MODULE 21 PROFESSIONAL RESPONSIBILITIES ,

83

in public practice. Answer (d) is incorrect because com- n

nonpro- petence of a member or a member's firm. Accordingly, a
fessionals may be hired, and because developing answer (b) is correct as it may be required to consult n
computer with c
systems is recognized as a service performed by experts in exercising due care. Due care does not i
public ac- require a
countants. obtaining specialty accreditation. l

10. (a) She may use the CPA designation on her busi- 14. (b) Under ruling 101 under Rule of Conduct 102, s
ness cards when she does not imply independence but when a CP A is acting as an expert witness, s/he t
shows should not a
her title and her employer. Therefore, answer (b) is act as an advocate but should give his/her position t
incor- based on e
rect. Answer (c) is incorrect because she may use the objectivity. The expert witness does this based on m
CPA special- e
designation on her business cards or company ized knowledge, training, and experience. n
transmittals if t
she does not imply independence. Answer (d) is 15. (c) The requirement is to determine which act is
incorrect generally prohibited. Answer (c) is correct because Ha w
because under the above situations, she can use the CP member in public practice shall not for a commission h
A rec- e
designation. ommend or refer to a client any product or service, or n
for a
11. (a) The requirement is to determine the activity commission recommend or refer any product or t
that service to be h
would most likely not impair a CPA's independence. supplied by a client, or receive a commission when the e
Ac-
counting and consulting services do not normally member or the member's firm perform for that client: m
impair (1) an e
independence because the member's role is advisory audit of a financial statement; or (2) a compilation of a m
in na- fi- b
ture (ET 191). Answers (b) and (c) are incorrect e
because r
management functions are being performed (ET 191).
An- e
swer (d) is incorrect because accepting a luxurious gift x
im- p
pairs a CPA's independence (ET 191). e
c
12. (a) The requirement is to identify the type of report t
that may be issued only by an independent accountant. s
An-
swer (a) is correct because AT 101 requires an t
accountant be h
independent for all attestation engagements. An a
attestation t
engagement is one in which the accountant expresses a
conclusion about the reliability of assertions which are a
the
responsibility of another party. A standard report on an t
examination of a financial forecast requires the auditor h
to i
express an opinion, which requires an accountant to be r
inde- d
pendent. Answer (b) is incorrect because CS 100
indicates p
that consulting services are fundamentally different a
from the r
attestation function, and therefore do not require t
indepen- y
dence of the accountant. Answers (c) and (d) are
incorrect w
because AR 100 indicates that an accountant who is not i
l
independent is not precluded from issuing a report on a l
compilation of financial statements.
u
13. (b) Per ET 56, due care requires a member to dis- s
charge professional responsibilities with competence e
and
diligence. Competence represents the attainment and t
main- h
tenance of a level of understanding and knowledge that e
en-
ables a member to render services with facility and f
acumen. i
It also establishes the limitations of a member's n
capabilities a
by dictating that consultation or referral may be n
required , c
when a professional engagement exceeds the personal i
al statement and the member's cause disclosure of the information would generally
compilation report does not disclose a lack of violate
independence; Rule 301 on confidential client information. Answers
or (3) an examination of prospective financial (b)
information." and (d) are incorrect because the CPA owns the
Answer (a) is incorrect because a member may working
purchase a papers.
product and resell it to a client. Any profit on sale
would not A.4. Responsibilities in Consulting Services
constitute a commission (ET 591).
21. (a) Types of consulting services include
16. (a) The principle of due care requires the member to
consulta-
tions, advisory services, implementation services,
observe the profession's technical and ethical standards,
transac-
strive continually to improve competence and the tion services, staff and other support services, and
quality of product
services, and discharge responsibility to the best of the services.
member's ability. Answer (b) is incorrect as the auditor
is
not required to examine all corroborating evidence
support-
ing management's assertions, but rather to examine
evidence
on a scope basis based on his/her consideration of
material-
ity and level of risk assessed. Answer (c) is incorrect as
the
auditor should be aware of the possibility of illegal
acts, but
an audit provides no assurance that all or any illegal
acts will
be detected. Answer (d) is not the best answer because
competence is derived from both education and
experience.
The principle of due care requires the member to strive
to
improve competence, however, attaining the proper
balance
of professional experience and formal education is not
a
criterion for exercising due care.

17; (d) The fact that a close relative of Kar works for
Fort impairs Kar's independence. Answer (a) is
incorrect
because the gift is of a token amount which does not
impair
Kar's independence. Answer (b) is incorrect because a
joint
financial investment must be material to impair
indepen-
dence, and this would generally not occur with respect
to a
retirement plan. Answer (c) is incorrect because
preparation
of the client's tax return is not a service that impairs
inde-
pendence.

18. (b) Independence was not required at the time the

loan was obtained, and because it is fully secured it is
grand-
fathered by 101-5. Answer (a) is incorrect because if
the

CP A is required to be independent, a mortgage loan

would
not be permitted even if it was fully secured. Answer
(c) is
incorrect because the CPA was not required to be
indepen-
dent of the client. Answer (d) is incorrect because the
CP A
was not required to be independent of the client.

19. (d) Both of the statements are incorrect; either

would violate Rule 301 on confidential client
information.
Answer (a) is incorrect because statement I also is
incorrect.
Answer (b) is incorrect because statement 11 also is
incor-
rect. Answer (c) is incorrect because statements I and
IT are

both incorrect. .
20. (c) Information in the CPA's working papers is
confidential and may not be disclosed except with the
cli-
ent's consent or by court order. Answer (a) is incorrect
be-