Professional Responsibilities Flashcards

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1
Q

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

A

Professional Responsibilities - Reg

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2
Q

Competence; Due Professional Care; Planning; Supervision; Obtain Sufficient Data; Serve Client Interest; Agreement: Written or Oral; Communicate w/ Client; Objectivity

NOT REQUIRED: Independence

A

Professional Responsibilities - Reg

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3
Q

Express: Contract specifies what accountant will do

Implied: Accountant performs without negligence

A

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4
Q

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.

A

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5
Q

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

A

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6
Q

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.

A

Professional Responsibilities - Reg

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7
Q

Misrepresentation - Accountant misrepresents MATERIAL fact(s)

Scienter - Accountant commits scienter

Damages - Client has actual damages.

Reasonable Reliance - Client reasonably relied on the misinformation.

A

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8
Q

To report something knowing it is false.

Characterized by reckless disregard for truth

Intentionally conceal facts

A

Professional Responsibilities - Reg

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9
Q

Lack of privity defends against contract breach and negligence.

NOT a defense against fraud.

A

Professional Responsibilities - Reg

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10
Q

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.

A

Professional Responsibilities - Reg

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11
Q

Regular fraud

Misrepresentation of Material Fact
Scienter
Damages
Reasonable Reliance

A

Professional Responsibilities - Reg

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12
Q

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.

A

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13
Q

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.

A

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14
Q

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.

A

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15
Q
  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.

A

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16
Q

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

A

Professional Responsibilities - Reg

17
Q

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

A

Professional Responsibilities - Reg

18
Q

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

A

Professional Responsibilities - Reg