Mod 23 Professional And Legal Responsibilities Handout + Highlighted Text Flashcards

Question

Confidential client information: If subpoenaed in a court case, accountant must...

Answer 1

Testify unless in a state that recognizes the accountant client Privilege

Answer 2

A state CPA society quality control review panel

Answer 3

Belong to accountant, not the client

Answer 4

Same rules of confidentiality apply

Answer 5

3rd parties

Answer 6

There is no privity

Answer 7

No direct or contractual relationship between the accountant and the 3rd party

Answer 8

1 Third Party Beneficiary Rule or Intended Users 2 Ultramares Rule (minority view) 3 foreseen users and any foreseen class of users (majority view)

Answer 9

Accountants are liable for negligence if they had no reason to know third party would rely on their work

Answer 10

1 if they were in privity with them or 2 they knew specific name of 3rd party that would rely on their Work

Answer 11

Make accountants liable for negligence to foreseen users and any foreseen class of users (Majority view)

Answer 12

1 accountants are liable for negligence to 3rd parties that are members of a group accountant knew would rely on their work 2 thus it's not necessary to know specific name of 3rd party, just That they are member of group that would rely on accountant's work

Answer 13

Privity is Only a defense to negligence actions by 3rd parties 2) no defense to fraud, '33, '34

Answer 14

1 A registration statement filed with the SEC 2 containing audited financial statements prepared by accountants For public sales of securities in interstate commerce

Answer 15

Suits for money damages under section 11 of '33

Answer 16

1 acquired stock, need not be initial purchaser 2 suffered loss 3 material misrepresentation or omission of fact in the FS

Answer 17

Need be proven by purchaser in securities act of 1933

Answer 18

It was not his fault (due diligence defense)

Answer 19

1 one year of discovery of misrepresentation and 2 within 3 years of the offering date

Answer 20

Willfully made misrepresentation

Answer 21

1 stock sold on national stock exchanges in interstate commerce And 2 requires reports and financial statements prepared by public accountants

Answer 22

``` 1 Purchaser of stock 2 suffered a loss 3 material misrepresentation or omission of fact in CPA's report 4 must show Scienter 5 must show reliance ```

Answer 23

1 Intent to deceive or bad faith is not enough 2 negligence is not enough

Answer 24

Revoked by state as disciplinary measure

Answer 25

A crime punishable by imprisonment for more than one year

Answer 26

A fraudulent tax return for client or self

Answer 27

Fails to file his tax return

Answer 28

Sanction those that are less serious using less serious remedies

Answer 29

Still expected to follow profession's Code of Professional Conduct

Answer 30

Revoke or suspend a CPA from practicing before the SEC 2) if CPA willfully violated federal securities laws or regulations or Has acted unethically or unprofessionally

Answer 31

Auditor for public company

Answer 32

Conviction of felony or misdemeanor in which moral turpitude was involved

Answer 33

Registered firms for violations of standards of performance

Answer 34

Inspections by PCAOB staff

Answer 35

Be inspected each year

Answer 36

Be inspected every 3 years

Answer 37

Other third parties

Answer 38

1 Third party who accountant knew would rely on FS ``` 2 or member of limited class that accountant knew would rely on FS for specified transaction ```

Answer 39

Accountant is liable to foreseen third parties for ordinary negligence

Answer 40

That accountants should not be exposed to liability in indeterminate amount to indeterminate class

Answer 41

All parties whether foreseen or not

Answer 42

Any party that accountant could reasonably foresee would receive financial statements and use them

Answer 43

Foreseeable parties for negligence

Answer 44

The effective date of the registration statement

Answer 45

Made for review of events subsequent to balance sheet date up Until making registration statement under securities regulation

Answer 46

``` 1 audit was performed with due care 2 misstatement was immaterial 3 plaintiff had prior knowledge of misstatement 4 plaintiff did not rely on information 5 misstatement was not cause of loss ```

Answer 47

1 audit was performed with due care 2 misstatement was immaterial 3 plaintiff had prior knowledge of misstatement 4 misstatement was not cause of loss

Answer 48

Plaintiff did not rely on the information

Answer 49

Client agrees to delegation

Answer 50

It is a contract for personal services unless client agrees to delegation

Answer 51

Accountants' professional liability (malpractice) insurance covers Their negligence

Answer 52

Protects client from accountant's fraud

Answer 53

Subsequent to date of auditor's report 2) effective date of registration for reports filed with SEC

Answer 54

1 detect material illegal acts 2 identify related party transactions and 3 evaluate ability of firm to continue as going concern

Answer 55

Inform audit committee or board of directors

Answer 56

Report this to the board of directors

Answer 57

Furnish SEC with copy of auditor's report to board and/or resign from audit

Answer 58

Auditor's failures under the Private Securities Litigation Reform Act

Answer 59

Civil suits for these reports to SEC under the Private Securities Litigation Act

Answer 60

1933 act and 1934 act

Answer 61

Reduce lawsuits against accounting firms and issuer's of securities

Answer 62

Law governs private litigation

Answer 63

Frivolous purposes

Answer 64

1 Providing stringent pleading requirements for many private actions under 1934 Act 2 Awards costs and attorneys' fees against parties failing to fulfill These pleading requirements

Answer 65

Liability of defendants is generally proportionate to their degree Of fault

Answer 66

Not act knowingly, they owe 15% Acted knowingly, they owe the full amount

Answer 67

Public Company Accounting Reform and Investor Protection Act

Answer 68

Willful nonretention of audit and review workpapers

Answer 69

5 years, in some cases 7 years

Answer 70

Falsifying of records to impede investigations

Answer 71

20 years or both

Answer 72

Audits a public company

Answer 73

Attorneys, consultants and company employees

Answer 74

Periodically update its rules on details of retaining workpapers And other relevant records connected with audits or reviews

Answer 75

Nonprofit organization 2) not a federal agency

Answer 76

Violation of 1934 Act with its penalties

Answer 77

1 two members must be or have been CPAs 2 three members cannot be or cannot have been CPAs 3 none of Board members may receive pay or profits from CPA firms

Answer 78

1 register and conduct inspections of public accounting firms 2 set standards on auditing, quality control, independence or preparation of audit reports

Answer 79

Peer reviews for part of CPA firm's practice that involves audits Of issuers

Answer 80

Every three years

Answer 81

In addition to regular inspections

Answer 82

Existing professional groups or new groups

Answer 83

Second partner review and approve each audit report

Answer 84

Examination of internal control along with description of material weaknesses

Answer 85

1 principal executive officer 2 principal accounting officer 3 principal financial officer or 4 controller

Answer 86

Broad code of ethics covering all officers and directors

Answer 87

Disclose the reasons why

Answer 88

Bankruptcy law to discharge that liability

Answer 89

Material violations by company or its officers, directors or agents Of securities laws or breach of fiduciary duties

Answer 90

Chief legal officer or chief executive officer

Answer 91

Report the evidence up the latter to those charged with governance

Answer 92

4 business days after the date event occurs

Answer 93

Resigned or refused to stand for reelection

Answer 94

1 disagreement with company's practices 2 operations or policies or 3 if director has been removed for cause

Answer 95

1 his or her name 2 description of material terms of employment agreement between company and officer

Answer 96

Other services relating to financial statements or accounting records

Answer 97

Systems design and/or implementation

Answer 98

Outsourcing services

Answer 99

Broker dealer services

Answer 100

Tax planning for potentially abusive tax shelters

Answer 101

Cases by case basis services of audit firm for audit client

Answer 102

Audit committee

Answer 103

Primary responsibility for issuer's audits 2) serving more than 5 consecutive years (must be rotated)

Answer 104

Chief Administrative Officer

Answer 105

Previous year, audit firm may not audit public company

Answer 106

Off balance sheet transactions

Answer 107

Reconciled with figures done under GAAP

Answer 108

Tampering and destruction of audit work papers

Answer 109

Whistle blowers from retaliation because of participation in proceedings against firms in securities fraud

Answer 110

Directly to audit committee, providing info anonymously and confidentially

Answer 111

Officers or directors with few exceptions

Answer 112

All material corrections noted by CPA firms

Answer 113

Practicing before the SEC

Answer 114

Promulgate new regulations in the future

Answer 115

Pro forma financial results and GAAP

Answer 116

From auditors to audit committee

Answer 117

They have adopted a code of ethics

Answer 118

Financial experts who serve on company's audit committee

Answer 119

Fraudulently manipulate or mislead auditors

Answer 120

Certify financial statements filed with the SEC

Answer 121

Fairly stated in all material respects

Answer 122

The report

Answer 123

Omit or misstate any material facts to the best of their knowledge

Answer 124

Internal control system in place to allow honest certification of financial statements

Answer 125

Adequate procedures to uncover illegal activity of client 2) proportional to the degree of responsibility

Answer 126

1 One type of responsibility is rough the auditors own carelessness 2 another is assisting in improper activities they are aware of

Answer 127

1 Federal tax return 2 exempt organizations 3 gift 4 estate tax returns

Answer 128

Income, employment, excise

Answer 129

Compensated and can be implied or explicit

Answer 130

Accountant who prepares, individual return for company president And performs the audit, doing the taxes for no additional fee

Answer 131

A friend, neighbor or relative free of charge, even though person receiving return receives a gift of gratitude from the taxpayer

Answer 132

1 typing, 2 reproducing or 3 other mechanical assistance in preparing a return

Answer 133

He or she is regularly employed by that employer

Answer 134

1 existence 2 character 3 or amount of schedule

Answer 135

The return takes a position the CPA could not recommend

Answer 136

Signing as a preparer

Answer 137

Verification on information furnished by client or third party (No review or audit needs to be performed)

Answer 138

Reasonable inquiries if the information appears incorrect

Answer 139

The client's past returns

Answer 140

1 relevant to return being prepared 2 not confidential

Answer 141

1 may be made where data is missing 2 can use estimates when impracticable to obtain exact information

Answer 142

1 becoming aware of material error in previously filed return or 2 upon becoming aware of client's failure to file required return

Answer 143

Recommend measures to be taken 2) not obligated to inform IRS of error without client's permission, except where required by law

Answer 144

Consider whether to keep professional relationship with client or withdraw

Answer 145

1 inform client promptly and recommend measures to be taken

Answer 146

Consider whether to withdraw from representing the client

Answer 147

No standard format required, but written preferred

Answer 148

1 preparing and filing documents 2 communication with IRS 3 rendering written advice w/respect to entity 4 representing client at conferences, hearings and meetings

Answer 149

1 transactions | 2 plan or arrangement

Answer 150

1 CPAs 2 attorneys 3 enrolled agents

Answer 151

1 enrolled actuaries 2 enrolled retirement plan agents 3 registered tax return preparers

Answer 152

Enrolled agents

Answer 153

Registered tax return preparers

Answer 154

1 At least 18 years old and 2 demonstrates competence in tax matters by passing an examination

Answer 155

Service and experience

Answer 156

Preparing and signing tax returns and claims for refund And other documents for submission to IRS

Answer 157

1 revenue agents 2 customer service representatives 3 or similar employees of IRS

Answer 158

Signed the tax return or claim for refund for the taxable year under examination

Answer 159

1 appeals officers 2 revenue officers or 3 counsel

Answer 160

Tax advice to client

Answer 161

1 prepare tax return 2 claim refund or 3 other documents submitted to IRS

Answer 162

1 register with IRS 2 pay an annual fee 3 obtain a preparer tax identification number

Answer 163

Preparer Tax Identification Number

Answer 164

Signing tax payers returns or claims for refund

Answer 165

1 PTIN registration 2 enrollment 3 renewal processes 4 oversee future testing and continuing education requirements

Answer 166

Before the IRS

Answer 167

Before the IRS in limited situations

Answer 168

Immediate family

Answer 169

Represent their employers

Answer 170

Represent a corporation

Answer 171

Represent the partnership

Answer 172

1 trustees 2 receivers 3 guardians or 4 executors

Answer 173

Believes in good faith and on reasonable grounds that records and information are privileged

Answer 174

Promptly return the client's records

Answer 175

All documents and electronic media provided to the practitioner

Answer 176

The practitioner to retain records

Answer 177

1 fact of noncompliance 2 consequences for such non compliance

Answer 178

Clients and Department of Treasury

Answer 179

1 engaging 2 supervising 3 training and 4 evaluating the person

Answer 180

1 unconscionable fee and 2 generally may not charge a contingent fee for preparing original return

Answer 181

1 IRS examination of original return or amended return 2 or claim for refund 3 or judicial proceedings arising under the code

Answer 182

1 fixed fees for routine services 2 hourly rates 3 ranges of fees for specific services 4 fee charged for initial consultation

Answer 183

30 days after the last date the fee schedule was published

Answer 184

False, fraudulent or coercive statement or claim

Answer 185

"Certified" 2) employee/employer relationship with the IRS

Answer 186

Best practices in providing advice in preparing or assisting in preparation of submission to IRS

Answer 187

Endorse nor negotiate any federal tax refund check issued to client By the government

Answer 188

1 document 2 affidavit or 3 other paper that is frivolous

Answer 189

Impeding the administration of federal laws

Answer 190

1 Without basis in fact or law 2 Or espouses position courts have held frivolous

Answer 191

1 Any opportunity to avoid penalties by disclosure 2 and requirements of adequate disclosure

Answer 192

1 covered opinions or 2 all other written advice

Answer 193

Taxpayers may rely on a practitioner's covered opinion to avoid penalties

Answer 194

Returns done for compensation

Answer 195

The tax payer no later than when preparer presents copy of return to taxpayer for signing

Answer 196

1 social security number of preparer and 2 identification number of preparer's employer or partnership

Answer 197

1 listing of return prepares 2 and place of employment for 3 years

Answer 198

Endorsed or negotiate a refund check issued to a taxpayer

Answer 199

1 for quality or peer review 2'under an administrative order by a regulatory agency