Ethics and Governance Flashcards
7 cards from real CA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Ethics and Governance flashcards as text
A CPA discovers that a client has overstated revenue to meet loan covenants. The client refuses to correct the financials. What should the CPA do?
Answer: Withdraw from the engagement and consider reporting obligations
When a client refuses to correct material misstatements, the CPA must withdraw and evaluate reporting obligations under professional standards.
Under the AICPA Code of Professional Conduct, which threat arises when a CPA audits financial statements they personally prepared?
Answer: Self-review threat
A self-review threat occurs when a CPA reviews their own prior work, compromising objectivity.
Which governance body is primarily responsible for overseeing the external auditor in a publicly traded U.S. company?
Answer: Audit committee
The audit committee, composed of independent directors, is responsible for overseeing the external audit process under SEC and SOX requirements.
A CPA's client pressures them to change an audit conclusion under threat of losing the engagement. This is an example of which threat to independence?
Answer: Intimidation threat
An intimidation threat occurs when a CPA is deterred from acting objectively by actual or perceived coercion from a client.
Which principle of the AICPA Code of Professional Conduct requires CPAs to be straightforward and honest in professional and business relationships?
Answer: Integrity
Integrity requires CPAs to be honest and straightforward, avoiding subordination of judgment and misrepresentation.
A corporate governance framework is BEST described as:
Answer: A system of rules and processes by which a company is directed and controlled
Corporate governance refers to the system of rules, practices, and processes by which a company is directed and controlled, balancing stakeholder interests.
Under Sarbanes-Oxley Section 302, who must certify the accuracy of financial reports filed with the SEC?
Answer: The CEO and CFO
SOX Section 302 requires the CEO and CFO to personally certify the accuracy and completeness of financial reports submitted to the SEC.