Prepare Test Your Knowledge
yourself of Professional Ethics
for eriodically, the Jowm^/publishes questions
college. American
on ethics topics that have been raised by
Institute of CPAs members. This set
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82 JOURNAL It/" ACCOUNTANCY
deals with Rule 101—hidependence. Rule 502—
Advertising ;uid Other Forms of Soiici-
and use oi the CPA designation.*
QUESTIONS
1. A member is performing an audit
for a client. May the member iJso issue
nionthly compilation reports without
impairing Iiis or her independence?
a Yes a No
2. May a member perform accounting
or bookkeeping services for an em-
ployee benefit plan and also perform
an audit for the plan?
• Yes • No
3. A member owns a building and
leases a portion of the space to an au-
dit chent. The income from the lease
is not material to the member. Is the
member independent?
• Yes • No
4. C'an a CPA advertise?
• Yes a No
5. May a member in industry use the
C'PA designation in connection with
financial statements and correspon-
dence of the members employer? May
the member also use the CPA designa-
tion along with employment title on
his or her business cards?
a Yes a No
6. May a member list other designa-
tions, in addition to CPA, on a letter-
head or business card?
• Yes D No
ANSWERS
1. Yes. a member may issue both
monthly compilation reports and per-
form an audit for the same client. Per-
formance of compilation services does
not impair a members independence.
See ET section 101.05 of the Code of
Profession;il Conduct.
2. Yes, a member may provide ac-
counting or bookkeeping services for
a client and be considered indepen-
dent, provided the member complies
with Interpretation 101-3—Account-
ing Services (ET section 101.05) of
the Code of Professional Conduct.
The member may wish to consult
with the Department of Labor.
3. Yes. Leasing property to a client re-
sults in an indirect financial interest in
that client. Therefore, a members inde-
pendence would be considered to be
impaired if the indirect financial interest
in tbe client is material to the member.
4. Yes. as long as the advertisement or
other form of solicitation is not false,
misleading or deceptive. Solicitation
by the use of coercion, overreaching
or harassing conduct is prohibited. See
ET section 502.01 and 502.03.
5. Yes. However, if die member uses the
CPA designation in a manner to imply
that he or she is independent of the em-
ployer, die member would be knowingly
misR'presenting facts in violation of Rule
102-—Integrity and Objectivity. See
ET sections 102.01 and I91.13O-.131,
6. Yes. the Code of Professional CA)n-
duct does not prohibit simultaneous
practices by a member licensed or cer-
tified in more than one profession.
The member may wish to consult the
rules of the appropriate state hoard of
accountancy •
•This quiz h based on rosponses of tlit- AlC^PA
professional ethics division staff to nit'nibcrs' in-
quiries. It is not a pronouncement of the pro-
tVssioiiil ethics e.xocutive committee nor does ic
purport to set forth an ofTiei.iI position of" the
AICPA. In addition, the questions and answers
do not address the requirements of other regu-
latory bodies, such as the state boards of
accountancy and the Securities and Exchange
Commission, whose positions may differ from
those of the AICHA.
Edicetl by Melanie H. Donenfeld, tecluiic;il in.»i-
ager. in the AICPA professional ethics division.