Q&A Hero

Q: The disadvantage of general statements in codes of professional conduct is A) the emphasis on positive activities. B) that they identify ideal conduct. C) the difficulty of enforcing general ideals without minimum standards of behaviour. D) that there are too many to remember.

Q: PAs are members of a professional association that can impose sanctions for violations of the professional code of conduct. What is an example of a severe penalty that can be imposed by a professional association? A) Publication of information about the offence in a newsletter B) Requirement of the completion of training courses C) Requirement to have another peer review conducted within one year D) Expulsion from the professional association

Q: In a code of conduct, the advantage of general statements of ideal conduct, as opposed to specific rules of behaviour, is A) the emphasis on positive activities that encourage a high level of performance. B) the ability to enforce the ideals. C) the enforceability of minimum behaviour and performance standards. D) the tendency to define the rules as maximum rather than minimum standards.

Q: The need to implement philosophies and practices commonly referred to as "improved business practices" comes from A) increased competition resulting in public accounting firms being concerned about keeping clients and maintaining a reasonable profit. B) a CAS pronouncement. C) a GAAP pronouncement. D) a need to increase profitability on assurance type mandates.

Q: Financial statement users cannot be expected to evaluate audit performance because they will not have the time or the competence to do so. In such a situation, how is public confidence in the quality of professional services enhanced? When there are A) only business majors hired to work as auditing students with public accounting firms. B) adequate controls at the public accounting firm to limit the amount of overtime worked. C) high standards of performance and conduct on the part of all practitioners. D) strict rules about the type of work that employees should complete on a daily basis.

Q: It is not practical for users to evaluate the quality of the performance of most professional services because of their A) complexity. B) legal standing. C) veracity. D) salaries and working conditions.

Q: The underlying reason for a high level of professional conduct, such as exemplified in a code of conduct, for any profession is A) the need for public confidence in the quality of service of the profession. B) that it provides a safeguard to keep unscrupulous people out. C) that it is required by federal legislation. D) that it allows licensing agencies to have a yardstick to measure deficient performance.

Q: Society has attached a special meaning to the term professional. A professional is A) someone who has passed a qualifying exam to enter the job market. B) any person who receives pay for the services performed. C) a person who is expected to conduct himself or herself at a higher level than the requirements of society's laws or regulations. D) someone who has both an education in the trade and on-the-job experience received under an experienced supervisor.

Q: Answer: Although students' answers will vary depending on the dilemma, their answer should list the following six steps, along with a discussion of how each step relates to their particular dilemma:

Q: Frank has discovered that his employer is part of a group of banks that is manipulating interest rates. He would like to stop this practice at his employer, and is not sure how best to talk to his boss. He has heard of the GVV (Giving Voice to Values) approach, and thinks he may be able to use it successfully because his company has recently implemented new initiatives to empower employees to speak of improvements to business practices. Frank has crafted a useful, powerful response that he could use, taking into account multiple options. He has conducted research to make him more informed on the issue, and has consulted a friend who is expert in this area. What should is the next thing he should do before talking to his boss? A) review the values underpinning the different positions in the value conflict B) further develop and practice his response (scripting) and get help (coaching) C) review the different possibilities for action to make sure that he has considered enough D) check his stakeholder analysis to make sure that it is thorough and complete

Q: Frank has discovered that his employer is part of a group of banks that is manipulating interest rates. He would like to stop this practice at his employer, and is not sure how best to talk to his boss. He has heard of the GVV (Giving Voice to Values) approach, and thinks he may be able to use it successfully because his company has recently implemented new initiatives to empower employees to speak of improvements to business practices Frank has identified who is affected, what is at stake for them, and how to connect with them. What is his next step, using the GVV analysis framework? A) list the values underpinning the different positions in the conflict B) consider his personal and professional purpose and choice in this situation C) practice what he is going to say, with help from a mentor or coach D) craft a useful, powerful response that he could use, taking into account multiple options

Q: Frank has discovered that his employer is part of a group of banks that is manipulating interest rates. He would like to stop this practice at his employer, and is not sure how best to talk to his boss. He has heard of the GVV (Giving Voice to Values) approach, and thinks he may be able to use it successfully because his company has recently implemented new initiatives to empower employees to speak of improvements to business practices. After considering his personal and professional purpose and choices, what should Frank do next? A) identify the stakeholders, what is at stake for them, and how to connect with them B) identify the values underpinning the different positions in the conflict and the possibilities for action C) practice what he is going to say, with help from a mentor or coach D) develop a powerful response that he can use with his boss, using external research or resources

Q: Frank has discovered that his employer is part of a group of banks that is manipulating interest rates. He would like to stop this practice at his employer, and is not sure how best to talk to his boss. He has heard of the GVV (Giving Voice to Values) approach, and thinks he may be able to use it successfully because his company has recently implemented new initiatives to empower employees to speak of improvements to business practices. After identifying and clarifying the ethical issue, what should Frank do next? A) identify the stakeholders, what is at stake for them, and how to connect with them B) identify the values underpinning the different positions in the conflict and the possibilities for action C) consider his personal and professional purpose and choices in this situation D) develop and practice a powerful response that he can use with his boss

Q: Frank has discovered that his employer is part of a group of banks that is manipulating interest rates. He would like to stop this practice at his employer, and is not sure how best to talk to his boss. He has heard of the GVV (Giving Voice to Values) approach, and thinks he may be able to use it successfully because his company has recently implemented new initiatives to empower employees to speak of improvements to business practices. The first step of the GVV approach includes A) identifying the stakeholders, what is at stake for them, and how to connect with them. B) identifying the values underpinning the different positions in the conflict and the possibilities for action. C) considering Frank's personal and professional purpose and choices in this situation. D) development and practice of a powerful response that Frank can use with his boss.

Q: Formal frameworks have been developed to help people resolve ethical dilemmas. After obtaining the relevant facts and identifying the ethical issues from the facts, what is the next step in the six-step ethical framework? A) Decide on the appropriate action to be taken in resolving the ethical dilemma. B) Identify the likely consequences of actions that will be taken. C) Determine who is affected by the outcome of the dilemma and how they are affected. D) Identify the alternatives available to the person who must resolve the dilemma.

Q: A public accountant would be facing an ethical dilemma when deciding whether or not to A) overlook a material overstatement of revenues to maintain a good client relationship. B) overlook a non material error in the financial statements. C) accept an invitation from the client to go golfing in order to maintain a good client relationship. D) participate in a charitable activity organized by the client.

Q: Ethical dilemmas occur when A) you know what you want to do but the rules say otherwise. B) businesses disregard the laws and engage in illegal behaviour. C) a person chooses to act in his/her own interest. D) a choice must be taken about appropriate behaviour.

Q: Ethical behaviour is considered to be a cornerstone for trust in everyday life as well as in business practices. Ethics are A) beliefs that we have about our own behaviour. B) a set of moral principles or values. C) rules in society that help us to do the right thing. D) laws that govern how businesses should behave.

Q: 3.1 Describe ethics and their relevance

Q: Canadian GAAS (including the CICA Handbook) are the authoritative standards for the conduct of financial statement audits in Canada. How would this affect the audit of a Canadian company that is owned by a Swedish company that must also report using Swedish (International) auditing standards?

Q: Securities regulations in Canada are the responsibility of A) national securities commission. B) provincial securities commissions. C) the professional accounting organizations. D) office of the auditor general of Canada.

Q: Stafford & Sandiford is a Public Accounting firm with 30 clients who are reporting issuers. Stafford & Sandiford can expect to be inspected by the CPAB A) once per year. B) once every 3 years. C) once every 5 years. D) randomly.

Q: Which of the following is a typical consequence to a PA or PA firm if practice inspectors find any files or quality control procedures to be unsatisfactory? The PA A) will lose the right immediately to conduct audit engagements. B) will no longer be allowed to sign audit reports for a period of time (such as a year). C) may be required to revise processes or attend training courses. D) will be required to rewrite the professional qualification examinations.

Q: How do practice inspections affect the ability of a PA firm to have articling students work at the firm? Practice inspectors A) only permit students to work there if the quality controls are good. B) review the ability of the office to provide sufficient, appropriate hours. C) require that students work only on audit engagements, not reviews. D) consider only work completed by qualified PAs, not students.

Q: For a CA or CGA working as a sole practitioner or working in a small public accounting office, the provincial practice inspectors will likely come to review audit files A) every three years. B) every five years. C) every year. D) files sent, not reviewed in person.

Q: During which phases of the financial statement audit does the auditor "conduct quality control" when conducting the financial statement audit using a risk assessment approach? During A) the risk assessments. B) the risk responses. C) the reporting process. D) risk assessment, risk response and reporting phases.

Q: There are many elements of quality control at the firm level. Which element does "processes should exist for following up internal and external complaints" belong to? A) engagement performance B) engagement quality control review C) documentation D) general human resource policies

Q: There are many elements of quality control at the firm level. Which element does "policies in place should include use of second or independent partner review, technical review, documentation, and compliance with quality control processes" belong to? A) engagement performance B) engagement quality control review C) documentation D) general human resource policies

Q: There are many elements of quality control at the firm level. Which element does "adequate processes and procedures should be in place to ensure that the audit or review is conducted in accordance with GAAS, that quality control procedures are followed for each engagement, and that the audit is appropriately documented" belong to? A) leadership and responsibilities within the firm B) general human resource policies C) extent of professional development D) engagement performance

Q: Jessica is a summer junior at Branes & Castle, a PA firm. Jessica has only completed 3 accounting courses in university and has not yet taken her auditing class. A team of auditors from Branes & Castle are starting the audit and Jessica was sent to help them. Jessica A) can perform work for the audit engagement as long as she is supervised and proper review of her work is performed. B) should not perform any work pertaining to the audit engagement since she doesn't have sufficient knowledge. C) should be limited to assisting the audit team with support functions such as photocopies and file assembly. D) can perform work for the audit engagement on cycles where risk was assessed as low.

Q: There are many elements of quality control at the firm level. Which element does "employees should be adequately trained in the skills needed to conduct audits and reviews" belong to? A) leadership and responsibilities within the firm B) independence C) general human resource policies D) extent of professional development

Q: There are many elements of quality control at the firm level. Which element does "ongoing professional development of personnel should exist, with assignment to work that matches employee competence, and performance evaluations related to audit quality" belong to? A) leadership and responsibilities within the firm B) independence C) general human resource policies D) extent of professional development

Q: There are many elements of quality control at the firm level. Which element does "adequate hiring policies (and documentation of their implementation) that ensure competence and integrity of personnel should be in place" belong to? A) leadership and responsibilities within the firm B) independence C) general human resource policies D) extent of professional development

Q: Dimitri works at a large public accounting firm. Dimitri referred one of his friends for a junior auditor position. Dimitri's friend was hired despite the fact that he had a criminal record dating from 3 years ago. The partner did not perform a background check on Dimitri's friend since he was recommended by an employee. Which element of quality control is compromised? A) General ethical requirements B) Independence C) General human resource policies D) Engagement performance

Q: Gary West is a sole practitioner. He has conducted the audit of Reggie's Farm for the past 12 years. In the current year, Reggie's Farm expanded by acquiring two other farms, installed a new accounting system and also started to export to the United States. Gary accepted the audit of Reggie's Farm for the upcoming year even though he has no experience with exports to the US or companies of the size of Reggie's Farm. Which element of quality control is compromised for Gary's firm? A) Independence B) Client acceptance or continuance C) Extent of professional development D) General ethical requirements

Q: Farah is currently auditing Software Synx, a public company. After a long day of work, Farah goes for a drink with her friend John who mentions that he owns shares of Software Synx. Farah indicates that John should hold on to his shares as they will go up next week when the financial statements are released and show an increase of 12% for revenues. Which element of quality control is compromised by Farah? A) General ethical requirements B) Independence C) General human resource policies D) Engagement performance

Q: There are many elements of quality control at the firm level. Which element does "a firm should establish a formal code of conduct that includes procedures for individuals to disclose differences of opinion and any inappropriate conduct" belong to? A) leadership and responsibilities within the firm B) general ethical requirements C) general human resource policies D) engagement quality control review

Q: There are many elements of quality control at the firm level. Which element does "management within a firm should ensure that qualified personnel monitor and address non-compliance with quality control procedures" belong to? A) leadership and responsibilities within the firm B) general ethical requirements C) general human resource policies D) engagement quality control review

Q: There are many elements of quality control at the firm level. Which element does "quality control procedures should be developed, documented, implemented and communicated" belong to? A) leadership and responsibilities within the firm B) general ethical requirements C) general human resource policies D) engagement quality control review

Q: There are many elements of quality control at the firm level. Which element does "an organizational culture that provides quality should be present for audit and review engagements" belong to? A) leadership and responsibilities within the firm B) general ethical requirements C) general human resource policies D) engagement performance

Q: A key difference between the PCAOB in the U.S. and CPAB in Canada is that A) CPAB is involved in the development of auditing standards. B) PCAOB is involved in the development of auditing standards. C) PCAOB conducts practice inspections of public company auditors. D) CPAB conducts practice inspections of public company auditors.

Q: CPAB's purpose is to A) develop auditing standards. B) provide training and continuing education to auditors. C) clarify and communicate the role of the auditor to the public. D) improve the public's confidence in independent auditing.

Q: 2.3 Examine the characteristics of quality control for financial statement audits A PA firm has an organizational structure that assures the technical review of every engagement by a partner who has expertise in the client's industry. This is an example of goodA) entity level controls.B) adherence to professional standards.C) business risk management.D) quality controls.

Q: The generally accepted auditing standards can be divided into three categories of standards. List the three categories and provide an example of each.

Q: For each of the following situations, state which element of the profession or society encourages the public accountant to conduct himself at a high level. A) Marco attended a seminar on the topic of business combinations to ensure he was up to date with the new standard. B) Barbara referred to the standard on hedging to ensure that her client had the appropriate documentation to qualify for hedge accounting. C) Gretchen refused to perform the audit of her uncle's restaurant chain. D) Walid worked overtime all week to ensure that the file was properly documented and met the quality control requirements. E) Sarah took the summer off to study for the Uniform Final Examination (UFE) to ensure that she would pass the entrance exam to become a chartered accountant.

Q: The CICA is the professional accounting organization for Chartered Accountants (CAs). Describe the role and responsibilities of the organization in serving its members.

Q: A PA firm is conducting the audit of a company that has operations in both Canada and Finland. There is a conflict between ISAs (International Statements on Auditing) and CASs (Canadian Auditing Standards) for the foreign operations that will be consolidated with the Canadian operations. Which reporting standards should the PA firm follow? A) reporting standards of Finland B) international reporting standards C) Canadian reporting standards D) the best of Canadian or international

Q: When conducting an audit, the auditor should look at Canadian GAAS as A) minimum standards of performance. B) normal standards of performance. C) ultimate standards of performance. D) practical standards of performance.

Q: The most authoritative requirements for public accountants performing financial statement audits in Canada are the A) standards used by the client. B) industry specific standards. C) CICA handbook requirements. D) assurance guidelines.

Q: What is the purpose of exposure drafts issued by the AASB (Auditing and Assurance Standards Board) in Canada? To A) expose the newly established standards to as many groups as possible. B) provide current copies of the standards in advance of being placed in the CICA Handbook. C) provide supporting reference material and other resources. D) explain how standards will be changed and solicit feedback.

Q: When the CICA Handbook is silent on an auditing issue, which of the following is the best of other authoritative sources that the auditor could use? A) audit technique studies B) audit firm practice manuals C) past practice at the client D) reference to audit standards partner

Q: Which of the following rights is in the CBCA (Canada Business Corporations Act) and is necessary for the completion of the audit? The right to A) obtain copies of all documentation needed to conduct the audit. B) advise management regarding how it should set up its records. C) publish information when management engages in fraud. D) have access to the necessary records, information and explanations.

Q: A strategic and risk-based audit approach means that the client must be assessed in the context of the business environment, including which of the following? A) ensuring that accounting complies with IFRS or ASPE B) completion of an independence threat analysis with supporting documentation C) corporate governance process and quality of internal controls D) talking to those audit committee members who are also part of management

Q: Who do the external auditors and the internal auditors usually report to? A) senior management B) the audit committee C) chief executive officer D) director of internal audit

Q: Larger audits may have established procedures that utilize an audit committee whenever there is a dispute between management and the auditors. What is the purpose of such procedures? A) make sure that the auditor understands management's point of view B) improves the competence of the financial statement auditors C) facilitate the auditors' independence from management D) helps make sure the audit is conducted following GAAS

Q: CAS 200 explains that as part of general qualifications and conduct the auditor should exercise due care in the performance of all aspects of auditing. Which of the following is an illustration of due care? A) having an objective state of mind and independence from the client B) completing formal education and having practical experience in the conduct of auditing C) issue a standard audit report using the CICA Handbook specified wording D) considering the completeness of the working papers

Q: CAS 200 explains that as part of general qualifications and conduct the auditor should be professionally competent. Which of the following help the auditor achieve competence? A) the use of due care in the performance of all aspects of auditing B) have an objective state of mind and independence from the client C) formal education, practical experience and continuing education D) conducting the audit using a risk-based approach and being skeptical

Q: CAS 200 provides overall objectives of the Independent Auditor during the conduct of an audit in three categories: qualifications and conduct, performance of the audit, and reporting of results. How do these standards provide guidance to auditors? They A) detail what an auditor should do during each financial statement audit. B) represent a framework for further discussion of detailed standards. C) provide specific rules about how work should be done for evidence gathering. D) explain how the audit report should be developed and distributed.

Q: Canadian GAAS (Generally Accepted Auditing Standards) are best described as A) the CICA Handbook, plus published research and public accounting firm practices in auditing. B) Canadian generally accepted auditing practices developed by public accounting firms. C) material that is fully codified in the CICA Handbook developed in Canada. D) the existing research that has been published about auditing that is used by firms.

Q: Communicating the findings of the audit in accordance with the CASs is a requirement of which category of generally accepted auditing standard? A) General B) Examination C) Reporting D) Quality

Q: Adequate planning and execution to reduce risk to an acceptable level is a requirement of which category of generally accepted auditing standard? A) General B) Examination C) Reporting D) Quality

Q: Adequate technical training and proficiency in auditing is a requirement of which category of generally accepted auditing standards? A) General B) Examination C) Reporting D) Quality control

Q: General qualifications and conduct standards indicate that performance of all aspects of auditing should be performed with due care. This means that the auditor must fulfill his/her duties A) in accordance with the CAS. B) carefully and in a timely manner. C) to the satisfaction of the client. D) diligently and carefully.

Q: The codes of professional conduct of the various accounting bodies are meant to A) provide a standard of conduct for all members, including those in public practice. B) interpret the assurance recommendations and views of the AASB. C) provide the rules underlying the audits and related service activities carried on by the accountants. D) establish the norms for quality control of an audit.

Q: During which phases of the financial statement audit does the auditor "evaluate evidence" when conducting the financial statement audit using a risk assessment approach? During A) the risk assessments. B) the risk responses. C) the reporting process. D) risk assessment, risk response and reporting phases.

Q: The risk response phases of conducting the financial statement audit using a risk assessment approach includes A) conducting an independence threat analysis to evaluate independence. B) preparation of the final auditor's report in response to audit findings. C) identification of risks of material misstatement at the client. D) gathering evidence to assess the likelihood of material misstatement.

Q: The first step in the financial statement audit using a risk assessment approach is to A) identify risks of material misstatement. B) gather evidence to assess the likelihood of material misstatement. C) evaluate audit evidence. D) evaluate the reporting framework.

Q: Canadian auditing standards (CASs) require that the audit be conducted using A) a controls testing approach. B) a risk assessment approach. C) a substantive approach. D) a standard approach.

Q: Sarbanes-Oxley in the U.S. and regulatory reporting requirements in Canada provide the clout to make management directly responsible for the financial statements. What is one of the ways that this is implemented in the CASs (Canadian Auditing Standards)? A) all listed company management must certify the accuracy of the evidence provided B) management must implement and carry out development of high quality internal controls C) management must acknowledge and understand its responsibilities D) companies must use internal auditors to assess the quality of the financial statements

Q: Sarbanes-Oxley in the U.S. and regulatory reporting requirements in Canada provide the clout to make management directly responsible for the financial statements. What is one of the ways that this is implemented in the CASs (Canadian Auditing Standards)? A) all listed company management must certify the accuracy of the evidence provided B) management must provide evidence to support financial statement data C) management must implement and carry out development of high quality internal controls D) companies must use internal auditors to assess the quality of the financial statements

Q: What is the auditor required to do with respect to the financial reporting framework at a client? A) assess whether the framework selected by management is suitable B) select an applicable framework for use with the financial statements C) make sure that ASPE or ASNPO are in use for publicly listed companies D) select the accounting principles to be used as part of the reporting framework

Q: The implementation of the Sarbanes-Oxley requirements in the US resulted in increased independence requirements for the auditors. The impact of this requirement in Canada was A) creation of the CPAB to oversee Canadian audit professionals. B) revisions of the rules of professional conduct for PAs. C) additional training requirements to become an auditor. D) modification of the type of opinion provided in an assurance engagement by the auditor.

Q: The implementation of the Sarbanes-Oxley requirements in the US resulted in the creation of the PCAOB to oversee listed companies' auditors and develop audit standards. The impact of this requirement in Canada was the A) creation of new auditing standards to ensure better quality control of the audit. B) revisions of the rules of professional conduct for CAs. C) additional training requirements to become an auditor. D) creation of the CPAB to oversee Canadian audit professionals.

Q: Independence is assessed in the eyes of external users and regulators. Which of the following is a tool that helps the auditor identify whether the auditor is independent for a particular audit engagement? A) completion of independence forms at time of employment B) the use of an independence threat analysis C) audit risk model assessment for each engagement D) professional skepticism when assessing control risks

Q: The reason for adopting the CASs is to A) comply with the requirement from the Canada Business Corporations Act. B) respond to the increased litigation risks faced by the auditors. C) be consistent with the international standards of auditing. D) to simplify the auditing process.

Q: When the criteria to be used in the financial statement audit is established, the auditor's responsibility is to A) evaluate the reporting framework used. B) select the acceptable financial reporting framework. C) make a recommendation to management for selecting the framework. D) create and document the framework used.

Q: How has the Canada Business Corporation Act given authority to Canadian accounting and auditing standard setters? By stating that financial statements A) must be compiled in accordance with International Financial Reporting Standards. B) should be prepared in accordance with the standards in the CICA Handbook. C) must be audited by accountants that reside in Canada. D) should be prepared in accordance with local financial reporting standards.

Q: 2.2 Link the market forces that help ensure that audit and assurance engagements are completed to high standards of quality What is one of the ways that high-profile business failures such as Enron, WorldCom and Nortel have affected the auditing profession?A) raised the cost of hiring accounting firm professionalsB) resulted in a need for decreased paperwork on auditsC) lowered the number of professionals working on an audit engagementD) created an increasing focus on standards and high-quality audits

Q: What are the three main factors that influence the organizational structure of all Public Accounting firms?

Q: The most common organizational form used by public accounting firms is A) sole proprietorship or partnership. B) professional corporation. C) corporation. D) co-operative.