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 providing attest services learns information that suggests a client is engaged in money laundering. Under the Bank Secrecy Act, CPAs in most states:
Answer: Are generally not required to file SARs but should consult legal counsel
Unlike financial institutions, CPAs are not generally required to file SARs, but they face potential criminal liability and should consult legal counsel about their obligations and consider withdrawal.
When issuing a comfort letter to an underwriter in connection with a securities offering, the CPA's primary communication responsibility is to:
Answer: Provide negative assurance on unaudited financial information for the period after the audit date
AU-C Section 920 specifies that comfort letters provide negative assurance on interim unaudited financial information, not a guarantee or positive assurance.
A CPA is advising a client on a transaction that may qualify for a tax shelter. Under Circular 230, the CPA must:
Answer: Ensure advice is based on reasonable assumptions and clearly states the limits of the analysis
Circular 230 Section 10.37 requires tax shelter advice to be based on reasonable factual and legal assumptions and clearly identify limitations on reliance.
Which of the following BEST describes the CPA's communication responsibility when an engagement letter scope change occurs mid-project?
Answer: Issue a new engagement letter or written amendment documenting the changed scope
Professional standards and risk management best practices require scope changes to be documented in writing, either through an amended or new engagement letter, to avoid misunderstandings.
A CPA serving on a nonprofit board must disclose a potential conflict of interest to other board members primarily because:
Answer: Board members owe fiduciary duties that require transparency about personal interests that could bias decisions
Fiduciary duty requires board members to act in the nonprofit's best interest, and undisclosed conflicts of interest violate this duty regardless of SEC rules.
During a review engagement, the CPA identifies a departure from GAAP. If the client refuses to correct the departure, the CPA should:
Answer: Modify the review report to disclose the departure and its effects
SSARS No. 21 requires the CPA to modify the review report to disclose the nature of the GAAP departure and, if practicable, its effect on the financial statements.
A CPA sends a client a proposed engagement letter but the client begins using the CPA's services before signing. The engagement letter is:
Answer: Enforceable because the client's conduct indicates acceptance
Under contract law, a client who begins using services under terms proposed in an unsigned engagement letter typically manifests acceptance through conduct, making the letter enforceable.