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
Which of the following is considered a safeguard created by the profession to mitigate threats to a CPA's independence?
Answer: Peer review requirements and disciplinary processes
Peer review requirements, continuing education mandates, and disciplinary processes are profession-created safeguards that help protect CPA independence.
Ethical relativism in accounting ethics holds that:
Answer: Ethical standards vary by culture and context with no universal truth
Ethical relativism posits that moral standards differ across cultures and situations, with no single universal ethical framework.
A CPA firm partners with a financial services company to refer clients for investment products and receives compensation. This arrangement must be:
Answer: Disclosed to clients and permissible only if it doesn't impair objectivity
Referral fees and commissions must be disclosed to clients and must not impair the CPA's objectivity under the AICPA Code.
Which of the following BEST describes the role of an audit committee in corporate governance?
Answer: Overseeing financial reporting, internal controls, and the external audit
The audit committee oversees the integrity of financial reporting, internal control effectiveness, and the relationship with external and internal auditors.
A CPA is asked to represent a client before the IRS in a tax dispute. This is an example of which threat to objectivity?
Answer: Advocacy threat
Representing a client's position before a regulatory body creates an advocacy threat because the CPA promotes the client's interests.
Which concept requires auditors to maintain independence in both fact AND appearance?
Answer: Independence in form and substance
Auditors must be independent in fact (actually unbiased) and in appearance (perceived as unbiased by reasonable observers).
The 'cooling-off period' under Sarbanes-Oxley prohibits a public company from hiring a former audit partner in a financial oversight role for at least:
Answer: 1 year after leaving the audit firm
SOX requires a one-year cooling-off period before a former audit engagement partner can take a financial oversight role at a former audit client.