R4

Question 1

Accrual related penalties apply to

Answer 1

Negligence or a disregard of the tax rules or regulations.

Any substantial understatement of income tax.

Both have a 20% tax penalty

Question 2

Penalty for not fyling a tax return on time.

Answer 2

The penalty for failure to file a tax return by the due date is 5% per month or fraction of month (up to a maximum of 25%)

Question 3

The IRS issues a private letter ruling (PLR)

Answer 3

in response to a taxpayer’s request for guidance on the tax treatment of a proposed transaction, typically one with significant tax consequences

Question 4

A temporary regulation issued by the U.S. Department of the Treasury is a

Answer 4

primary authority because it is official tax law issued by a branch of the federal government, the administrative branch.

Question 5

The Internal revenue code IRC holds

Answer 5

The most authoritative value.

Question 6

Treasury Regulations have the highest

Answer 6

authoritative weight of the administrative sources of tax law.

Question 7

When a CPA breaches a contract for professional services

Answer 7

the client and any third party beneficiary of the contract are entitled to compensatory money damages.

Question 8

Ultramares

Answer 8

limits the accountant’s liability for negligence to:
(i) parties in privity and
(ii) intended third party beneficiaries

Question 9

A suit for common law fraud may succeed only if

Answer 9

the accountant acted with scienter (knew that the statement was wrong or recklessly disregarded the truth).

Question 9

Under the majority position an accountant is liable for negligence only to

Answer 9

third parties whom the accountant knows or should foresee will be relying on the accountant’s work.