Code of Ethics Part III and IV: Attempt History

10/19/21, 4:13 PM Code of Ethics Part III and IV: 1ST 21-22 Acctg 22 Auditing and Assurance Principles
Code of Ethics Part III and IV

Due
No due date
Points
70
Questions
70
Time Limit
120 Minutes
Instructions
Directions: Read each question carefully and choose the BEST answer. Your response to
each question is FINAL because there will be NO BACKWARD NAVIGATION. This means
that you will have NO ability to GO BACK to a specific question once
you skipped or answered it.
A professional accountant should comply to the following ethical principles:
a. Integrity;
b. Objectivity;
c. Professional Competence and Due Care;
d. Confidentiality; and
e. Professional Behavior.
Attempt History
Attempt Time Score
LATEST Attempt 1
119 minutes 54 out of 70
Score for this quiz:

54 out of 70
Submitted Oct 11 at 11:38am
This attempt took 119 minutes.
Question 1 1
/ 1 pts
https://canvas.instructure.com/courses/3240497/quizzes/9203493 1/48
Which of the following threats to independence may be created

when litigation takes place, or appears likely between the firm or a
member of the assurance team and the assurance client?
Correct!
Self-interest or intimidation threat

Self-interest or advocacy threat

Familiarity or self-review threat

Advocacy or intimidation threat
Question 2 1
/ 1 pts
The following forms of assistance to a financial statement audit

client do not generally threaten the firm’s independence, except:

Analyzing and accumulating information for regulatory reporting.
Correct!
Authorizing or approving transactions.

Assisting in resolving account reconciliation problems.

Assisting in the preparation of consolidated financial statements.
Question 3 1
/ 1 pts
What threats to independence are created when a contingent fee

is charged by a firm in respect of an assurance engagement?

Familiarity and intimidation threats
Correct!
Self-interest and advocacy threats

Self-review and intimidation threats.

Self-interest and self-review threats
Question 4 1
/ 1 pts
(Section 521. 6A1) The father of a member of the assurance team

is a Board of Director of the client entity. The threat to
independence caused by this relationship is assessed to be other
than clearly insignificant. Which of the following safeguards would
least likely reduce the threat to an acceptable level?
Correct!
When the assurance client’s management appoints the firm,
persons other than management ratify or approve the
appointment.

Policies and procedures to empower staff to communicate senior
levels within the firm any issue of independence and objectivity
that concerns them.

Where possible, structuring of the assurance team so that the
professional does not deal with matters that are within the
responsibility of the close family member.

Removing the individual from the assurance team.
Question 5 1
/ 1 pts
A self-interest threat may be created when a member of the

assurance team knows that this close family member has a direct
financial interest or a material indirect financial interest in the
assurance client. Which of the following should be considered in
evaluating the significance of the indentified threat to
independence?
I. The nature of the relationship between the member of the

assurance team and the close family member.
II. The materiality of the financial interest.
Correct!
Both I and II

II only

I only

Neither I nor II
Question 6 1
/ 1 pts
The following are examples of circumstances that may create

familiarity threats, except:
Correct!
Promoting shares in a listed entity when that entity is a financial
statement audit client.

A member of the engagement team having a close or immediate
family relationship with a director or officer of the client.

Long association of senior personnel with the assurance client.

A former partner of the firm being a director or officer of the client
or an employee in a position to exert direct and significant
influence over the subject matter of the engagement.
Question 7 1
/ 1 pts
After evaluating the significance of the threat created by an actual

or threatened litigation, the following safeguards should be applied
to reduce the threat to an acceptable level, except

Involving an additional professional accountant in the firm who
was not a member of the assurance team to review the work or
otherwise advise as necessary.

If the litigation involves a member of the assurance team,
removing that individual from the assurance team.
Correct!
Withdraw from, or refuse to accept, the assurance engagement.

Disclosing to the audit committee, or others charged with
governance, the extent and nature of the litigation.
Question 8 1
/ 1 pts
(Section 600) The firm, or network firm, may provide an audit

client that is not a listed entity with accounting and bookkeeping
services, including payroll services, of a routine or mechanical
nature, provided any self-review threat created is reduced to an
acceptable level. The following are example of such services,
except

Recording transactions for which the audit client has determined
or approved the appropriate account classification.
Correct!
Determining or changing journal entries, or the classifications for
accounts or transactions or other accounting records without
obtaining the approval of the audit client.

Preparing financial statements based on information in the trial
balance.

Posting coded transactions to the audit client’s general ledger.
Question 9 1
/ 1 pts
Section 540.50 of the Code states that in the financial statement

audit of listed entities, the engagement partner and the individual
responsible for the engagement quality control review should be
rotated after serving in either capacity, or a combination thereof,
for a pre-defined period, normally no more than
Correct!
7 years

10 years

6 years

5 years
Question 10 1
/ 1 pts
Litigation support services include the following activities, except

Calculating estimated damages or amounts that might become
receivable or payable as the result of litigation or other legal
dispute.

Calculating estimated damages or amounts that might become
receivable or payable as the result of litigation or other legal
dispute.
Correct!
Providing assistance to an audit client’s internal legal department.

Acting as an n expert witness.
Question 11 0
/ 1 pts
Family and personal relationships between a member of the

assurance team and a director, an officer or certain employees,
depending on their role, of the assurance client, least likely create

intimidation threat
u Answered
familiarity threat

Self-interest threat
rrect Answer
self-review threat
Question 12 1
/ 1 pts
A member of the assurance team had served as an officer of the

assurance client prior to the period covered by the assurance
report. This may create the following threats to independence,
except

Familiarity threat

Correct!
Advocacy threat

Self-review threat
Question 13 1
/ 1 pts
Which of the following would not create a threat to independence?
Correct!
A deposit made by the firm or member of the assurance team with
the assurance client that is a bank and such deposit is held under
normal commercial terms.

A loan from, or a guarantee of a loan to the firm from an
assurance client that is a bank or a similar institution and the loan
or guarantee is made under normal lending procedures, terms
and requirements.

A loan, or a guarantee of a loan, to a member of the assurance
team from an assurance client that is a bank or a similar institution
and the loan is immaterial to both the member of the assurance
team and the assurance client.

A loan from, or a guarantee to the firm from an assurance client
that is a bank or a similar institution and the loan or guarantee is
immaterial to both the firm and the assurance client.
Question 14 1
/ 1 pts
A close business relationship between a firm or a member of the

assurance team and the assurance client or its management, or
between the firm, a network firm and financial statement audit
client may create:
Correct!
Self-interest and intimidation threats

Self-interest and self-review threats

Advocacy and self-review threats

Self-review and familiarity threats
Question 15 0
/ 1 pts
When a firm obtains an assurance engagement at a significantly

lower professional fee than that charged by the predecessor firm,
or quoted by other firms, a (an):
rrect Answer
self-interest treat is created
u Answered
threat to independence is not created

intimidation threat is created

advocacy threat is created
Question 16 1
/ 1 pts
Which of the following circumstances may create self-interest

threats for a professional accountant in public practice?
Correct!
A financial interest in a client or jointly holding a financial interest
with a client.

Acting as an advocate on behalf of an assurance client in litigation
or disputes with third parties.

Being threatened with litigation.

Performing a service for a client that directly affects the subject
matter of the assurance engagement.
Question 17 1
/ 1 pts
What threat to independence may be created when the fees

generated by the assurance client represent a large proportion of
the revenue of an individual of the firm?

Familiarity threat

Advocacy threat
Correct!
Self interest threat

Self review threat
Question 18 1
/ 1 pts
What threat to independence is created when the litigation support

services provided to an audit client include the estimation of the
possible outcome and thereby affects the amounts or disclosures
to be reflected in the financial statements?

Advocacy threat

Familiarity threat

Intimidation threat
Correct!
Self-review threat
Question 19 0
/ 1 pts
Section 400.30 A1 (Engagement Period) of the Code requires the

members of the assurance team and the firm should be
independent of the assurance client during the period of the
assurance engagement. Which of the following statements is
correct?

If the assurance engagement is expected to recur, the
engagement period starts when the assurance team begins to
perform assurance services and ends with the notification by
either party that the professional relationship has terminated or
the issuance of the final assurance report, whichever is earlier.

If the assurance engagement is expected to recur, the
engagement period ends with the notification by either party that
the professional relationship has terminated.
u Answered
The engagement period starts when the assurance team begins
to perform assurance services and ends when the assurance
report is issued, regardless of whether the engagement is
expected to recur.
rrect Answer
In the case of a financial statement audit engagement, the
engagement period does includes the period covered by the
financial statements reported on by the firm.
Question 20 1
/ 1 pts
These are fees calculated on a predetermined basis relating to the

outcome or result of a transaction or the result of a transaction or
the result of the work performed.
Correct!
Contingent fees

Predetermined fees

Commissions

Fixed fees
Question 21 1
/ 1 pts
Related entity is an entity that has any of the following

relationships with the client, except:

An entity that has direct or indirect control over the client provided
that the client is material to such entity.

An entity which is under common control with the client (referred
to as a “sister entity”) provided the sister entity and the client are
both material to the entity that controls both the client and sister
entity.
Correct!
An entity with a direct financial interest in the client even through
such entity has no significant influence over the client provided
the interest in the client is material to such entity.

An entity over which the client has direct or indirect control.
Question 22 1
/ 1 pts
Which of the following would not generally create a threat to

independence?

Determining which recommendations of the firm should be
implemented.
Correct!
Purchase of goods and services from an assurance client by the
firm (or from a financial statement audit client by a network firm)
or a member of the assurance team that the transaction is in the
normal course of business and on an arm’s length basis.

Reporting, in a management role, to those charged with
governance.

A partner or employee of the firm or a network firm serves as
Company Secretary for a financial statement audit client.
Question 23 0
/ 1 pts
The network firms are required to be independent of the client

for assurance engagements provided to clients that are not audit
clients, when the assurance report is expressly restricted for use
by identified users

for assurance engagements provided to clients that are not audit
clients, when the report is not expressly restricted for use by
identified users
rrect Answer
for assurance engagements provided to an audit client
u Answered
all of the given choices
Question 24 1
/ 1 pts
Which of the following is not a contingent fee?
Correct!
A fee that is fixed by a court or other public authority.

An audit fee that is based on 5% of the client’s adjusted net
income for the current year.

An arrangement whereby no fee will be charged unless a
specified finding or result is attained.

A fee that is dependent upon the approval of the assurance
client’s loan application.
Question 25 1
/ 1 pts
If the valuation services involves the valuation of matters material

to the financial statements and the valuation involves a significant
degree of subjectivity, the self-review threat created (choose the
incorrect one)

Could not be reduced to an acceptable level by the application of
any safeguard.

Such valuation services should not be provided.
Correct!
Could be reduced to an acceptable level by the application of
safeguards.

The assurance team should withdraw from the audit engagement,
if the team opted to perform the valuation services.
Question 26 1
/ 1 pts
A self-interest threat is created if a firm has a material financial

interest in an entity that has a controlling interest in an assurance
client that is not a financial audit client. Which of the following
action appropriate to permit the firm to perform the engagement?
Correct!
Either dispose of the financial interest in total or dispose of a
sufficient amount of it so that the remaining interest is no longer
material.

No safeguards need be applied because the threat is clearly
insignificant.

Involve an additional professional accountant who did not take
part in the assurance engagement to review the work done by the
assurance team.

Discuss the matter with those charged with governance, such as
the audit committee.
Question 27 0
/ 1 pts
According to Section 608 of the code, legal services encompass a

wide and diversified range of areas including both corporate and
commercial services to clients such as contract support, litigation,
mergers, and acquisition advice and support, and the provision of
assistance to a client’s internal legal department. The provision of
legal services by a firm, or network firm, to an audit client may
create.

Advocacy and intimidation threats
rrect Answer
Self-review and advocacy threats

u Answered
Familiarity and intimidation threats
Question 28 1
/ 1 pts
What threat to independence may be created if fees due from an

assurance client for professional services remain unpaid for a long
time, especially if a significant part is not paid before the issue of
the assurance report for the following year?

Intimidation threat
Correct!

Self review threat

Advocacy threat
Question 29 0
/ 1 pts
Under subsection 520.6A1 of the Code, the purchase of goods

and services from an assurance client by the firm (or from an audit
client by a network firm) or a member of the assurance team
would not generally create a threat to independence provided the
transaction is in the normal course of business and on an arm’s
length basis. However, such transactions may be of a nature or
magnitude so as to create a self-interest threat. Which of the
following safeguards would least likely reduce the threat to an
acceptable level?
u Answered
Discuss the issue with those charged with governance, such as
the audit committee.
rrect Answer
Refuse to perform the assurance engagements.

Remove the individual from the assurance team.

Eliminate or reduce the magnitude of the transaction.
Question 30 1
/ 1 pts
Section 400.53 of the code provides that where the larger

structure is aimed at cooperation and the entities within the
structure share a significant part of professional resources, it is

considered to be a network. Professional resources include the
following, except:
Correct!
Brand name

Partners and staff

Audit methodology or audit manuals

Training courses and facilities
Question 31 0
/ 1 pts
Which of the following statements concerning threats to

independence is incorrect?

Threat of replacement over a disagreement with the application of
an accounting principle may create an intimidation threat.
rrect Answer
Acting as an advocate on behalf of an assurance client in litigation
or in resolving disputes with third parties may create a self-review
threat.
u Answered
A former partner of the firm being a director, officer of the
assurance client or an employee in a position to exert direct and
significant influence over the subject matter of the assurance
engagement may create a familiarity threat.

A loan or guarantee to or from an insurance client or any of its
directors or officers may create a self-interest threat.
Question 32 1
/ 1 pts
Which of the following is not a factor to consider in determining

the professional fee of a professional accountant in public
practice?

The time necessarily occupied by each person engaged in
performing the professional services.

The level of training and experience of the persons necessarily
engaged in performing the professional services.
Correct!
The result of the assurance work.

The skill and knowledge required for the type of professional
services involved.
Question 33 1
/ 1 pts
When a close family member of a member of the assurance team

is a director, an officer, or an employee of the assurance client in a
position to exert direct and significant influence over the subject
matter information of the assurance engagement, threats to
independence may be created. If threats are other than clearly
insignificant, which of the following safeguards can be applied to
reduce the threats to an acceptable level?
I. Removing the individual from the assurance team.
II. Where possible, structuring the responsibility of the assurance

team so that the professional does not deal with matters that are
within the responsibility of the close family member.
III. Policies and procedures to empower staff to communicate to

senior levels within the firm any issue or independence and
objectivity that concerns them.

I and III only

II and III only

I and II only
Correct!
I, II and III
Question 34 1
/ 1 pts
A loan, or guarantee of a loan, to the firm from an assurance client

that is a bank or a similar institution, would not create a threat to
independence provided:
I. The loan, or guarantee, is made under normal lending

procedures, terms and requirements.
II. The loan is immaterial to both the firm and the assurance client.
Correct!
Both I and II

Neither I nor II

I only

II only
Question 35 1
/ 1 pts
______________ is the avoidance of facts and circumstances that

are so significant that a reasonable and informed third party,
having knowledge of all relevant information, including safeguards
applied, would reasonably conclude a firm’s, or a member of the
assurance team’s, integrity, objectivity or professional skepticism
had been compromised. (Sec 400.50)

Independence of mind

Exercise of due care and diligence
Correct!
Independence in appearance

Independence in fact
Question 36 1
/ 1 pts
When a firm obtains an assurance engagement at a significantly

lower fee level than that charged by the predecessor firm, or
quoted by other firms, the self interest threat created will not be
reduced to an acceptable level unless
I. The firm is able to demonstrate that appropriate time and

qualified staffs are assigned to the task.
II. All applicable assurance standards, guidelines, and quality

control procedures are being complied with

neither I nor II

I only
Correct!
both I and II

II only
Question 37 1
/ 1 pts
Which of the following is a misunderstanding created by the use of

the word “independence”?

Possessing the ability to act with integrity and objectivity.

Possessing the ability to express a conclusion without being
affected by influences that compromise professional judgment.
Correct!
A person exercising professional judgment should be free from all
economic, financial and other relationships.

Independence precludes relationships that may appear to impair
objectivity in rendering assurance services.
Question 38 1
/ 1 pts
The following statements relate to the provision of legal services

to an audit client. Which is incorrect?

Acting for an audit client in the resolution of a dispute or litigation
in such circumstances when the amounts involved are material in
relation to the financial statements of the audit client would create
advocacy and self-review threats so significant no safeguards
could reduce the threats to an acceptable level.

Legal services to support an audit client in the execution of a
transaction (e.g., contract support) may create a self-review
threat.

The appointment of a partner of an employee of the firm or
network firm as General Counsel for legal affairs to an audit client
would create self-review and advocacy threats that are so
significant no safeguards could reduce the threats to an
acceptable level.
Correct!
The provision of legal services to an audit client involving matters
that would not be expected to have a material effect on the
financial statements may create a self-review threat.
Question 39 1
/ 1 pts
There are fundamental principles that the professional accountant

has to observe when performing assurance engagements. The
requirement of which principle is of particular importance in an
assurance engagement in ensuring that the conclusion of the
professional accountant has value to the intended user?

Confidentiality
Correct!
Objectivity

Professional competence

Integrity
Question 40 1
/ 1 pts
Which of the following would not, it itself, create a network?

A larger structure that is aimed at cooperation and the entities
within the structure share common quality control policies and
procedures.
Correct!
A larger structure where the entities within the structure share
costs that are limited only to those costs related to the
development of audit methodologies, manuals, or training
courses.

A larger structure that is aimed at cooperation and the entities
within the structure share common ownership, control or
management.

A larger structure that is aimed at cooperation and it is clearly
aimed at profit or cost sharing among the entities within the
structure.
Question 41 1
/ 1 pts
Which of the following is incorrect regarding engagement period?

When an entity becomes an audit client during or after the period
covered by the financial statements that the firm will report on, the
firm should consider whether any threats to independence may be
created by previous services provided to the audit client.

In case of an audit engagement, the engagement period includes
the period covered by the financial statements reported on by the
firm.

The period of the engagement starts when the assurance team
begins to perform assurance services and ends when the
assurance report is issued, except when the assurance
engagement is of a recurring nature.
Correct!
If the assurance engagement is expected to recur, the period of
the assurance engagement ends with the notification by either
party that the professional relationship has terminated or the
issuance of the final assurance report, whichever is earlier.
Question 42 0
/ 1 pts
For assurance engagements provided to clients that are not audit

clients, when the report is not expressly restricted for use by
identified users, the following should be independent of the client:
A B C D
The members of the
Yes Yes Yes Yes
assurance team
The firm Yes Yes No No

Network firms Yes No No Yes

u Answered
A

D
rrect Answer
B

C
Question 43 1
/ 1 pts
In cases when the threat to independence is other than clearly

insignificant and no safeguards are available to reduce it to an
acceptable level, which of the following actions should be taken?I.
Eliminating the activities or interests creating the threat.
II. Refusing to accept or continue the assurance engagement

II only
Correct!
Either I or II

Neither I nor II

I only
Question 44 1
/ 1 pts
The recruitment of senior management for an assurance client,

such as those in a position to affect the subject matter of the
assurance engagement, may create the following current or future
threats to independence, except

Intimidation threats
Correct!
Self-review threats

Self-interest threats

Familiarity threats
Question 45 1
/ 1 pts
The provision of corporate finance services, advice, or assistance

to an assurance client may create


Self-interest and intimidation threats

Correct!
Advocacy and self-review threats
Question 46 1
/ 1 pts
A direct financial interest, or a material indirect financial interest, in

the assurance client of a member of the assurance team or his
immediate family member may create a significant self-interest
threat. Which of the following safeguards would least likely
eliminate the threat or reduce it to an acceptable level?

Dispose of the direct financial interest prior to the individual
becoming a member of the assurance team.
Correct!
Discuss the matter with those charged with governance.

Remove the member of the assurance team from the assurance
engagement.

Dispose of the indirect financial interest in total or dispose of a
sufficient amount of it so that the remaining interest is no longer
material prior to the individual becoming a member of the
assurance team.
Question 47 1
/ 1 pts
Which of the following business relationships between a firm or a

member of the assurance team and the assurance client or its
management, or between the firm, a network firm and an audit
client may create self-interest and intimidation threats?
I. Having a material financial interest in a joint venture with the

assurance client or a controlling owner, director, officer, or other
individual who performs senior managerial functions for the client.
II. Arrangements to combine one or more services or products of

the firm with one or more services or products of the assurance
client and to market the package with reference to both parties.
III. Distribution of marketing arrangements under which the firm

acts as a contributor or marketer of the assurance client’s
products or services, or the assurance client acts as the distributor
or marketer of the products or services of the firm.

I and II only

I and III only

II and III only
Correct!
I, II, and III
Question 48 1
/ 1 pts
A self –interest threat would be created if the firm, or a member of

the assurance team, makes a loan to an assurance client that is
not a bank or similar institution, or guarantees such an assurance
client’s borrowing. The self-interest threat created would be so
significant that no safeguard could reduce the threat to an
acceptable level unless the loan or guarantee is:

Immaterial to the firm or the member of the assurance client.

Made under normal lending terms, procedures and requirements.
Correct!
Immaterial to both the firm or the member of the assurance team
and the assurance client.

Made under normal lending terms, procedures and requirements
and the loan or guarantee is immaterial to both the firm or the
member of the assurance team and the assurance client.
Question 49 1
/ 1 pts
A loan, or a guarantee of a loan, from an assurance client that is a

bank or a similar institution, to a member of the assurance team or
his immediate family, would not create a threat to independence
provided the loan, or a guarantee, is:

Immaterial to the assurance client.
Correct!
Made under normal lending procedures, terms and requirements.

Immaterial to the member of the assurance team or his immediate
family.

Immaterial to both the member of the assurance team or his
immediate family and the assurance client.
Question 50 0
/ 1 pts
Section 603 of the Code states, “A valuation comprises the

making of assumptions with regard to future developments, the
application of certain methodologies and techniques, and the
combination of both in order to compute a certain value, or range
of values, for an asset, a liability or for a business as a whole.”
Which of the following threats may be created when a firm or a
network firm performs valuation for an audit client that is to be
incorporated in the client’s financial statements?

Advocacy threat

Intimidation threat
rrect Answer
Self-review threat
u Answered
Familiarity threat
Question 51 0
/ 1 pts
Which of the following threats to independence is created when a

member of the assurance team participates in the assurance
engagement while knowing or having reason to believe that
he/she is to, or may join the assurance client sometime in the

future?
u Answered
Intimidation threat

Self-review threat

Advocacy threat
rrect Answer
Question 52 1
/ 1 pts
If the fee quoted for a professional service is so low, it may be

difficult for the CPA to perform the engagement in accordance with
applicable technical and professional standards for that price. This
situation may create a self-interest threat to:

Professional behavior
Correct!
Professional competence and due care

Objectivity

Integrity
Question 53 0
/ 1 pts
A firm provides valuation services to an audit client. The service

involves valuation of matters material to the financial statements
and involves a significant degree of subjectivity. Which of the
following safeguards should be applied to eliminate the self-review
threat created, or reduce it on an acceptable level?

Making arrangements so that personnel providing such services
do not participate in the audit engagement.
u Answered
Confirming with the audit client their understanding of the
underlying assumptions of the valuation and the methodology to
be used and obtaining approval for their use.

Obtaining the audit client’s acknowledgement of responsibility for
the results of the work performed by the firm.
rrect Answer
The self-review threat created could not be reduced to an
acceptable level by the application of any safeguard.
Question 54 1
/ 1 pts
Which of the following most completely describes how

independence has been defined by the accountancy profession?

Performing an assurance service from the viewpoint of the public.
Correct!
Possessing the ability to act with integrity, and exercise objectivity
and professional skepticism.

Accepting responsibility to act professionally and in accordance
with laws and regulations.

Avoiding the appearance of significant interests in the affairs of an
assurance client.
Question 55 1
/ 1 pts
Firms are required to establish policies and procedures relating to

independence communications with audit committees, or others
charged with governance of the client. In the case of the financial
statement audit of listed entities, such communication should be:

Oral or in writing
Correct!
Oral and in writing

In writing

Oral
Question 56 1
/ 1 pts
A former officer, director, or employee of the assurance client

serves as a member of the assurance team. This situation will
least likely create

self-interest threat

familiarity threat

self-review threat
Correct!
intimidation threat
Question 57 0
/ 1 pts
(Section 601) Which of the following statements relating to the

provision of accounting and bookkeeping services to an audit
client that is a listed entity is incorrect?

The provision of accounting and bookkeeping services to audit
clients in emergency or other unusual situations, when it is
impractical for the audit client to make other arrangements would
not be considered to pose an unacceptable threat’s to
independence if certain conditions are met.
u Answered
The provision of accounting and bookkeeping services of a
routine or mechanical nature to divisions or subsidiaries of listed
audit clients would not be seen as impairing independence with
respect to the audit client if certain conditions are met.

The provision of accounting and bookkeeping services to an audit
client that is a listed entity may impair the independence of the
firm or network firm, or at least give the appearance of impairing
independence.
rrect Answer
The provision of accounting and bookkeeping services to an audit
client is a normal part of the audit process and does not threaten
the firm’s independence.
Question 58 1
/ 1 pts
When identified threats to independence are not clearly

insignificant and the firm decides to accept or continue the
assurance engagement, the decision should be documented. The
firm’s documentation should include:
I. A description of the threats identified.
II. The safeguards applied to eliminate or reduce the threats to an

acceptable level.

II only
Correct!
Both I or II

I only

Neither I nor II
Question 59 0
/ 1 pts
The following activities may create self-interest or self-review

threats, except:
rrect Answer
Using the same senior personnel on an assurance engagement
over a long period of time.

Having custody of an assurance client’s assets.

Supervising assurance client employees in the performance of
their normal recurring activities.
u Answered
Preparing source documents or originating data evidencing the
occurrence of a transaction.
Question 60 1
/ 1 pts
Accepting gifts or hospitality (unless the value is clearly

insignificant) may create

Familiarity and self-review threats
Correct!
Self interest and familiarity threats


Self-interests and self-review threat.
Question 61 1
/ 1 pts
A self-interest threat would be created if the firm, or a member of

the assurance team, accepts a loan from, or has borrowing
guaranteed by, an assurance client that is not a bank or similar
institution. The self interest threat created would be so significant
that no safeguard could reduce the threat to an acceptable level
unless the loan or guarantee is:
Correct!
Immaterial to both the firm or the member of the assurance team
and the assurance client.

Made under normal lending terms, procedures and requirements.

Made under the normal lending terms, procedures and
requirements and the loan or guarantee is immaterial to both the
firm or the member of the assurance team and the assurance
client.

Immaterial to the firm or the member of the assurance team.
Question 62 0
/ 1 pts
Section 540.50 of the Code states when a financial statement

audit client becomes a listed entity, the length of time the
engagement partner or the individual responsible for the
engagement quality control review has served the audit client in
that capacity should be considered in determining when the
individual should be rotated. Before rotating off the engagement,
the person is allowed to continue to serve as the engagement
partner or as the individual responsible for the engagement quality
control review for:

4 additional years
rrect Answer
2 additional years

1 addition year
u Answered
3 additional years
Question 63 1
/ 1 pts
What kind of threat to noncompliance to fundamental principles is

created if the professional fees due from a financial statement
audit client remain unpaid for a long time?

Self-review threat

No threat is created
Correct!

Familiarity threat
Question 64 0
/ 1 pts
A CPA –lawyer, acting as a legal counsel to one of his audit client,

is an example of

advocacy threat
u Answered

self-review threat
rrect Answer
advocacy threat
Question 65 1
/ 1 pts
When the total fees generated by an assurance client represent a

large proportion of a firm’s total fees, the dependence on that
client or client group and concern about the possibility of losing
the client may create a/an

Self review threat

Intimidation threat

Advocacy threat
Correct!
Question 66 0
/ 1 pts
The following statements relate to the provision of taxation,

internal audit or IT systems services to audit clients. Which is
false?
rrect Answer
The provision of services in connection with the assessment,
design and implementation of internal accounting controls and risk
management controls does not create a threat to independence
provided that firm or network personnel do not perform
management functions.

The provision of services by a firm or network firm to an audit
client that involve the design and implementation of financial
information technology systems that are used to generate
information forming part of clients financial statements may create
a self-review threat.
u Answered
Taxation services, including compliance, planning, provision of
formal taxation opinions, and assistance in the resolution of tax
disputes may create a self-review threat.

A self-review threat may be created when a firm, or network firm,
provides internal audit services to an audit client.
Question 67 1
/ 1 pts
Section 540.20 of the Code states that using the same

engagement partner or the same individual for the engagement
quality control review on a financial statement audit over a
prolonged period may create a:

Self-review threat
Correct!
Familiarity threat

Intimidation threat

Question 68 1
/ 1 pts
Which of the following threats to independence may be created by

family and personal relationships between a member of the
assurance team and a director, an officer or an employee of the
assurance client in a position to exert direct and significant
influence over the subject matter information of the assurance
engagements?

Self-interest, advocacy or self review threats.

Advocacy , familiarity or self review threats.
Correct!
Self interest, familiarity or intimidation threats.

Self-review, familiarity, or advocacy threats.
Question 69 1
/ 1 pts
Section 400.1 (Independence) of the Code states, “It is in the

public interest and, therefore, required by this Code, that
professional accountants in public practice be independent when
performing audit or review engagements.
Correct!
Both independence of mind and independence in appearance.

Independence of mind only.

Independence in appearance only.

Either independence of mind or independence in appearance.
Question 70 1
/ 1 pts
When an immediate member of the family member of a member

of the assurance team is director, an officer , or an employee of
the assurance client in a position to exert direct and significant
influence over the subject matter information of the assurance
engagement, or was in such position during the period covered by
the engagement, the threats to independence can only be
reduced to an acceptable level by:

Withdrawing from the assurance engagement.
Correct!
Removing the individual from the assurance team.

Discussing the issue with those charged with governance, such
as the audit committee.

Where possible, structuring the responsibilities of the assurance
team so that the responsibilities does not deal with matters that
are within the responsibility of the immediate family member.
Quiz Score:
54 out of 70

Code of Ethics Part III and IV: Attempt History

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10/19/21, 4:13 PM Code of Ethics Part III and IV: 1ST 21-22 Acctg 22 Auditing and Assurance Principles

Code of Ethics Part III and IV

A professional accountant should comply to the following ethical principles:

c. Professional Competence and Due Care;

Score for this quiz:

Which of the following threats to independence may be created

The following forms of assistance to a financial statement audit

What threats to independence are created when a contingent fee

(Section 521. 6A1) The father of a member of the assurance team

A self-interest threat may be created when a member of the

I. The nature of the relationship between the member of the

II. The materiality of the financial interest.

The following are examples of circumstances that may create

After evaluating the significance of the threat created by an actual

(Section 600) The firm, or network firm, may provide an audit

Section 540.50 of the Code states that in the financial statement

Litigation support services include the following activities, except

Family and personal relationships between a member of the

A member of the assurance team had served as an officer of the

Which of the following would not create a threat to independence?

A close business relationship between a firm or a member of the

When a firm obtains an assurance engagement at a significantly

Which of the following circumstances may create self-interest

What threat to independence may be created when the fees

What threat to independence is created when the litigation support

Section 400.30 A1 (Engagement Period) of the Code requires the

These are fees calculated on a predetermined basis relating to the

Related entity is an entity that has any of the following

Which of the following would not generally create a threat to

The network firms are required to be independent of the client

Which of the following is not a contingent fee?

If the valuation services involves the valuation of matters material

A self-interest threat is created if a firm has a material financial

According to Section 608 of the code, legal services encompass a

What threat to independence may be created if fees due from an

Under subsection 520.6A1 of the Code, the purchase of goods

Section 400.53 of the code provides that where the larger

structure share a significant part of professional resources, it is

Which of the following statements concerning threats to

Which of the following is not a factor to consider in determining

When a close family member of a member of the assurance team

I. Removing the individual from the assurance team.

II. Where possible, structuring the responsibility of the assurance

III. Policies and procedures to empower staff to communicate to

A loan, or guarantee of a loan, to the firm from an assurance client

I. The loan, or guarantee, is made under normal lending

______________ is the avoidance of facts and circumstances that

When a firm obtains an assurance engagement at a significantly

I. The firm is able to demonstrate that appropriate time and

II. All applicable assurance standards, guidelines, and quality

Which of the following is a misunderstanding created by the use of

The following statements relate to the provision of legal services

There are fundamental principles that the professional accountant

Which of the following would not, it itself, create a network?

Which of the following is incorrect regarding engagement period?

For assurance engagements provided to clients that are not audit

The firm Yes Yes No No

In cases when the threat to independence is other than clearly

II. Refusing to accept or continue the assurance engagement

The recruitment of senior management for an assurance client,

The provision of corporate finance services, advice, or assistance

A direct financial interest, or a material indirect financial interest, in

Which of the following business relationships between a firm or a