08 Federal Laws and Regulations

Question 1

Under what provisions of the Securities and Exchange Commission can accountants be criminally liable for any willful violation?

Answer 1

Any provision of the 1933 Act
Any provision of the 1934 Act

Question 2

What does the acronym “FUTA” stand for?

Answer 2

Federal Unemployment Tax Act

Question 3

What purpose does the Federal Unemployment Tax Act serve?

Answer 3

To provide unemployment compensation benefits to workers who lose jobs and can’t find new ones

Question 4

Who pays Federal Unemployment Tax Act (FUTA) taxes?

Answer 4

The employer (only) pays these taxes.

Question 5

List the eligibility requirements for unemployment benefits.

Answer 5

Involuntarily terminated
Available and looking for work
Not receiving disqualifying income

Question 6

What does the acronym “ACA” stand for?

Answer 6

Affordable Care Act, more commonly known as the PPACA or “Obamacare”

Question 7

Percentage of ACA’s Medicare Surtax on unearned income

Answer 7

3.8% (of lesser of NII or excess of AGI over AGI thresholds)

Question 8

How is the additional Medicare tax calculated?

Answer 8

0.9% on earned income surpassing certain thresholds.

Question 9

What is the burden of proof in a criminal case?

Answer 9

Beyond a reasonable doubt

Question 10

What is the ACA cut-off level for applicable large employers subject to employer mandate penalty?

Answer 10

50 FTEs

Question 11

What is the primary test to classify workers?

Answer 11

Control test

Question 12

List the four factors fleshing out the control test.

Answer 12

More likely an employee the more of these are the case:
1. Generally on the job 40 hours a week
2. Works primarily for this principal
3. Uses the principal’s tools, and
4. Earns most of his or her income from this principal.

Question 13

What are the three categories of IRS test to distinguish between employees and independent contractors?

Answer 13

1. Behavioral control
2. Financial control
3. Relationship types

Question 14

Three reasons why an employer might wish to label an employee as an independent contractor.

Answer 14

Any three of these: Less liability for worker’s income taxes, FUTA taxes, FICA taxes, overtime and minimum wages under FLSA, discrimination, FMLA benefits, and for injuries caused by for worker’s torts.

Question 15

Name three of the ten essential health benefits.

Answer 15

Any three of the following: outpatient services (including diagnosis, observation, consultation, treatment, intervention, and rehabilitation services), emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, prescription drugs, rehabilitative services and devices, laboratory services, preventive and wellness services, and pediatric services.

Question 16

True or False: The Securities and Exchange Commission can bring criminal charges against companies that have a filing with the agency.

Answer 16

False.
The Commission cannot bring criminal charges but refers these cases to the Department of Justice, which files and prosecutes the cases.

Question 17

List the elements of a Securities Exchange Act §18(a) claim.

Answer 17

False statement
In a “filed” document
Materiality
Purchase or sale
“Eyeball” reliance
Causation
Damages

Question 18

What is the purpose of the Securities Exchange Act §10(b)?

Answer 18

This section punishes fraud in purchase or sale of securities in violation of SEC rules, like 10b-5.

Question 19

When is an accounting firm liable regarding securities with which it has done work?

Answer 19

it is liable only for that part of the registration statement (financial statements) that it prepared.

Question 20

What elements must a plaintiff prove to win a §11 claim under the Securities and Exchange Act?

Answer 20

The plaintiff must prove:
A false statement or omission of fact appeared in a registration statement.
The misstatement or omission was material.
Plaintiff bought securities that were issued under the defective registration statement.
Plaintiff suffered damages.

Question 21

List the Securities and Exchange Act §12(a)(1) remedies to violations of §5 of the Act.

Answer 21

Sale of unregistered securities
Failure to deliver prospectus
Use of inadequate prospectus
Offer before filing registration statement

Question 22

List the elements of a Securities Exchange Act §12(a)(1) lawsuit.

Answer 22

Defendant violated Section 5.
Defendant was a “seller.”
Damages

Question 23

List the elements that a plaintiff must prove in a Securities Exchange Act §12(a)(2) lawsuit.

Answer 23

The plaintiff must prove:
Misrepresentation or omission;
Materiality;
Tracing;
Defendant is a “seller”; and
Damages.

Question 24

What are the major provisions of the Securities Exchange Act of 1934?

Answer 24

It created the Securities and Exchange Commission.
It created a periodic reporting system.
It punishes fraud.
It regulates the securities business.

Question 25

List the types of required reports described in the Securities Exchange Act.

Answer 25

10-Ks; 10-Qs; 8-Ks

Question 26

List the elements of a Securities Exchange Act §10(b) liability.

Answer 26

Misstatement
Materiality
Reliance
Causation
Purchase or sale
Damages

Question 27

What is the key to assuming liability under the Securities Exchange Act §18(a)?

Answer 27

False statement in a “filed document”

Question 28

What are the potential penalties for innocent misclassification?

Answer 28

$50 fine for each missing W-2; fine of 1.5% of wages for income taxes not withheld, plus 40% of employee’s FICA taxes and 100% of the employer’s matching FICA contribution; and 0.5% penalty on the unpaid tax liability for each month up to 25% of the total tax liability.