According to the ethical standards of the profession, a CPA's independence would most likely be impaired if the CPA:
a. Accepted any gift from a client.
b. Became a member of a trade association that is a client.
c. Contracted with a client to supervise the client's office personnel.
d. Served, with a client bank, as a co-fiduciary of an estate or trust.
Correct Ans - C
Under which of the following circumstances may a CPA charge fees that are contingent upon finding a specific result?
a. For an examination of prospective financial statements.
b. For an audit or a review if agreed upon by both the CPA and the client.
c. For a compilation if a third party will use the financial statement and disclosure is not made in the report.
d. If fixed by courts, other public authorities, or in tax matters if based on the results of judicial
proceedings.
Correct Ans - d
Which of the following circumstances is a defense to an accountant's liability under Section 11 of the Securities Act of 1933 for misstatements and omissions of material facts contained in a registration statement?
a. The absence of scienter on the part of the accountant.
b. The absence of privity between purchasers and the accountant.
c. Due diligence on the part of the accountant.
d. Nonreliance by purchasers on the misstatements.
Correct Ans - C
Which of the following promises is supported by legally sufficient consideration and will be enforceable?
a. A person's promise to pay a real estate agent $1,000 in return for the real estate agent's earlier act of not charging commission for selling the person's house.
b. A parent's promise to pay one child $500 because that child is not as wealthy as the child's sibling.
c. A promise to pay the police $250 to catch a thief.
d. A promise to pay a minor $500 to paint a garage.
Correct Ans - d
Under the Negotiable Instruments Article of the UCC, which of the following instruments meets the negotiability requirement of being payable on demand or at a definite time?
a. A promissory note payable one year after a person's marriage.
b. A promissory note payable June 30, year 1, whose holder can extend the time of payment until the following June 30 if the holder wishes.
c. A promissory note payable June 30, year 1, whose maturity can be extended by the maker for a reasonable time.
d. An undated promissory note payable one month after date.
Correct Ans - b
Thorn purchased a used entertainment system from Sound Corp. The sales contract stated that the entertainment system was being sold "as is." Under the Sales Article of the UCC, which of the following statements is (are) correct regarding the seller's warranty of title and against infringement?
I. Including the term "as is" in the sales contract is adequate communication that the seller is conveying the entertainment system without warranty of title and against infringement.
II. The seller's warranty of title and against infringement may be disclaimed at any time after the contract is formed.
a. I only.
b. II only.
c. Both I and II.
d. Neither I nor II.
Correct Ans - d
