Week 5 Clipped Classroom Test (5%) to be attempted at home and
place your answer on ivle, with your student no, name and group
The following questions are concerned with possible violations
of Code of professional conduct and ethics for public accountant
and accounting entities (CPCE). Choose the best response:
a. Triolo has a small public accounting practice. One of Trios
clients requests services that Triolo cannot adequately provide.
Triolo recommends a larger firm, Pinto and Associates, to his
client, and in return Pinto agrees to pay Triolo 10% of the fee for
services rendered by Pinto for Triolos client. Who, if anyone, is
in violation of the ethical rules? (1) Both Triolo and Pinto (2)
Neither Triolo nor Pinto (3) Only Triolo (4) Only Pinto
b. A public accountant who is seeking to sell an accounting
practice must: (1) Not allow a peer review team to look at working
papers and tax returns without the
permission from the client prior to consummation of the sale (2)
Not allow a prospective purchaser to look at working papers and tax
returns without
permission from the client (3) Give all working papers and tax
returns to the client (4) Retain all working papers and tax returns
for a period of time sufficient to satisfy statutory
limitations c. A public accountants retention of client records
as a means of enforcing payment of an overdue
audit fee is an action that is: (1) Not addressed by CPCE (2)
Acceptable if sanctioned by the Company Act (3) Prohibited under
the ethical rules (4) A violation of the Singapore Auditing
Standards (SSA)
d. The independent audit is important to users of financial
statements because it: (1) Determines the future stewardship of the
management of the company whose financial
statements are audited (2) Measures and communicates financial
and business data included in financial statements (3) Involves the
objective examination of and reporting on management-prepared
statements (4) Reports on the accuracy of all information in the
financial statements
e. The appearance of independence of an auditor is least likely
to be impaired if the auditor: (1) Own a unit in a cooperative
block of units, where each unit has a vote in the cooperative,
and the auditor who does not participate in the management has
been retained as the auditor for the cooperative
(2) Joins a trade association, which is an audit client, and
serves in a non-management capacity (3) Accepts a gift from a
client (4) Serves as an executor and trustee of the estate of an
individual who owned the majority of
the shares of a closely held client company
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Class work in week 5. Divide the class into three/four groups
and discuss the following issue to present. Time allow 30
minutes.
Group One:
1. Why is independence so essential for auditors? 2. Compare the
importance of independence of auditors with that of other
professionals, such as
solicitors. 3. Explain the difference between independence in
appearance and in fact.
Group Two:
Assume that a partner of a public accounting firm owns 200
shares in a large client. The ownership is an insignificant part of
his total wealth.
(a) Has the partner violated the independence requirements? (b)
Explain whether the ownership is likely to affect the partners
independence in fact. (c) Explain the reason for the strict
requirements about equity investments in the
independence requirements
Group Three
Discuss how each of the following could affect independence in
fact and independence in appearance, and evaluate the social
consequences of prohibiting auditors from doing each one.
1. Ownership of shares in a client 2. Having booking services
for a client performed by the same person who does the audit 3.
Recommending adjusting entries to the clients financial statements
and preparing financial
statements, including footnotes, for the client 4. Having
management services for a client performed by individuals in a
department that is
separate from the audit department 5. Having the annual audit
performed by the same audit team, except for assistants, for five
years
in a row. 6. Having the annual audit performed by the same
public accounting firm for 10 years in a row 7. Having management
select the audit firm
Which of (1) to (7) above are prohibited by the Code of Ethics
for Professional Accountants or the Corporation Act.
