Book 1 Random Notes

Question 1

Can practioner keep client record?

Answer 1

Yes, they must return all client records, but can keep copies of the records

Question 2

Can a practioner represent conflicting interests with a client

Answer 2

Yes, only provided that the affected client waives the conflict of interest by informed written consent

Question 3

What type of restrictions and duties are placed on practioners in regards to advertising and solication

Answer 3

No form of public communications that contains false statement
- no uninvited written or oral solicitation before the IRS

Question 4

Under which circumstances can a practitioner not give written advice concerning a tax issue?

Answer 4

1. basing written advice on non factual assumptions
2. unreason advice
3. does not consider all the relevant facts
4. take in account that the tax position might not get audited

Question 5

According to the IRC code of 1986, what is the amount liable for a compensated preparer

Answer 5

1) First tier ( $1000 of 50% of income)

2) $5000 ( or 50% of income) -> willful and reckless understatement of income -> no disclosure, unrealistic

Question 6

Will the CPA be liable if acted in good faith?

Answer 6

not required to obtain verfication of representations to made by the client

Question 7

What are come requirements of a compensated tax return preparer?

Answer 7

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

Question 8

How can a CPA be held liable for negligence?

Answer 8

For not practicing due care

Question 9

What type of relationship does the CPA have with their client?

Answer 9

Fidiciary

Question 10

What is the AICPA responsible for?

Answer 10

investigating potential disciplinary matters

Question 11

What is NABSA responsible for?

Answer 11

requirements for candidates about different jursidiction and require the CPE program sponsors to provide program level content

Question 12

Which act established the PCOAB?

Answer 12

Sarbanes-Olxey Act - > PCOAB is overseen by the SEC

Question 13

What are some requirements for the PCOAB

Answer 13

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

Question 14

What are some SOX requirements for firms?

Answer 14

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

Question 15

How many ways can a CPA be liable to a client?

Answer 15

1) Fraud (scienter willful intent)
2) Gross/constructive fraud
3) Negligence
4) Breach of contract

Question 16

What are the standards to prove gross/constructive negligence?

Answer 16

1) no actual scienter

2) fraud from SLOPPY performance

Question 17

What are the standards to prove negligence?

Answer 17

1) CPA owed legal duty
2) cpa breached that contract
3) injury and damage done

Question 18

how can a CPA be held liable for a tax client?

Answer 18

1) failing to timely file client return
2) advice client on tax deduction
3) not evaluating info for joint/separate returns

Question 19

What are ultramare rules?

Answer 19

CPA can be held responsible for 1) fraud and gross negligence
for third parties

Question 20

Under common law, CPA cannot be held liable to

Answer 20

third party including investors and creditors

privity - contractual relationship

Question 21

When will CPA be held liable for ordinary negligence to a third party

Answer 21

1) services are primarily for the third party

2) if third party is injured

Question 22

What is the securities act of 1933 created for?

Answer 22

IPOs -> requires filing of registration statement with the SEC

Question 23

Under Section 11a of the 1933 act, what are some parameters?

Answer 23

1. Anyone who acquire the security can sue the CPA
2. may sue if fin statements omits material facts
3. Plaintiff does not have to proof of burdern
4. Do not have to prove reliance on untrue financial statements
5. burden of proof is on the CPA
6. simple negligence is enough

Question 24

What is the SEC act of 1934

Answer 24

regulates traded changes ->third party must prove scienter , recovery limited to loss

Question 25

What accountant-client privelege are there?

Answer 25

none on a federal level, only apply to state

Question 26

What is needed to prove constructive fraud against the CPA?

Answer 26

1. the plaintiff relied on the CPA misrepresentation

2. the cpa acted in a grossly negligent manner