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Unformatted text preview: Question CPA-01476 Which of the following statements best describes the ethical standard of the profession pertaining to advertising and solicitation? a.All forms of advertising and solicitation are prohibited. b.There are no prohibitions regarding the manner in which CPAs may solicit new business. c.A CPA may advertise in any manner that is not false, misleading, or deceptive. d.A CPA may only solicit new clients through mass mailings. Explanation Choice &quot;c&quot; is correct. Under Rule 502 of the Code of Professional Conduct, advertising that is not false, misleading or deceptive is permitted by the CPA. Choice &quot;a&quot; is incorrect. Advertising that is informative and objective is allowed under Rule 502. Choice &quot;b&quot; is incorrect. Rule 502 states that false, misleading or deceptive advertising is not allowed. Choice &quot;d&quot; is incorrect. Mass mailings are not the only form of advertising allowed. Be careful of choices including the words &quot;all, always, must, only, and never.&quot; Question CPA-01477 Under the ethical standards of the profession, which of the following situations involving nondependent members of an auditor's family is most likely to impair the auditor's independence? a.A parent's immaterial investment in a client. b.A first cousin's loan from a client. c.A spouse's employment with a client. d.A sibling's loan to a director of a client. Explanation Choice &quot;c&quot; is correct. Under Rule 101 of the Code of Professional Conduct, independence requirements extend to the member's spouse, dependent children, and dependent relatives. A spouse working for a client is considered part of the class of &quot;members&quot; subject to independence requirements. Choices &quot;a&quot;, &quot;b&quot;, and &quot;d&quot; are incorrect. These choices do not, by definition, fall within the &quot;member&quot; class. Question CPA-01478 Under the ethical standards of the profession, which of the following investments in a client is not considered to be a direct financial interest? a.An investment held through a nonclient regulated mutual fund. b.An investment held through a nonclient investment club. c.An investment held in a blind trust. d.An investment held by the trustee of a trust. Explanation Choice &quot;a&quot; is correct. Under Rule 101 of the Code of Professional Conduct regarding independence, the concept is the amount of control or the appearance of control that a member can exert over the investment that can impair independence. While it is still not desirable to even own shares in a nonclient regulated mutual fund that has investments in the client company, this answer choice is the best given the choices. The member does not control which stocks the mutual fund is investing in. Choices &quot;b&quot;, &quot;c&quot;, and &quot;d&quot; are incorrect. The member can exert control upon which investments are purchased by the investment club or by the trustees in trusts that could be revocable. Question CPA-01480 Burrow &amp; Co., CPAs, have provided annual audit and tax compliance services to Mare Corp. for several years. Mare has been unable to pay Burrow in full for services Burrow rendered 19 months ago. Mare has been unable to pay Burrow in full for services Burrow rendered 19 months ago....
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This note was uploaded on 08/28/2011 for the course ACCOUNTING 423 taught by Professor K during the Spring '11 term at San Diego.
- Spring '11