cpa audit ch2 review 1

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Joens1313
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276876
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cpa audit ch2 review 1
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2014-06-15 16:40:50
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cpa audit ch2 review 1
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  1. A violation of the profession’s ethical standards would most likely have occurred when a CPA in public practice
    Serves on a municipal board of income tax appeals, discloses that status to concerned parties, participates as a board member in a tax appeal involving a client, but does not receive the client’s consent for such action.

    Under Interpretation 102-2, if the significant relationship creating a conflict of interest is disclosed to and consent is obtained from all appropriate parties, Conduct Rule 102 does not prohibit performance of the professional service. Moreover, an Ethics Ruling has determined that service on a governmental body is within the Interpretation. (But disclosure and consent do not eliminate an impairment of independence.) The failure to secure the client’s consent therefore means that the arrangement could be viewed as impairing the CPA’s objectivity.
  2. When a CPA is associated with financial statements that do not comply with promulgated GAAP because the statements would be misleading without the departure, the CPA is required to disclose
    required to describe (1) the departure, (2) the approximate effects of the departure (if practicable), and (3) the reasons compliance would result in misleading financial statements.But this requirement applies only if the effect on the statements or data is material.

    Under Conduct Rule 203, a CPA who performs services that require representations of conformity with promulgated GAAP is required to describe (1) the departure, (2) the approximate effects of the departure (if practicable), and (3) the reasons compliance would result in misleading financial statements. But this requirement applies only if the effect on the statements or data is material.
  3. Under the ethical standards of the profession, is an investment held through a regulated mutual fund by a CPA in a corporate client is an indirect financial interest?
    yes - Independence is impaired if, during the period of the professional engagement, a covered member had a direct or material indirect financial interest in the client. Ownership of fund shares is a direct financial interest in the fund. Underlying investments in the fund are indirect interests.
  4. t/f --- According to SEC independence regulations, preapproval of accountants’ services may be in accord with detailed policies and procedures rather than explicit.
    True --- Audit committees ordinarily must preapprove the services performed by accountants (permissible nonaudit services and all audit, review, and attest engagements). Approval must be either explicit or in accordance with detailed policies and procedures. If approval is based on detailed policies and procedures, the audit committee must be informed, and no delegation of its authority to management is allowed.
  5. T/F ---the Conceptual Framework for AICPA Independence Standards Adopts a risk-based approach to analysis of independence matters.
    True -- The risk-based approach evaluates the risk that a CPA is not independent or is perceived by a reasonable and informed third party with knowledge of all relevant information as not independent. That risk must be reduced to an acceptable level to establish independence. Risk is acceptable when threats are acceptable. They may be acceptable because of the types of threats and their potential effect. Moreover, threats may be sufficiently mitigated or eliminated by safeguards. Threats are acceptable when it is not reasonable to expect that they will compromise professional judgment.

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