Book 1 Random Notes Flashcards
Can practioner keep client record?
Yes, they must return all client records, but can keep copies of the records
Can a practioner represent conflicting interests with a client
Yes, only provided that the affected client waives the conflict of interest by informed written consent
What type of restrictions and duties are placed on practioners in regards to advertising and solication
No form of public communications that contains false statement
- no uninvited written or oral solicitation before the IRS
Under which circumstances can a practitioner not give written advice concerning a tax issue?
- basing written advice on non factual assumptions
- unreason advice
- does not consider all the relevant facts
- take in account that the tax position might not get audited
According to the IRC code of 1986, what is the amount liable for a compensated preparer
1) First tier ( $1000 of 50% of income)
2) $5000 ( or 50% of income) -> willful and reckless understatement of income -> no disclosure, unrealistic
Will the CPA be liable if acted in good faith?
not required to obtain verfication of representations to made by the client
What are come requirements of a compensated tax return preparer?
1) sign, give address, and IRS identification number of the self
2) furnish the taxpayer with a copy of the return
3) main 3 year record
4) do not cash another person’s refund
How can a CPA be held liable for negligence?
For not practicing due care
What type of relationship does the CPA have with their client?
Fidiciary
What is the AICPA responsible for?
investigating potential disciplinary matters
What is NABSA responsible for?
requirements for candidates about different jursidiction and require the CPE program sponsors to provide program level content
Which act established the PCOAB?
Sarbanes-Olxey Act - > PCOAB is overseen by the SEC
What are some requirements for the PCOAB
1) 2 members must be former CPAs, remaining 3 not CPA, head chair must have not been practice for 5 yrs
2) conduct review of firms that audit over 100 issuers ( annual)
3) other smaller firms - every 3 years
What are some SOX requirements for firms?
1) registered accounting firms must maintain record for 7 years
2) second partner peer review
3) lead audit partner must rotate off audit every 5 years on a PUBLIC company engagement
How many ways can a CPA be liable to a client?
1) Fraud (scienter willful intent)
2) Gross/constructive fraud
3) Negligence
4) Breach of contract
What are the standards to prove gross/constructive negligence?
1) no actual scienter
2) fraud from SLOPPY performance
What are the standards to prove negligence?
1) CPA owed legal duty
2) cpa breached that contract
3) injury and damage done
how can a CPA be held liable for a tax client?
1) failing to timely file client return
2) advice client on tax deduction
3) not evaluating info for joint/separate returns
What are ultramare rules?
CPA can be held responsible for 1) fraud and gross negligence
for third parties
Under common law, CPA cannot be held liable to
third party including investors and creditors
privity - contractual relationship
When will CPA be held liable for ordinary negligence to a third party
1) services are primarily for the third party
2) if third party is injured
What is the securities act of 1933 created for?
IPOs -> requires filing of registration statement with the SEC
Under Section 11a of the 1933 act, what are some parameters?
- Anyone who acquire the security can sue the CPA
- may sue if fin statements omits material facts
- Plaintiff does not have to proof of burdern
- Do not have to prove reliance on untrue financial statements
- burden of proof is on the CPA
- simple negligence is enough
What is the SEC act of 1934
regulates traded changes ->third party must prove scienter , recovery limited to loss
What accountant-client privelege are there?
none on a federal level, only apply to state
What is needed to prove constructive fraud against the CPA?
- the plaintiff relied on the CPA misrepresentation
2. the cpa acted in a grossly negligent manner
