Communication & Stakeholder Relations Flashcards
7 cards from real Certified Public Accountant practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Communication & Stakeholder Relations flashcards as text
A CPA discovers a material misstatement in a client's financial statements after the audit report has been issued. Which stakeholder should be notified FIRST?
Answer: The client's management and those charged with governance
Per AU-C Section 560, the CPA should first inform management and those charged with governance before determining further action regarding subsequent discovery of facts.
When communicating audit findings to an audit committee, a CPA should ensure the communication is:
Answer: Timely enough to enable the committee to take appropriate action
AU-C Section 265 requires that significant deficiencies and material weaknesses be communicated in writing on a timely basis so the committee can act.
A CPA in public practice receives a subpoena for client records. The BEST course of action is to:
Answer: Notify the client and consult legal counsel before responding
AICPA ethics rules require the CPA to notify the client and obtain legal counsel before releasing confidential client information in response to a legal process.
Which communication element is MOST critical when a CPA presents a going-concern opinion to stakeholders?
Answer: The conditions and events that raised substantial doubt
ASC 205-40 and auditing standards require disclosure of the specific conditions and events creating substantial doubt about an entity's ability to continue as a going concern.
A management letter (letter of recommendations) issued after an audit is primarily intended to:
Answer: Communicate internal control and operational improvement suggestions to management
A management letter communicates constructive suggestions for improvements in internal controls, efficiency, and other operational matters to management, not to external parties.
Under AICPA standards, when a CPA in public practice becomes aware of a client's non-compliance with a law that is NOT clearly inconsequential, the CPA should FIRST:
Answer: Communicate the matter to appropriate levels of management above those involved
AU-C Section 250 requires the auditor to communicate non-compliance to appropriate management levels above those involved, unless senior management is implicated.
A CPA is preparing a written tax advice memo for a client facing a complex transaction. Which element is MOST important to include to fulfill professional communication responsibilities?
Answer: The relevant facts considered, applicable law, and conclusions reached
Treasury Circular 230 and AICPA standards require tax advice to clearly identify relevant facts, applicable legal authorities, and the CPA's conclusions based on those authorities.