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REG > R5- Pt2/3 > Flashcards

R5- Pt2/3 Flashcards

1
Q

How long does the taxpayer have to petition the court for appeal after an audit?

A

90 Days

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2
Q

If no petition to appeal is filed, how long does a taxpayer have to pay tax due after an audit?

A

10 Days

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3
Q

The board is subject to Oversight by the SEC & has duty to:

A
  • Register Public accounting Firms
  • Establish Rules relating to the prep. of audit reports
  • Conduct inspection, investigations
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4
Q

Each firm registered with the PCAOB must adhere to the Auditing Standards:

A
  • Audit Documentation for 7 years

- Provide a concurring or 2nd partner review of each report

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5
Q

A registered Public Accounting firm that performs SEC may only provide Tax Services to an Audit Client IF:

A
  • Pre-Approved by the Audit Committee
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6
Q

The Lead Audit or Coordinating partner & reviewing partner must rotate off the audit in how many years?

A
  • Every 5 Years
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7
Q

Public Company Audit Committee is directly responsible for?

A
  • Compensation
  • Appointment
  • Oversight of the work
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8
Q

What is the Relationship between the Auditor & Audit Commitee?

A
  • Auditor Reports directly to the Audit Committee

- Audit Committee Resolves Disputes betwn Auditor & MG.

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9
Q

Audit Committee members are to be members of the issuer’s board of directors BUT are to be?

A
  • Independent

- Can’t be officers, employees, etc

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10
Q

What are the Corporate Responsibility for Financial Reports?

A
  • The CEO & CFO must sign representations regarding Annual & Quarterly Reports
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11
Q

Once the CEO & CFO signed the Annual & Quarterly Reports, it includes their assertion that?

A
  • Reviewed the report
  • Report does Not contain untrue Statements or Omit material Information
  • FAIRLY present all material respects to financial condition
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12
Q

The CEO & CFO signing the report have Assumed the responsibility for Internal Controls, including that:

A

The Internal Controls:

  • Designed to ensure that material info has been made available
  • Evaluated for effectiveness
  • Conclusions as to the Effectiveness of I/C
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13
Q

When the CEO & CFO signs the report, they made the disclosures to the Issuer’s Auditors & Audit Committee that:

A
  • All significant deficiencies of I/C

- Any Fraud involving MG or any employee

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14
Q

If there is an accounting Restatement due to material Noncompliance, the CEO & CFO may be required to reimburse the issuer for:

A
  • Bonuses or incentives-based or equity based Compensation

- Gain on Sale of securities during that 12-month period

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15
Q

The F/S should disclose all Material Off-Balance Sheet Transactions, including?

A
  • Contingent Obligations
    &
  • Unconsolidated Subsidiaries
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16
Q

Form 10-K & 10-Q reports must include an Internal Control Report stating:

A
  • That MG. is responsible for establishing & maintaining an adequate I/C
  • Assessment of the Effectiveness of the I/C structures
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17
Q

The Code of Ethics contemplates standards that Promote:

A
  • Honest & Ethical Conduct
  • Full, Fair, Accurate & Timely Disclosures
  • Compliance with laws, rules & Regulations
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18
Q

The Audit Process is part of the enforcement system to ensure that :

A
  • This ‘Voluntary’ assessment & payment is actually occurring.
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19
Q

The IRS utilizes statistical models, a form of discriminant analysis called?

A
  • Discriminant Inventory Function System or DIF
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20
Q

The Discriminant Inventory Function System does what?

A
  • Select Tax Returns that are most likely to contain Errors
    &
  • Yield significant amounts of additional tax revenue upon audit
  • The criteria is not disclosed
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21
Q

What is a Information Return Discrepancy?

A
  • W-2s & 1099s do not match the amounts reported on a return
22
Q

If an individual’s Itemized deductions are in excess of norms established fro certain income levels,

A
  • The return may be selected for an Audit
23
Q

Upon Submission of a tax return, it is immediately reviewed for?

A
  • Math Errors
  • Soc. Sec numbers are accurate
  • Signatures are not missing
24
Q

After the audit, if the Revenue agents agrees with tax return then?

A
  • Taxpayer signs a Form 870

- Normally closes the case, But may review for fraud

25
Q

When the Taxpayer signs Form 870, waives rights to?

A
  • Rights to appeal
  • Receive statutory notices
  • Petition the US Tax Court
26
Q

The Revenue Agent can’t settle an unresolved issue based on?

A
  • Probability of winning the case in court
27
Q

If an agreement can’t be reached at the Revenue Agent level then?

A
  • Taxpayer receives a copy of the Revenue Agent’s Report & 30day letter of the right to appeal.
  • Adms Appeal
28
Q

The taxpayer can’t take a case to the US Tax Court before?

A
  • IRS sends a notice of deficiency
29
Q

The Appeals division is authorized to settle?

A
  • All tax disputes

- Based on the hazards of litigation

30
Q

If an agreement is reach with the Appeals Division, the taxpayer signs?

A
  • Form 870-AD
31
Q

If no agreement after Appeals Conference, taxpayer is entitled to take the case to?

A
  • US Tax Court
  • US Court of Federal Claims
  • US District Court
32
Q

Who can Initiate the Process to take the Tax case to court when no agreements have been made?

A
  • Either the IRA or Taxpayer
33
Q

Unique Characteristics of the US Tax Court:

A
  • No Jury
  • Only Federal Cases
  • No full Payment is Req,
  • 19 Judges travel to hears cases
34
Q

US Tax Court’s decisions can be Appealed to?

A
  • Various US Courts of Appeals

- Tax Court will follow the Court of Appeals that has Direct Jurisdiction

35
Q

Unique Characteristics of the US District Court:

A
  • 1 Judge & option for jury
  • Not just Tax Cases
  • Must first pay disputed tax Liability & sue IRS for refund
36
Q

Unique Characteristics of the US Court of Federal Claims:

A
  • 16 Judges & No Jury
  • Must first pay disputed tax Liability & sue IRS for refund
  • Nationwide
37
Q

The Court of Federal Claims follows the decisions of the Fed. Court of Appeals, NOT?

A
  • The Geographic Court of Appeals
38
Q

Unique Characteristics of the US Courts of Appeals:

A
  • First level of Appellate court
  • 3 Judge Panel, No Jury
  • Handles tax & non-tax issues brought from tax court or district court from geographic area
39
Q

What are the Exceptions to Penalties?

A
  • No more then $1,000
  • At least 90% of the current yr tax
  • At Least 100% of prior year
40
Q

What is the Failure to File Penalty?

A
  • 5% of the Amount of Tax due for each month
41
Q

What is the Failure to Pay Penalty?

A
  • 1/2 of 1% per month

- Up to a Max. of 25% of Unpaid Tax

42
Q

What is the Penalty for Negligence with respect to an Understatement of Tax?

A
  • 20%

- When understatement is not Substantial

43
Q

What is the Defense for Negligence with respect to understatement of tax?

A
  • Reasonable Basis
44
Q

What is the Penalty for Substantial Understatement of Tax?

A
  • 20%
  • Accuracy-related Penalty
  • More difficult for the taxpayer to avoid the penalty
45
Q

If the Taxpayer adequately Discloses the tax position, taxpayer can avoid the penalty IF?

A
  • Has Reasonable Basis

- Other then a Tax Shelter

46
Q

If the Taxpayer does NOT disclose the tax position, can avoid the penalty if?

A
  • Substantial Authority for the Tax Position

- Except a Tax Shelter

47
Q

What is the Penalty for Fraud ?

A
  • 75%

- Willful, Intentional, Reckless

48
Q

For the IRS to prevail for a Civil Penalty, then?

A
  • IRS Must prove by a Preponderance of evidence
49
Q

For the IRS to prevail for a Criminal Penalty, then?

A
  • IRS must prove beyond a Reasonable Doubt
50
Q

What is a Frivolous Position?

A
  • Position taken on the return that is Patently Improper, but Arguable
  • Less then 20%
  • NOT: Defense to avoid any penalty
51
Q

SOX prohibits Executives & Officers who worked for the Accounting Firm within how many years?

A
  • Within one year before the Audit
52
Q

What is the order of events in the Legislative Process for a specific tax law, in logical order?

A
  • The Legislation originates in the House Ways & Means Committee
  • The Legislation is voted on & approved by the full house
  • The Legislation is voted on & approved by the full Senate
  • The Legislation is considered by a Joint Conference Committee
  • The Legislation is vetoed by the President
  • The President’s veto is overwritten by 2/3 votes of the House & Senate

REG (25 decks)

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