1.

Why the does the CPA profession deemed it essential to promulgate

ethical standards and establish means for ensuring their
observance?
It is a distinguishing mark that every certified public
accountant must act in accordance with the interest of the
public. Thus, it is their professional responsibility to
satisfy the interest not of an individual or their employer
but of those users not in privy of the two parties. In
addition, It is important to establish means to ensure that
standards are not being violated when practicing their
profession. These means will identify threats to compliance
and evaluate if it the job is workable.
2. Cite a news article involving professional accountant’s
malpractice. Identify the affected Code of Ethics fundamental
Principles and propose possible course of action. (20 pts)

3. An engagement is to be classified as an Assurance Engagement if

and only if the following elements are present:
– (a) A three party relationship involving a practitioner, a
responsible party, and intended users;

– (b) An appropriate subject matter;

– (c) Suitable criteria;

– (d) Sufficient appropriate evidence; and

– (e) A written assurance report in the form appropriate to a

reasonable assurance engagement or a limited assurance
engagement.

Can the three parties of the engagement merge into one person, or
two person? Decide and support your answer/s. (10 pts)

4. Define the following (5 pts each)

– Professional Skepticism
 – Assurance Engagement Risk

– Suitable criteria

– Audit Risk

– Detection Risk

– Business Risk

– Generally Accepted Auditing Standard

5. Identify which Code of Ethics’ Fundamental Standards are

affected? Explain and support your answer. (5 pts each)

A. Juanita Garcia, CPA, refused to be associated with a

client’s financial statements after the client declined to
correct a material misstatement. Garcia later contacted
James Jordan, CPA, retained by the client to replace
Garcia, and informed Jordan of the misstatement.
B. Brianna Lopez, CPA, agreed to review loan applications for
First Charter Bank, an audit client. The bank granted or
denied the loans on the basis of Lopez’ recommendations
C. In defense of a lawsuit alleging negligence, Melissa
Franklin, CPA, explained that she was not an expert in
commodities trading and therefore did not detect the
accounting fraud perpetrated by her client, a commodities
broker.
D. Rudy Boesch, CPA, accepted an audit engagement for a fixed
fee of $27,000 plus 1% of audited net assets.
E. Ben Williams, CPA, issued an unqualified opinion on a set
of financial statements, even though he felt uncomfortable
about an accounting practice applied by the client.
Although the practice in question was in accordance with
GAAP, it increased net income significantly above a level
that Williams considered reasonable.