Question

The AICPA's Code of Professional Conduct includes a form of Organization and Name Rule. It states that a member may practice public accounting only in a form or organization allowed by law or regulation that conforms with resolutions of the AICPA Council. Assume that a CPA firm is part of an alternative practice structure (APS) in which the firm is a subsidiary of another entity. Which attribute prevents a member of the AICPA from practicing public accounting in the APS? The parent performs back-office functions for the firm. The parent leases employees to the firm. Non-CPAs own a majority of the firm's financial interests. Substantially all revenues of the firm are paid to another entity.

Answer 1

1. As per the AICPA Code of Professional Conduct, can practice in an APS provided it confirms to the AICPA's resolutions. The resolution requires CPAs to own a majority of the financial interests in a firm engaged to provide attest services to the public.
Hence the correct answer is Option 3. Non CPAs own a majority of the financial interests.
This is an attribute which prevents the AICPA member from practicing public accounting in the APS.

2. The correct answer is Option 2. - A CPA in public practice providing auditing and other attestation services.
As per the AICPA Code of Professional Conduct, one of the principles listed in the code is Independence. As per the code, a member in public practice should be independent in fact and appearance when providing auditing and other attestation services.

3. The given case is an example of employee fraud. The responsibility of the auditor in this scenario is to communicate the fraud to the appropriate level of Management. Had the fraud been perpetrated by the management itself, the auditor would need to report to the TCWG.
Hence the correct answer is Option 2. The auditor should bring the transaction to the attention of an appropriate level of management.

4. As per the SSAE, a practitioner is required to comply with presumptively mandatory requirements in all cases to which the requirement applies. However, in exceptional cases, the practitioner may depart from the requirement provided the reason for the same is documented.
If the SSAE provides that a procedure or action is one that the practitioner should consider, the terms 'should consider' should be interpreted as the procedure or action is presumptively required, whereas carrying them out is not.
Hence the correct answer is Option 2. the consideration of the procedure or action is presumptively required, whereas carrying out the procedure or action is not.