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Chapter 3: Ethics for Professional Accountants

Multiple choice questions

Multiple choice questions

Try the following multiple choice questions to test your knowledge of this chapter. Once you have answered the questions, click on 'Submit Answers for Grading' to get your results. If your lecturer has requested that you send your results, please complete the routing information found at the bottom of your graded page and then click on the 'E-Mail Results' button. Please do not forward your results unless your lecturer has specifically requested that you do so.
This activity contains 12 questions.

Which of the following ethical principles do not incorporate the characteristics most people associate with ethical behavior?
Pursuit of excellence Respect for others Bargaining Loyalty

The Code of Ethics for Professional Accountants is divided into three parts. Which of the following is not one of those parts?
A part that applies to all professional accountants A part that applies to employed professional accountants A part that applies only to those professional accountants in public practice A part that applies to all auditors

What is the first step taken in case the policies of the accountant's employing organization do not resolve an ethical conflict?
Seek counseling and advice on a confidential basis with an independent adviser Submit an information memorandum describing the conflict to an appropriate representative of that organization Review the conflict with your supervisor's supervisor

Review the conflict problem with the immediate superior

The IFAC Code prohibits the following non-audit service for audit clients:
Information technology systems services Outsourcing of internal audit function Valuation services Actuarial services

The 'Code of Ethics for Professional Accountants', Section 8 discusses independence in assurance services in terms of a principles-based approach that takes into account:
Audit firm financial safeguards The public interest Knowledge of the audit client's industry Threats to competence

Which of the following is not correct about independence of mind?

It is the state of mind that creates confidence in the auditor

It allows an individual to act with integrity

It permits the provision of an opinion without being affected by influences that compromise professional judgment It is the exercise of objectivity and professional skepticism

Which of the following would be considered a 'self-interest threat'?

A member of the assurance team has a close family member who is a

director or officer of the assurance client Acting as the client's advocate in a legal proceeding

When a member of the assurance team was previously a director or officer of the assurance client Potential employment with an assurance client

Which of the following is not a Safeguard created by the profession, legislation or regulation?
Internal policies to monitor compliance with independence ethics Continuing education requirements Peer review of quality control Professional monitoring processes

The compromise or appearance of compromise of independence may arise if:

The auditor's second cousin is a major stockholder in the client being audited Fees due from a client for professional services remain unpaid for an extended period of time In October 2000 the auditor financed his new million dollar house with a loan from the client who is a mortgage lender The auditor is paid a year's past due billings from a client just before an audit requested by the client's major banker

Ownership of 10 shares of an audit client and ownership by an auditor of a small part of a joint venture in which a secretary at the audit client also owns shares are examples of:
Substance over form Violation of international standards on auditing (ISA) Lack of independence in fact

Lack of independence in appearance

Based on the independence provisions of the Sarbanes-Oxley Act of 2002, which of the following is not true about an audit firm's services to audit clients?
They can offer tax services unconditionally

They cannot provide internal auditing outsourcing

Approval for tax services must be disclosed in the audit client's reports to the SEC A non-audit partner reviewing the audit engagement must be rotated every five years

Financial involvement with a client will affect independence and may lead a reasonable observer to conclude that independence has been impaired. Which of the following is not a form of financial involvement with a client?
Financial interest in a joint venture with a client

Loans to or from the client

Financial interest resulting from being an administrator of any trust with a financial interest in the client Fees paid for audit engagement

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