AICPA Conceptual Framework.
This threat arises when a CPA has a close personal relationship with a key employee at the client company.
What is Familiarity Threat?
This term refers to having the necessary technical qualifications for professional services and ensuring proper supervision and evaluation of the work's quality
What is competency?
This component of the fraud triangle refers to the circumstances that allow fraud to occur, or ‘open the door’ to fraud.
What is opportunity?
This metric, derived from the financial statements, is typically the most important benchmark for company management and it may be compared to results from the prior year and other accounting periods.
What is earnings per share?
This entity requires all public companies to have an independent auditor’s report in annual financial statements.
What is the Securities & Exchange Commission (SEC)?
This term refers to maintaining a questioning mindset and validating explanations with underlying documentation when auditing a client.
What is Professional Skepticism?
The securities and exchange commission lists three conditions that compromise independence: 1) Acting as Management, 2) Reviewing your own work, and this.
What is Advocacy for a Client?
When a CPA's spouse or significant other holds significant stock in a client company, this safeguard should be applied to maintain independence.
What it "remove them from the engagement?"
CPAs offering attest services are prohibited from accepting this type of payment for recommending services to clients.
What is a commission or referrel fee?
This component of the fraud triangle relates to the attitudes one adopts in order to justify fraud.
What is rationalization?
This term describes a type of accruals that managers have control over and may more easily use to manipulate earnings.
What are discretionary accruals?
This entity oversees the audits of nonpublic companies.
What is the AICPA Auditing Standards Board (ASB)?
*just AICPA will be accepted
During an audit, this term describes the analytical process used to identify potential manipulation by comparing financial data across periods.
What is horizontal analysis?
Jane, a forensic accountant, was hired as an expert witness to support ABC Corp.’s point of view against ZYX Inc. Jane cannot perform attest procedures for ZYX inc. because of this threat to independence.
What is Advocacy Threat?
Sharing CPA Exam Questions and Answers is an example of breaching this ethical rule/ concept.
“Everyone else is doing it” is an example of this.
What is rationalization?
This deceptive practice involves taking large write-offs in a single period to pave the way for future profitability.
What is "big bath"?
When an auditor is unable to issue an opinion for whatever reason, they will do this.
What is disclaim an opinion?
This entity sets auditing standards for publicly listed entities and reviews audits performed by CPAs to help ensure quality audits are performed in compliance with those standards.
What is the PCAOB?
This threat to independence occurs when a client, dissatisfied with the audit findings, threatens to hire different auditors in future, potentially influencing the current audit's conclusions
What is undue influence threat?
Abba CPAs violated this ethical rule when they purchased a billboard advertising their firm as the “best CPA firm in the US”.
What is Advertising and Solicitation?
Ineffective internal controls or monitoring by management are related to this side of the fraud triangle.
What is opportunity?
Earnings management can be carried out in two ways – via changes in 1) accounting policies and 2) this.
What are real actions (or operational decision manipulation)?
This type of opinion is issued when financial statements are ‘clean’, or prepared in accordance with GAAP without any significant issues of note (PCAOB).
What is unqualified?
Under SOX, this type of service cannot be provided if audit services are provided, unless pre-approved by the audit committee.
What are tax services?
This is the first step in the AICPA’s Conceptual Framework Process.
What is "identify threats?"
Auditors Inc. violated ethical standards by employing this compensation structure, which rewards them with $1 million only if their client attains specific stock price targets.
What are contingency fees?
AU-C240 requires the auditor to perform this during the audit.
What is Fraud Risk Assessment
Surveys show that, when choosing between 1) accounting policy manipulation and 2) operating decision manipulation, practitioners believe this category of earnings management is more acceptable.
What is operating decision manipulation?
If significant conflict exists with management or the auditor decides that management cannot be trusted, then this may be justified.
What is withdraw from the engagement?
This term means to present the true economic substance of transactions, rather than just following the ‘letter of the law’.
What is "representational faithfulness?"