Quiz 23-26 Flashcards
Management will include an internal control report in its public audit report, your CPA firm reviews the management report to see if…
2) and the CPA firm…
it is in accordance with Attestation standards
2) reports on management’s report without charging additional
Fee
Management will include an internal control report in its public audit report. According to Section 404 of SOX, the CPA firm shall…
Attest to and report on assessment made by management
Can a CPA list his name and designation in the listings and bank stationary?
Yes
Work product doctrine is also know as…
Work product rule
Work product doctrine, what does it do? 2
1 Protects certain work to be admitted into a tax case
2 material in question may be shielded
A CPA who fraudulently performs an audit of a corporation’s financial statements will probably be liable to…
Any person who suffered a loss as result of the fraud
Under Ultramares, third parties who aren’t in privity of contract with accountants cannot…
2) But can…
Cannot sue for negligence
2) Can sue for gross negligence
Interpretation 101-5 of Rule 101 regarding independence states in essence that a loan to a limited partnership in which members have combined interest exceeding…
50% of total limited partnership interest is considered a loan
To those members
Section 206 does not allow a CPA firm employee to be a significantly placed employee (controller) of publicly traded firm for…
At least 1 year
If you’re offered a high level job by a publicly traded company and your CPA firm has not audited for 1 year…
You can take the job
Reason for 1 year cooling period between auditing at public accounting firm and taking a high level job at a public audit client?
Too high a potential conflict of interest
Because taxpayers are not versed in the language of tax, communication to clients should…
Should not contain too much detail
NASBA is tasked with…
Monitoring CPE programs for accuracy and content
State boards dictate the…
Rules and expectations of licensure within individual jurisdictions
A CPA’s Membership in a client social club, such as a country club is…
Basically only for social purposes and does not impair independence
What would impair a CPA’s independence if they were members of a client’s country club?
If they served on the club’s board of directors
The CPA owns an office building and the mortgage on the building is guaranteed by a client. This would…
Impair CPAs independence
If an audit failed to reveal employee fraud, the CPA’s adherence to…
GAAS may prevent liability
When a contract is assigned if the party fails to perform, the assignor would…
Be liable for performance
If the assignor enters into a contract with a 3rd party and assigns the rights of the contract to the other party (assignee). What are 3 circumstances that would make the assignor liable to the assignee?
1 assignor fails to perform contract
2 assignor releases 3rd party from contract
3 3rd party pays assignor
If the assignor enters into a contract with a 3rd party and assigns the rights of the contract to the other party (assignee). In what circumstance would the assignor no be liable to the assignee?
The assignee releases the third party
A single member entity is…
Disregarded as separate from their owner
An LLC with one member must submit IRS Form 8832 and elect to be…
A corporation or disregarded entity for tax purposes
Under the Securities Act of 1933, original offerings may be made…
Without registration
Under the 1933 act any Resales of offering may be subject…
Registration unless another exemption provision of the Act is Applicable
Under the ‘33 Act, For securities sold under a transaction exemption, Resales of the offering must be made under…2
1 a registration or
2 different exemption provision of the 1933 Act
Under the statute of limitations, in a case of a claim for breach of contract, the time period begins to run on the date…
2) this would also apply to the type of contract that is…
Date the contract is breached
2 construction contract
The 1933 act is only applicable to issuance of securities by…3
1 issuers
2 underwriters
3 dealers
If the sale or offer to sell securities is made by a person other than an issuer, underwriter or dealer the offering of securities will…
Be exempt from registration under the ‘33 Act
Control person
Someone having substantial power to influence the policies of management (ex. President of company)
The CPA may not associate his name with…
Direct mailers to non clients
Example of direct mailers to non clients
Estate planning firm composed of nonCPA owners who use high
Level of direct advertising
The CPA had ethical responsibilities to the public no matter in what…
Form or organization CPA participates
Apparent authority (AKA ostensible authority) is…
1 Power or understanding created or manifested in mind of third
party
2 that agent may act on behalf of principal
Any limitation on apparent authority (in partnership) must be…
Communicated to third parties to be effective
Apparent authority is derived from the words and actions of the principal as…
2) It is not…
Viewed by the third party
2) not from express authority
Submitting a claim against the partnerships to arbitration requires…
Express authority from the principals
The Act of 1933 imposes various criminal and civil liability on…
The issuer if the omissions are material
Under the ‘33 Act, when omissions are intentional, this leaves…
Little defense for the defendant
Under the Act of 1934, SEC Rule 10b-5 specifically addresses…2
1 Fraud in issuance of securities and
2 and there associated materials whether registered under ‘33 Act
or not
The key is, to be recognized under the 33 and 34 acts, the omission must be…
Material misrepresentation to the buyer
Specific performance forces performance of the contract when…
The goods are unique
Patents are unique, so the court would grant…
Remedy for contract for sale of patent
Upon dissolution of a partnership, each partner…
Continues to have apparent authority to make contracts
Upon dissolution of a partnership, each partner continues to have apparent authority to make contracts which would be binding upon the partnership until and unless both…
Both actual and constructive notice of dissolution is given by the partnership
For a purchaser of land to avoid a contract with the seller based on duress, it must be shown that…
The seller’s improper threats actually induced the purchaser to
assent the contract
Assent
Caused
Under Regulation A, an issuer is permitted to offer up to…2
1 $5 million of securities
2 including a maximum of $1.5 million
Under Regulation A, an issuer is permitted to offer up to $5 million of securities including a maximum of $1.5 million by…
Selling security holders in any 12 month period without registration
With SEC
All offerings made under Registration A are…
Exempt from full registration under the ‘33 Act
Registration A filing is…
Less detailed than a formal registration
Under registration A, Not all intrastate offerings are…
Exempt from registration requirements
Example of numerous limitations on intrastate exception
At least 80% of issuer’s assets must be located within state of
Issuance
Stockbroker transactions and issuances under Reg D which involve resale are…
Not exempt from registration
Partnership’s interest in specific partnership property is…
Not assignable to the partnership’s individual creditors
A partnership’s interest in specific partnership property is not…
Not subject to attachment by partner’s individual creditors
A creditor may not obtain a…
Partner’s interest in specific partnership property
A court will not award a partner’s creditor with a…
Lien on specific partnership property
