CPA Auditing and Attestation (AUD) : Ethics - SEC & PCAOB
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Example Questions
Example Question #1 : Ethics Sec & Pcaob
In order to maintain independence, a partner, principal, shareholder or professional employee of a firm may not hold more than ____% in a client's stock.
5%
10%
1%
25%
5%
According to PCAOB guidelines: “During the period of the professional engagement, a partner or professional employee of the firm, his or her immediate family, or any group of such persons acting together owned more than 5 percent of a client’s outstanding equity securities or other ownership interests.”
Example Question #2 : Ethics Sec & Pcaob
Independence is impaired by:
Members in the same alumni association with the CEO of a client
Banking in an institution used by the client
employment relationship with the client
Association membership with client management
employment relationship with the client
Under AICPA and PCAOB guidelines, independence is impaired by an employment arrangement with a client. Under ET Section 100: Participated on the attest engagement team or was an individual in a position to influence the attest engagement for the client when the attest engagement covers any period that includes his or her former employment or association with that client.”
Example Question #3 : Ethics Sec & Pcaob
Ron Johnson is the lead audit partner on the engagement with Abco, Inc. (a public company). Mr. Johnson must be rotated from the engagement every:
Seven Years
Never
Five Years
10 Years
Five Years
Under PCAOB standards for public companies, an audit lead is required to rotate every five years. The guidance provided by the PCAOB includes the following: “Auditors have many rigorous standards that must be upheld that are supposed to create independence from the companies they audit. One of the most important is the mandatory lead rotation every five years. This is a much more cost-effective way of increasing independence between auditors and clients. When the lead auditor changes, they must “start from scratch” with their client, which means no longstanding relationship is intact. In addition, the audit firm will have to spend less time on the audit than if it were an entirely new company, which saves massive amounts of time, and most importantly, money.”
Example Question #4 : Ethics Sec & Pcaob
An issuer may hire an employee of a registered public accounting firm who served on the audit engagement team within the previous year for which of the following positions?
Controller
CFO
CEO
Staff accountant
Staff accountant
SOX and SEC rules prohibit an accounting firm from auditing an issuer's financial statements if certain members of management of the issuer had been members of the firm's audit engagement team within the one year period preceding the beginning of audit procedures. These positions include CEO, CFO, and controller.
Example Question #5 : Ethics Sec & Pcaob
Under the SOX 2002 provisions, registered public accounting firms are required to prepare and maintain audit work papers and other info related to any audit for a period of:
3 years
1 year
7 years
5 years
7 years
Registered firms are required to maintain these work papers for a period of 7 years.
Example Question #6 : Ethics Sec & Pcaob
Of the following audit clients, which client's engagement would have to be conducted under SEC or PCAOB regulations and procedures?
A governmental entity
ABC LP
A corporation listed on the New York Stock Exchange
A family owned and run electrician business
A corporation listed on the New York Stock Exchange
Only a public company or issuer would have to obey these procedures.
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