AIMA solved assignments for PA06
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Subject Code: PA08
Subject Name: ACCOUNTING ETHICS AND BUSINESS LAWS
Component name: ASSIGNMENT 1
PA08 ACCOUNTING ETHICS AND BUSINESS LAWS Solved Assignments for AIMA
Question 1:- Which statement best describes a situation that requires an auditor to apply Department of Labour(DOL) independence rules?
a) The auditor provides services to employee benefit plans sponsored by government entities.
b) The auditor is a governmental employee or contractor.
c) The auditor provides advisory services to employee benefit plans subject to state and federal rules.
d) The auditor provides audit services to employee benefit plans subject to ERIS requirements.
Question 2:- John is a CPA working as the Chief Financial Officer at My Company, Inc., a firm that provides marketing and promotional event planning. What type of AICPA member is John?
a) Member in business and in public.
b) Member in business.
c) Member in public practice.
d) Other Member.
Question 3:- Jenn have a direct financial interest in his client that is not material to your net worth.
a) Jenn cannot have direct material interest.
b) Jenn can have direct financial interest.
c) It’s not threat to independence as its not material.
d) Jenn cannot have any interest in client whether material or non-material.
Question 4:- Aiba is CPA , She completed the report for the client but her fees of $10,000 is yet unpaid. Can Aiba have lien on client record?
a) Aiba can have lien on the record till the time whole fee is paid.
b) Aiba should return the records to client once 50% fee is paid.
c) Aiba should first take the fees then complete the report. She can’t have lien on records.
d) Aiba cannot have lien on the record.
Question 5:- As auditors and accountants, CPAs play a key role in safeguarding the integrity of financial reporting. A single significant error in judgment may result in:
a) lose your license to practice as a CPA.
b) be expelled from membership in the AICPA or a state CPA society.
c) incur significant fines and steep legal liabilities.
d) All of the above.
Question 6:- Member`s close friend is employed by the client in assistant manager`s role.
a) Close friend is not mentioned in Code as covered member so it’s not a threat.
b) It should be ignored as Assistant Manager is not a key position.
c) It should be seen whether he may have influence on financial statement, even if he is not in a key position, it’s a threat.
d) It’s a threat of familiarity going by the code of conduct framework, though friend is not covered in framework.
Question 7:- In case threat is identified in compliance with code of conduct, what action should be taken?
a) If threat not significant , ignore it If threat is significant, apply safeguard to reduce or to eliminate it.
b) Decline or discontinue professional service or resign from the engagement.
c) Either A or B
d) Neither A nor B
Question 8:- Sara, a CPA accepted new assignment on Actuary valuation with big fee. Sara does not have expertise in Actuary.
a) Sara Should accept the client as its giving new exposure.
b) The client is giving big fee to Sara , its increasing her finances, she should accept the assignment.
c) Sara should not accept the assignment.
d) Sara should learn the Actuary after accepting the assignment.
Question 9:- Who are the covered members?
a) Firm
b) Partner in Attest office
c) Both A & B
d) Neither A nor B
Question 10:- Which is the example of Advocacy threat?
a) A firm underwrites or promotes a client’s shares.
b) A firm acts as a registered agent for a client.
c) A member endorses a client’s services or products.
d) All of the above.
Question 11:- Which of the option relates to self-review threat?
a) Excessive reliance exists on revenue from a single client.
b) The member performs bookkeeping services for a client.
c) Senior personnel have a long association with a client.
d) None of the above.
Question 12:- The effectiveness of a safeguard depends on:
a) The facts and circumstances specific to a particular situation.
b) The proper identification of threat.
c) Whether the safeguard is suitably designed to meet its objectives.
d) All of the above.
Question 13:- An individual in a position to influence the attest engagement is one who?
a) evaluates the performance or recommends the compensation of the attest engagement partner.
b) Works as an IT manager in the firm.
c) Provides 8 hours non audit services to Audit client.
d) Provides 10 hours non audit services to audit client.
Question 14:- Lisa is a tax accountant, works in the same branch of office where audit team is located. She will help prepare the tax return and assist the audit client in computing the tax provision for audit client. Is She a covered member?
a) Yes, because she provides services to audit client.
b) Yes, because she is located in the same office as an audit team.
c) No, because she performs no attest services for audit client.
d) No, because she is only providing assistance on these engagements.
Question 15:- David is a management consulting manager. He will provide approximately 35 hours of consulting services to the audit client. Is he a covered member?
a) No, because he is not a partner in the firm.
b) Yes, because he will provide more than 10 hours of consulting services to audit client.
c) No, because he provided no attest services to client.
d) No, because he is not a partner in the firm.
Question 16:- George is a covered member with respect to ABC Inc of the following, who must also comply with the independence rules?
a) George’ friend, whom he supports financially.
b) George`s ex-wife, Dolly.
c) George’ first cousin, Louis.
d) None of the them.
Question 17:- Which of the following are considered to be an attest engagement under the AICPA independence rules?
a) Reviews of financial statements.
b) Services rendered under the attestation standards.
c) Audits of financial statements.
d) All of the above.
Question 18:- A manager has a credit card from an audit client with respect to which he is a covered member.
The balance on his current credit card statement is $11000 and is material to his net worth. Does this loan impair his independence?
a) No, because credit card loans do not create threats to independence.
b) No, because he is not partner in the firm.
c) Yes, if the staff person does not maintain a current balance of $10,000 or less.
d) Yes, because the monthly purchases are material to the staff person’s net worth.
Question 19:- Which of the following activities would be least likely to create unacceptable threats to a member’s independence?
a) Finalise a deal on behalf of the client with potential investors.
b) Prepare source documents for the client.
c) Prepare financial statements based on the client’s trial balance.
d) None of them
Question 20:- Joseph CPA is engaged to perform bookkeeping services for a client. Which of the following activities will impair Joseph’ independence?
a) Supervise the client’s employees as they perform their normal recurring activities.
b) Post client-approved entries to the client’s trial balance.
c) Advise the client on current accounting issues.
d) Generate unsigned checks using source documents or other records the client provided and approved.