Which of the following best describes the responsibility of the CPA in performing compilation services for a company?

Inhaltsverzeichnis Show

Who can perform a compilation engagement?
What is the purpose of an audit performed by a CPA quizlet?
Who is responsible for the financial statements in a compilation engagement?
What does the accountant do in a compilation engagement?

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Read 'Chapter 1: Ethics And Ethical Reasoning' & answer the following question(s):
1.	Plato maintained that all “wrong-doing” is involuntary and arises from ignorance. T F
	TRUE
	FALSE
2.	Which of the following statements best explains why the accounting profession has found it essential to promulgate ethical standards and to establish means for ensuring their observance?
	Vigorous enforcement of an established code of ethics is the best way to prevent unscrupulous acts.
	Ethical standards that emphasize excellence in performance over material rewards establish a reputation for competence and character.
	A distinguishing mark of a profession is its acceptance of responsibility to the public.
	A requirement for a profession is to establish ethical standards that stress primarily a responsibility to clients and colleagues.
3.	The concept of materiality is least important to an auditor when considering the
	Adequacy of disclosure of a client's illegal act.
	Discovery of weaknesses in a client's internal control.
	Effects of a direct financial interest in the client on the CPA's independence.
	Decision whether to use positive or negative confirmations of accounts receivable.
4.	According to the profession's ethical standards, an auditor would be considered independent in which of the following instances?
	The auditor's checking account, which is fully insured by a federal agency, is held at a client financial institution.
	The auditor is also an attorney who advises the client as its general counsel.
	A member donates service as treasurer of a charitable organization that is a client during the period covered by the financial statements
	The client owes the auditor fees for two consecutive annual audits.
5.	In which of the following circumstances would a CPA who audits XM Corporation lack independence?
	The CPA is a director of, but does not control, YN Corporation, which has a loan from XM.
	The CPA and XM's president each owns 25% of FOB Corporation, a closely held company.
	The CPA has an automobile loan from XM, a financial institution. The loan is collateralized by the automobile.
	The CPA reduced XM's usual audit fee by 40% prior to the audit because XM's financial condition was unfavorable.
6.	On June 1, 2004, a CPA obtained a $100,000 personal loan from a financial institution client for whom the CPA provided compilation services. The loan was fully secured and considered material to the CPA's net worth. The CPA paid the loan in full on December 31, 2004. On April 3, 2005, the client asked the CPA to audit the client's financial statements for the year ended December 31, 2005. Is the CPA considered independent with respect to the audit of the client's December 31, 2005, financial statements?
	Yes, because the loan was fully secured.
	Yes, because the CPA was not required to be independent at the time the loan was granted.
	No, because the CPA had a loan with the client during the period of a professional engagement.
	No, because the CPA had a loan with the client during the period covered by the financial statements.
7.	According to the profession's ethical standards, which of the following events may justify a departure from a Statement of Financial Accounting Standards? New Legislation or Evolution of a New Form of Business Transaction
	No Yes
	Yes No
	Yes Yes
	No No
8.	Which of the following actions by a CPA most likely violates the profession's ethical standards?
	Arranging with a financial institution to collect notes issued by a client in payment of fees due.
	Compiling the financial statements of a client that employed the CPA's spouse as a bookkeeper.
	Retaining client records after the client has demanded their return.
	Purchasing a segment of an insurance company's business that performs actuarial services for a client's employee benefit plans.
9.	According to the profession's ethical standards, an auditor would be considered independent in which of the following instances?
	The auditor is the officially appointed stock transfer agent of a client.
	The auditor's checking account, which is fully insured by a federal agency, is held at a client financial institution.
	The client sponsors an employee benefit plan in which the auditor participates.
	The client is the only tenant in a commercial building owned by the auditor.
10.	Adams is the executive partner of Adams & Co., CPAs. One of its smaller clients is a large nonprofit charitable organization. The organization has asked Adams to be on its board of directors, which consists of a large number of the community's leaders. Membership on the board is honorary. Adams & Co. would be considered to be independent
	Under no circumstances.
	As long as Adams's directorship was disclosed in the organization's financial statements.
	As long as Adams was not directly in charge of the audit.
	As long as Adams does not perform or give advice on management functions of the organization
11.	Which of the following most completely describes how independence has been defined by the accounting profession?
	Performing an audit from the viewpoint of the public.
	Avoiding the appearance of significant interests in the affairs of an audit client.
	Possessing the ability to act with integrity and objectivity
	Accepting responsibility to act professionally and in accordance with a professional code of ethics.
12.	In which of the following instances would the independence of the CPA most likely not be considered to be impaired? The CPA has been retained as the auditor of the financial statements of a
	Charitable organization in which the spouse of the CPA serves as treasurer.
	Municipality in which the CPA owns $25,000 of the $2,500,000 indebtedness of the municipality.
	Credit union of which the CPA is a member.
	Company in which the CPA's investment club owns a 10% interest.
13.	A violation of the profession's ethical standards would most likely have occurred when a CPA in public practice
	Used a records-retention agency to store the CPA's working papers and client records.
	Served as an expert witness in a damage suit and received compensation based on the amount awarded to the plaintiff.
	Referred life insurance assignments to the CPA's spouse, who is a life insurance agent.
	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.
14.	Upon discovering irregularities in a client's tax return that the client would not correct, a CPA withdraws from the engagement. How should the CPA respond if asked by the successor CPA why the relationship was terminated?
	"It was a misunderstanding."
	"I suggest you get the client's permission for us to discuss all matters freely."
	"I suggest you ask the client."
	"I found irregularities in the tax return that the client would not correct."
15.	Which action is not considered a discreditable act?
	Negligently permitting another to sign a document containing materially false and misleading information.
	Being finally determined by a court of competent jurisdiction to have violated any of the federal antidiscrimination laws.
	Having a bank collect notes received from a client in payment of fees.
	Failing to follow standards and procedures established by governmental agencies in audits of grants by those agencies.
16.	According to the ethical standards of the profession, which of the following acts is generally prohibited?
	Issuing a modified report explaining a failure to follow a governmental regulatory agency's standards when conducting an attest service for a client.
	Revealing confidential client information during a quality review of a professional practice by a team from the state CPA society.
	Accepting a contingent fee for representing a client in an examination of the client's federal tax return by an IRS agent.
	Retaining client records after an engagement is terminated prior to completion and the client has demanded their return.
17.	The profession's ethical standards most likely are violated when a CPA represents that specific services will be performed for a stated fee and it is apparent at the time of the representation that the
	Actual fee would be substantially higher.
	Actual fee would be substantially lower than the fees charged by other CPAs for comparable services.
	CPA would not be independent.
	Fee was a competitive bid.
18.	According to the ethical standards of the profession, which of the following acts is generally prohibited?
	Purchasing a product from a third party and reselling it to a client.
	Writing a financial management newsletter promoted and sold by a publishing company.
	Accepting a commission for recommending a product to an audit client.
	Accepting engagements obtained through the efforts of third parties.
19.	A member of the AICPA who is engaged to prepare an income tax return has a duty to prepare it in such a manner that the tax is
	The legal minimum.
	Computed in conformity with generally accepted accounting principles.
	Supported by the taxpayer’s audited financial statements.
	Not subject to change upon audit.
20.	In accordance with the AICPA’s Statements on Standards for Tax Services, when a reasonable basis exists for omission of an answer to an applicable question on a tax return
	The preparer need not provide an explanation for the omission on the return.
	A brief explanation of the reason for the omission must be provided on the return.
	The question should be marked as nonapplicable.
	A note on the return should state that the answer will be provided if the information is requested.
Read 'Chapter 2: Ethical Reasoning and Accountants' & answer the following question(s):
Read 'Chapter 3: Conclusions and Implications' & answer the following question(s):
Read 'Chapter 4: Culture, Motivation, Power, and Business Ethics' & answer the following question(s):
Read 'Chapter 5: AICPA’s Code of Professional Conduct' & answer the following question(s):
Read 'Chapter 6: Interpretations and Rulings' & answer the following question(s):
Read 'Chapter 7: Corporate Responsibility law (Sarbanes-Oxley act)' & answer the following question(s):
Read 'Chapter 8: Standards of Ethical Conduct for Practitioners' & answer the following question(s):
Read 'Chapter 9: Massachusetts Ethics' & answer the following question(s):
Read 'Chapter 10: Regulation of Accountants' & answer the following question(s):

Return to Syllabus

Who can perform a compilation engagement?

Applicability of AR-C 80. The accountant should perform a compilation engagement when he is engaged to do so. A compilation engagement letter should be prepared and signed by the accountant or the accountant's firm and management or those charged with governance.

What is the purpose of an audit performed by a CPA quizlet?

The purpose of an audit is to provide financial statement users with an opinion by the auditors on whether the financial statements are presented fairly, in all material and immaterial respects, in accordance with the applicable financial reporting framework.

Who is responsible for the financial statements in a compilation engagement?

Under a compilation, management takes responsibility for the preparation and presentation of the financial statements. The accountant providing the compilation services should have sufficient industry-level experience and knowledge of the client to compile the financial statements.

What does the accountant do in a compilation engagement?

04 The objective of the accountant in a compilation engagement is to ap- ply accounting and financial reporting expertise to assist management in the presentation of financial statements and report in accordance with this sec- tion without, undertaking to obtain or provide any assurance that there are no material ...

Which of the following best describes the responsibility of the CPA in performing compilation services for a company?

Who can perform a compilation engagement?

What is the purpose of an audit performed by a CPA quizlet?

Who is responsible for the financial statements in a compilation engagement?

What does the accountant do in a compilation engagement?

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