Regulatory Compliance & Standards Flashcards
7 cards from real CPA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Regulatory Compliance & Standards flashcards as text
Under the AICPA independence rules, which of the following would most likely impair a CPA firm's independence when auditing a client?
Answer: A covered member owns 5% of the client's voting stock directly
Direct ownership of 5% of voting stock by a covered member constitutes a material financial interest that impairs independence.
PCAOB Rule 3526 requires audit committee pre-approval of which of the following?
Answer: All non-audit services provided to an audit client
PCAOB Rule 3526 requires that auditors obtain pre-approval from the audit committee before providing any non-audit services to a public company audit client.
When a CPA performs a compilation engagement, the report must include a statement that the accountant:
Answer: Has not audited or reviewed the financial statements
A compilation report states that the accountant has not audited or reviewed the statements and expresses no assurance.
Under FASB ASC 840/842, which of the following distinguishes an operating lease from a finance lease under ASC 842?
Answer: Finance leases result in front-loaded total expense recognition; operating leases recognize straight-line expense
Under ASC 842 finance leases produce front-loaded expense (interest + amortization), while operating leases recognize straight-line total lease cost.
Which federal law prohibits CPAs from aiding in the preparation of a tax return they know will understate tax liability?
Answer: IRC Section 6694
IRC Section 6694 imposes penalties on tax return preparers who understate a taxpayer's liability due to unreasonable positions or willful conduct.
Under the GAO Yellow Book (GAGAS), which type of independence standard applies to CPAs who provide both audit and non-audit services to a government entity?
Answer: Conceptual framework independence standards
GAGAS uses a conceptual framework approach requiring CPAs to identify, evaluate, and apply safeguards to threats to independence.
The SEC's Regulation S-X primarily governs which aspect of public company reporting?
Answer: The form and content of financial statements filed with the SEC
Regulation S-X prescribes the form, content, and requirements for financial statements included in SEC filings.