AICPA Code of Professional Conduct and Independence - Fill in the Blank Flashcards

Fill-in-the-blank flashcards covering key concepts from the lecture notes on independence, ethics, professional judgment, tax services, and related standards.

Professional skepticism is essential in making professional judgments; it helps frame the auditor’s mindset of __.

independent thought

Judgment is the process of reaching a decision or drawing a conclusion where there are a number of possible alternative solutions. The missing term is __.

Judgment

Auditors should approach matters with __ and independence, with an inquiring mind and critical assessment of audit evidence.

objectivity

Auditors need to use __ thought process.

System 2

Judgments can fall prey to __ and biases that negatively influence judgments.

cognitive traps

Professional skepticism links to professional judgment through the ethical standards of independent thought, objectivity and due care, which are incorporated in __.

AICPA Code of Professional Conduct

When differences exist between AICPA and those of the licensing state board of accountancy, the CPA should follow the __ rules.

state board’s

AICPA uses a __ approach for analyzing threats.

risk-based

Self-Review Threat is exemplified by __ used to generate the client’s financial statements.

preparing source documents

Advocacy Threat involves __ client interests, such as promoting the client’s securities in an IPO.

promoting the client’s securities

Familiarity Threat arises when a CPA on the attest engagement team whose __ is the client’s CEO.

spouse

Undue Influence Threat occurs when there is a threat to replace the CPA due to a disagreement with the client over the application of an accounting principle. The missing term is __.

Undue influence threat

Safeguards include policies and procedures addressing ethical conduct and compliance with laws and regulations. The missing term is __.

policies and procedures

Tax services must be preapproved by the audit committee. The missing term is __.

preapproved

Independence may be impaired when a partner or professional employee leaves the firm and is subsequently employed by the client in a key position unless the following is met: __ to the former professional are not material to the firm.

Amounts due

A CPA should not perform __ functions or make management decisions for an attest client.

management

Three principles that underlie auditor independence: An auditor cannot function in the role of __.

management

The General Standard of Independence is judged by a __ investor.

reasonable

PwC violated independence rules when it performed __ nonaudit services to audit clients.

restricted

EY auditors engaged in __ relationships with the client’s CFO.

personal

KPMG former partner engaged in __ trading of non-public information.

insider

Deloitte managers maintained __ accounts with audit client.

bank

PwC faced allegations of __.

age discrimination

Materiality criterion is used to determine whether nonaudit services to an affiliate violate independence if the amounts are __.

material

A __ threat is included among the threats to integrity and objectivity in the Business Conceptual Framework.

self-interest

One safeguard is __ at the top, reflecting management's commitment to ethics.

tone

The General Standards rule requires competence, adherence to professional standards, and adherence to __.

accounting principles

Contingent fees are permitted for __-type services for a nonattest client; they are prohibited for an attest client.

advisory

Commissions and referral fees require disclosures by CPAs when recommending or referring a service to which the commission relates; this is known as __ disclosures.

disclosures

Confidential information should not be disclosed without the client's __.

consent

SSTS No. 1 requires CPAs to determine if a tax position will be sustained on its __.

merits

A taxpayer is a client, a CPA’s employer, or any other __ recipient of tax services.

third-party

SSTS 1-1 includes establishing the relevant facts, considering the reasonableness of the assumptions and representations, applying the pertinent authorities to the facts, considering the business purpose and economic substance of the transaction, considering whether the issue involves a listed or reportable transaction, and arriving at a conclusion supported by the __.

authorities

A 'prohibited tax shelter transaction' means listed transactions, transactions with contractual protection, or __ transactions.

confidential

Treasury Circular 230: Knowledge of error return obligates the practitioner to inform the client and advise whether to __ the return.

correct

Circular 230: Conflict of Interest — The practitioner should not represent a client before the IRS if the representation involves a __ of interest.

conflict

Waiver of conflicts of interest requires that the client provides written informed consent at the time the conflict is known, but no later than __ days.

30

CPAs cannot waive a conflict of interest in a representation that requires __ under the rules.

independence

The PCAOB Rule addressing Auditor Independence is __.

Rule 3520

PCAOB inspections are designed to determine whether there are __ in audit reports; leading cause is deficiencies in internal quality controls.

deficiencies

Conclusion: CPAs are bound by a __ system requiring adherence to the AICPA rules of professional conduct.

deontological

The conceptual framework applies to integrity and objectivity, as well as other rules of conduct, but not __.

independence

Role of professional skepticism: organizations should set the tone to emphasize a __ mind during audit.

questioning