Professional Standards & Competencies 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 Professional Standards & Competencies flashcards as text
A CPA discovers during fieldwork that the client's CEO has been embezzling funds. The CPA's primary obligation is to:
Answer: Communicate the finding to those charged with governance
AU-C Section 265 and 240 require the auditor to communicate significant fraud findings to those charged with governance (e.g., the audit committee).
Under the AICPA Code, a CPA firm that performs bookkeeping for an attest client creates a threat to independence classified as a:
Answer: Self-review threat
Providing bookkeeping services to an attest client creates a self-review threat because the CPA would be auditing their own work.
Which AICPA standard governs review engagements for historical financial statements of nonpublic entities?
Answer: AR-C Section 90
AR-C Section 90 (part of SSARS) governs review engagements for nonpublic entities under the Accounting and Review Services standards.
A CPA issues a report on prospective financial statements. If the statements are for general use, which type is appropriate?
Answer: Forecast
Forecasts (based on expected conditions) are appropriate for general distribution, while projections (based on hypothetical assumptions) are restricted to limited use.
The 'due care' principle in AICPA General Standards requires CPAs to:
Answer: Discharge responsibilities with competence and diligence
Due care requires CPAs to perform services with competence, diligence, and adequate planning and supervision — not to guarantee outcomes.
Under SAS No. 145, the auditor's risk assessment procedures must include:
Answer: Analytical procedures and inquiries of management as a minimum
SAS No. 145 requires risk assessment procedures including analytical procedures and inquiries as a baseline to understand the entity and identify risks of material misstatement.
A CPA who serves on the board of directors of an audit client most likely creates which independence impairment?
Answer: Management participation threat that impairs independence
Serving on a client's board is a management participation threat under ET Section 1.295 that generally impairs independence regardless of the role type.