CPA Ethics & Professional Responsibilities Flashcards

Which of the following best describes 'professional skepticism' as required by auditing standards?

Answer: A questioning mind and critical assessment of audit evidence

Professional skepticism requires an auditor to maintain a questioning mind and critically evaluate evidence without assuming dishonesty or unquestioned integrity.

A CPA discovers that a colleague has committed a material violation of professional standards. Under the AICPA Code, the CPA should FIRST:

Answer: Attempt to resolve the matter through firm channels if possible

The AICPA Code encourages CPAs to first attempt resolution through internal firm or organizational channels before escalating to external bodies.

Under the concept of 'independence in appearance,' a CPA should:

Answer: Avoid situations that a reasonable observer might question as compromising objectivity

Independence in appearance means avoiding circumstances that a reasonable, informed third party would view as compromising the CPA's objectivity.

Which of the following represents a 'self-review threat' to CPA independence?

Answer: Auditing financial statements that the CPA's firm helped prepare

A self-review threat occurs when a CPA audits work that they or their firm previously performed, compromising objectivity.

The AICPA's 'Statements on Standards for Tax Services' (SSTSs) are best described as:

Answer: Enforceable standards of professional conduct for CPA tax practitioners

SSTSs are enforceable standards of professional conduct for AICPA members engaged in tax practice and can result in disciplinary action.

A CPA firm rotates the lead engagement partner on a public company audit every five years primarily to address which threat to independence?

Answer: Familiarity threat

Partner rotation mitigates the familiarity threat, which arises when a long-standing relationship with a client compromises the auditor's objectivity.