Mary (a tax manager) has been assigned to the audit of MPC, Inc. Jeremy, a close friend of
Mary's family for many years, is the CFO of MPC. Concerned about the appearance of her
independence, Mary applies the AICPA conceptual framework and determines that the threat to
her independence is significant and cannot be mitigated by safeguards. As a result, what is
Mary's best course of action?
She should participate on the audit engagement because her firm wants her to.
She should not provide audit services to MPC.
She should not participate in the audit unless she obtains a written waiver from her firm's
general counsel.
She should document her assessment of independence, which should include a sworn
statement from Jeremy.
Which part of the AICPA Code of Professional Conduct applies to members in public practice?
Part 1.
Part 3.
Part 0.
Part 2.
Bryan, the controller of a midsize manufacturing company, supervises four employees. His boss,
Mariam, instructs him to increase the company's profits for an amount that is material to the
financial statements by adjusting several small “miscellaneous” revenue accounts. Though
concerned about the effect on the financial statements, Bryan directs his staff to make the
entries. What should Bryan have done in these circumstances?
Ensured that his staff were competent to make the entries.
Identified this matter as a potential ethical issue.
Referred the matter to the AICPA's professional ethics hotline.
Considered the rules of other regulators.
Which bodies are responsible for licensing and overseeing the conduct of certified public
accountants (CPAs) in the U.S.?
State boards of accountancy.
U.S. Department of Occupations.
State CPA societies.
State colleges and universities.
Once you have identified the people or organizations that will benefit or be harmed by an ethical
issue, which step should you perform next?
Gather the critical facts related to the ethical issue.
Make a decision about the ethical issue.
Document your conclusions.
, Consider the alternative approaches to the ethical issue.
Jolene is an accounting supervisor at Ross Property Management. She instructs her
subordinate, Mariana, to make certain accounting entries in the company's books that will
increase revenue by a material amount. Based on her research, Mariana believes that
recognizing revenue in this way would be premature and not consistent with GAAP. What should
Mariana do next, according to the AICPA Code of Professional Conduct?
Discuss her findings with Jolene.
Resign her position quietly.
Report the matter to the board of directors.
Discuss her concerns with Jolene's boss.
Your employer is a social media company whose CFO is engaging in an activity that would
violate federal securities regulations. Which statement best describes when such activity would
be considered noncompliance with laws and regulations (NOCLAR)?
When the illegal activity is related to personal misconduct.
When compliance with securities regulations is required under company policy.
When the illegal activity reflects poorly on the company's business.
When compliance with securities regulations is fundamental to the company.
Stephanie, the CFO of Love Pet Supplies, receives an invitation to dinner from Nelson, the CEO
of one of her company's vendors, to discuss some business. She has dined with Nelson before,
generally once a year in a local, moderately priced restaurant. When determining whether this
situation presents any significant threats to her compliance with the AICPA code, what other
factor should Stephanie consider?
Whether Nelson or others at the vendor provide other gifts or entertainment to her.
Whether Nelson excluded certain other Love employees from the invitation.
Whether the meal with Nelson involves the consumption of alcoholic beverages.
Whether Stephanie truly earned and deserves to be treated to these dinners.
You identify a conflict of interest before performing tax services for a client and determine that
threats to your compliance with the AICPA code are not at an acceptable level. According to the
“Conflicts of Interest” interpretation, what should you consider next?
Whether safeguards might reduce threats to an acceptable level.
Whether to obtain a waiver to perform the tax services engagement.
Whether the client knows about the conflict of interest.
Whether to decline to perform the tax services.
Mary's family for many years, is the CFO of MPC. Concerned about the appearance of her
independence, Mary applies the AICPA conceptual framework and determines that the threat to
her independence is significant and cannot be mitigated by safeguards. As a result, what is
Mary's best course of action?
She should participate on the audit engagement because her firm wants her to.
She should not provide audit services to MPC.
She should not participate in the audit unless she obtains a written waiver from her firm's
general counsel.
She should document her assessment of independence, which should include a sworn
statement from Jeremy.
Which part of the AICPA Code of Professional Conduct applies to members in public practice?
Part 1.
Part 3.
Part 0.
Part 2.
Bryan, the controller of a midsize manufacturing company, supervises four employees. His boss,
Mariam, instructs him to increase the company's profits for an amount that is material to the
financial statements by adjusting several small “miscellaneous” revenue accounts. Though
concerned about the effect on the financial statements, Bryan directs his staff to make the
entries. What should Bryan have done in these circumstances?
Ensured that his staff were competent to make the entries.
Identified this matter as a potential ethical issue.
Referred the matter to the AICPA's professional ethics hotline.
Considered the rules of other regulators.
Which bodies are responsible for licensing and overseeing the conduct of certified public
accountants (CPAs) in the U.S.?
State boards of accountancy.
U.S. Department of Occupations.
State CPA societies.
State colleges and universities.
Once you have identified the people or organizations that will benefit or be harmed by an ethical
issue, which step should you perform next?
Gather the critical facts related to the ethical issue.
Make a decision about the ethical issue.
Document your conclusions.
, Consider the alternative approaches to the ethical issue.
Jolene is an accounting supervisor at Ross Property Management. She instructs her
subordinate, Mariana, to make certain accounting entries in the company's books that will
increase revenue by a material amount. Based on her research, Mariana believes that
recognizing revenue in this way would be premature and not consistent with GAAP. What should
Mariana do next, according to the AICPA Code of Professional Conduct?
Discuss her findings with Jolene.
Resign her position quietly.
Report the matter to the board of directors.
Discuss her concerns with Jolene's boss.
Your employer is a social media company whose CFO is engaging in an activity that would
violate federal securities regulations. Which statement best describes when such activity would
be considered noncompliance with laws and regulations (NOCLAR)?
When the illegal activity is related to personal misconduct.
When compliance with securities regulations is required under company policy.
When the illegal activity reflects poorly on the company's business.
When compliance with securities regulations is fundamental to the company.
Stephanie, the CFO of Love Pet Supplies, receives an invitation to dinner from Nelson, the CEO
of one of her company's vendors, to discuss some business. She has dined with Nelson before,
generally once a year in a local, moderately priced restaurant. When determining whether this
situation presents any significant threats to her compliance with the AICPA code, what other
factor should Stephanie consider?
Whether Nelson or others at the vendor provide other gifts or entertainment to her.
Whether Nelson excluded certain other Love employees from the invitation.
Whether the meal with Nelson involves the consumption of alcoholic beverages.
Whether Stephanie truly earned and deserves to be treated to these dinners.
You identify a conflict of interest before performing tax services for a client and determine that
threats to your compliance with the AICPA code are not at an acceptable level. According to the
“Conflicts of Interest” interpretation, what should you consider next?
Whether safeguards might reduce threats to an acceptable level.
Whether to obtain a waiver to perform the tax services engagement.
Whether the client knows about the conflict of interest.
Whether to decline to perform the tax services.
