
A firm has been asked to perform a non-attest service for an
attest client. The client has only one employee capable of
overseeing the non-attest services. Due to lack of time,
management does not want the employee to accept that
responsibility; and therefore, there will be no such oversight by
the client. If the firm provides the non-attest service under these
conditions, independence with the client -----
impaired.
(a) will be
(b) will not be
(a) is correct. Interpretation 101-3, General Requirements for
Performing Non-attest Services, says that independence will be
impaired if a client will not oversee the non-attest services
provided.
Which of the following best describes the difference between a
direct financial interest and an indirect financial interest?
,3|Page
(a) Ownership of 100 shares of stock would be a direct financial
interest whereas ownership of 5 shares of the same stock would
be an indirect financial interest.
(b) a $1,000 investment in a stock would be a direct financial
interest where a $50 investment in that stock would be an
indirect financial interest.
(c) A direct financial interest is one where the financial interest
is owned directly by the individual or by an entity which the
individual controls or where he/she can supervise or participate
in investment decisions. An indirect financial interest is one
where the financial interest is owned beneficially through an
intermediary and the beneficiary neither controls the
intermediary nor can he/she supervise or participate in the
investment decisions.
(c) is correct. Interpretation 101-15, Financial
Relationships under Definitions of Direct Financial
Interest and Indirect Financial Interest, states this.
(a) and (b) are both incorrect. The size of the investment does not
control whether it is a direct or indirect interest. Ownership of
just one share of stock would be a direct financial interest.
A public accounting fum uses an outside commercial storage
company to store prior years audit and tax files for current and
, 4|Page
prior clients. The storage company is considered a. third-party
service provider. The firm _________ required to inform the clients
whose records are so stored that they are using such a third-
party service provider.
(a) lS
(b) is not
(b) is correct. Ruling 112 says a member is not required to inform
a client that a third-patty service provider is being used for
storing records pertaining to them.
Hill, a member, performs some non attest services for his attest
client Smith & Co. In performing these services he complies with
the General Requirements for Performing Non-attest Services
contained in Interpretation 101-3, Performance of Non-attest
Services. The non-attest services performed do not impair Hill's
independence with Smith & Co. under the AICPA Code of
Professional Conduct. However, these services do impair Hill's
independence with Smith & Co. under the independence
regulations of the authoritative regulatory body where Smith &
Co. must file its audited financial statements. In performing these
non-attest services for Smith & Co. Hill has
