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1.
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Within a company, who has the highest level of responsibility to protect the shareholders from fraud? 1
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  the board of directors
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the independent CPAs
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company management
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stakeholders and members of the public
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2.
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In which of the following situations would a CPA be considered independent? 15
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She is the controller for the company.
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She is a temporary training instructor during part of the period.
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She has or is committed to acquire a large but indirect interest in the client.
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She has or is committed to acquire a small direct interest in the client.
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3.
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Which of the following acts discredit or adversely affect a certificate or registration holder’s ability to engage in the practice of public accountancy? 28
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Filing a frivolous complaint
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Knowingly preparing a false tax return
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Accepting a fee fixed by a state regulatory agency
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Issuing a disclaimer of opinion
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4.
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A licensee may perform which of the following services for a contingent fee? 18
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An engagement as a testifying accounting expert
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An engagement requiring independence
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An audit or review of financial statements
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A tax case in front of a tax court in a dispute for a non-audit client
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5.
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The Rules of Professional Conduct apply to which of the following: 10
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Practitioners who prepare reports for use by the client's board of directors.
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Texas CPAs engaged in the client practice of public accountancy
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A temporary employee with direct financial interest in the client
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Only out of state practitioners
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6.
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Which of the following statements is true about mission statements? 6
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Organizations with mission statements have consequences for fraudulent activity.
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The Rules of Professional Conduct mandate that clients have mission statements.
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Mission statements usually express an organization's core values
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Mission statements are included in an organization's bylaws.
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7.
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A situation or state of affairs that can resolve ethical dilemmas for the long term is: 26
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Implementing checklists in the organization.
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Holding anti-bribery training sessions in the organization.
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Regular training sessions with discussion and interaction.
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Role playing situations with supervisory personnel.
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8.
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A client has a right to some of the auditor’s working papers. Which of the following would a client have a right to obtain? 20
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Audit programs
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A worksheet that represents the only support for a transaction in the books of original entry.
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A worksheet that contains excerpts of company documents
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Letters of representation and confirmation
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9.
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Which statement relating to issuance of financial statements is false? 15
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Independence is eliminated by disclosure in the accompanying audit report.
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A preparer of financial statements can be an administrator of the estate of the client or his representative.
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Independence of the CPA must be in fact and appearance.
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Independence is required only for attestation services.
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10.
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Indicate which statement is true regarding advertising contact with clients as well as prospective clients. 24
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Advertising should not be continued when the prospective party expressly writes that he/she does not wish to be contacted.
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Advertising may be via the Internet.
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Copies of advertisements of certificate holders should be retained for a period of 12 months.
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Only certificate holders who follow generally accepted auditing standards may advertise.
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11.
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Which of the following is not part of the Fraud Triangle? 41
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incentives
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opportunity
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materiality
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rationalism
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12.
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A key component of ethics policy should be: 30
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To securely embed the policy in external operations.
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To test certified employees periodically to determine competence.
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For staff to feel comfortable so they can raise issues without fear.
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Delivery of an awareness campaign that requires suppliers to participate.
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13.
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Certificate or registration holders must report which of the following events to the State Board? 29
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Cell phone restrictions
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Felony charges
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Any lawsuits of the certificate holder
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Bankruptcy filings by the CPA
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14.
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Which of the following is not a discreditable act? 28
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Fraudulently obtaining a CPA certificate
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Committing gross negligence in the practice of public accountancy
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Being arrested for not paying a traffic ticket
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Threatening retribution to a client
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15.
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Certificate holders may receive the following types of compensation: 18
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Contingency fees for testifying in a court of law
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Commissions for client referrals
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Other compensation for referrals if disclosed in writing by nature, source, and amount of compensation
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Fees for services when an individual acts for the certificate holder
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16.
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Research on ethics supports the fact that CPAs should take CPE ethics training on a regular basis because: 5
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Accountants need more advanced tools to fulfill their obligations in an increasingly complex environment so as to lessen ethical lapses.
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Taking an ethics course guarantees proper ethical behavior.
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Kohlberg supports ethics training.
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Accountants need to restore public confidence.
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17.
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Reports accompanying the financial statements of a client: 10
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may disclaim an opinion
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need only be issued for reviews and compilation services
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may be signed by a certificate holder
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may contain departures from generally accepted accounting principles
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18.
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Independence is impaired in which of the following situations? 15
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The certificate holder had an immaterial financial interest in the husband of a client.
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The CPA served as an executor of an estate that had a direct financial interest in the client.
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For all grandfathered loans
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When a certificate holder performs services on a voluntary basis for charitable organizations
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19.
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An ultimate test for a healthy culture in organizations is 12
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For the CEO to develop an innovative strategy for the short term
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To evaluate CEO's for having developed and nourished a constructive culture in organizations
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To evaluate CFO's for making a profit in organizations
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To see if the CEO makes profits consistently.
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20.
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Prudence is a virtue from Aristotle that: 10
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Dupes employees into believing people are generally honest.
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Supports attest work where opinions differ on discslosures in financial statements.
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Represents the ability to govern oneself with use of reason that avoids risk.
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Requires that prudish people take a no-risk approach.
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