Professional Responsibilities

Question 1

This engagement helps the client be more efficient with personnel and resources in order to accomplish their goals.

Answer 1

Professional Responsibilities - Reg

Question 2

Competence; Due Professional Care; Planning; Supervision; Obtain Sufficient Data; Serve Client Interest; Agreement: Written or Oral; Communicate w/ Client; Objectivity NOT REQUIRED: Independence

Answer 2

Professional Responsibilities - Reg

Question 3

Express: Contract specifies what accountant will do Implied: Accountant performs without negligence

Answer 3

Professional Responsibilities - Reg

Question 4

DUTY - DAMAGES - RESULT Duty - Accountant must have had duty to perform with due care exercised by an average accountant. Damages - The client experienced actual damages. Result/Causation - The damages were as a result of the negligence.

Answer 4

Professional Responsibilities - Reg

Question 5

It is not the accountant’s job to find fraud and they are not normally liable for not detecting it

Answer 5

Professional Responsibilities - Reg

Question 6

When a normal audit following GAAS would have detected the fraud. When an accountant agrees to take on more responsibility than what is required under a normal audit. When accountant words the audit report to indicate this greater responsibility.

Answer 6

Professional Responsibilities - Reg

Question 7

Misrepresentation - Accountant misrepresents MATERIAL fact(s) Scienter - Accountant commits scienter Damages - Client has actual damages. Reasonable Reliance - Client reasonably relied on the misinformation.

Answer 7

Professional Responsibilities - Reg

Question 8

To report something knowing it is false. Characterized by reckless disregard for truth Intentionally conceal facts

Answer 8

Professional Responsibilities - Reg

Question 9

Lack of privity defends against contract breach and negligence. NOT a defense against fraud.

Answer 9

Professional Responsibilities - Reg

Question 10

Accountants are not liable to third parties unless the third party was an intended beneficiary of the engagement AND the accountant knew they would be relying on the financial statements.

Answer 10

Professional Responsibilities - Reg

Question 11

Regular fraud Misrepresentation of Material Fact Scienter Damages Reasonable Reliance

Answer 11

Professional Responsibilities - Reg

Question 12

Gross Negligence - reckless disregard for truth CPAs usually not liable for simple negligence; but Gross Negligence (aka Constructive Fraud) opens the CPA up to be liable to third parties.

Answer 12

Professional Responsibilities - Reg

Question 13

Accountant must report discovered illegal activity to Audit Committee or Board of Directors If material in public company; BOD has *1 DAY* to notify SEC.

Answer 13

Professional Responsibilities - Reg

Question 14

NO Federal Accountant-Client privilege for non-disclosure of private conversations to a court unless a particular state recognizes such a privilege. If your client tells you Yeah; I cheated on my taxes; a court could force an accountant to testify about that conversation.

Answer 14

Professional Responsibilities - Reg

Question 15

1. Can be subpoenaed 2. Can be looked at by another CPA doing peer review 3. Property of the accountant who created them Note: Source documents supplied by client must be returned to client if they request them back; even if there is a billing dispute.

Answer 15

Professional Responsibilities - Reg

Question 16

Accountants have no way of auditing individual’s personal finances and are not required to do so when preparing a return

Answer 16

Professional Responsibilities - Reg

Question 17

If a past error is found; accountant should inform client of this error. Contacting the IRS is NOT required. If client won’t fix it; then the accountant should reconsider whether they want to do business with the client

Answer 17

Professional Responsibilities - Reg

Question 18

Accountant must prepare the return in good faith and ask for more information if something is missing When recommending a tax position; the accountant should realistically believe that it would stand up under the scrutiny of a court

Answer 18

Professional Responsibilities - Reg