REG - 5

Question 1

If the state society of CPAs expenses a member, must the state board of accountancy automatically revoke his CPA license?

Answer 1

Not necessarily, but would not be surprising.

Question 2

If the state board of accountancy revokes a member’s CPA license, will he automatically be expulsed from the AICPA?

Answer 2

Yes.

The person would no longer be a CPA which is requisite to membership in the state society of CPAs

Question 3

Which of the following bodies ordinarily would have the authority to suspend or revoke a CPA’s license to practice public accounting?

A. The SEC.
B. The AICPA.
C. A state CPA society.
D. A state board of accountancy.

Answer 3

A state board of accountancy.
While certain types of punishments may be meted out by the SEC, the AICPA, and state CPA societies, ONLY a state board of accountancy truly has the power to revoke a CPA’s license to practice public accountancy. Nonetheless, the SEC may, for example, prevent an accountant from appearing before it or doing any attest work for a public company.

The AICPA may revoke an accountant’s membership, as may a state CPA society. But ONLY the state board of accountancy may revoke a license to practice.

Question 4

What is JEEP?

Answer 4

JEEP is the Joint Ethics Enforcement Program that divides ethics complaints and investigations between the AICPA and state societies.

Question 5

When an ethics complaint carrying national implications arises, which entity typically handles it?

Answer 5

AICPA

Question 6

Which of the following can grant a CPA license?
	A. 	A state board of accountancy.
	B. 	The AICPA.
	C. 	The Securities Exchange Commission.
	D. 	All of the listed entities.

Answer 6

Only state boards of accountancy can grant a CPA license.

Question 7

What must a plaintiff show in a negligence case?

Answer 7

In a negligence case, the plaintiff must show that the CPA did not use reasonable care or did not act as a reasonable CPA in the circumstances. If the defendant can show that he followed GAAS in preparing the report, it is strong evidence that he acted reasonably. It is not an absolute defense, but it tends to show that he did what other accountants would have done in the same situation.

Question 8

constructive knowledge

Answer 8

should have known

Question 9

scienter

Answer 9

a guilty mind, a required element of ACTUAL fraud.

Scienter involves whether or not a person or company has a “guilty mind.” One of the requirements of fraud is an intent to deceive. Therefore, if a firm did not intentionally make a misrepresentation and has no “guilty mind,” no fraud has occurred.

Question 10

The Ultramares Rule

Answer 10

Established in a 1931 case, requires privity before an accountant is liable for negligence. Other rules, such as the Restatement rule, allow foreseeable users who rely on a negligently false statement to sue.

Question 11

What kind of company may not file a voluntary petition for Chapter 7 relief?

Answer 11

Insurance companies

Question 12

What is the required limit to bring an involuntary Chapter 7 petition?

Answer 12

An involuntary petition may succeed if the aggregate unsecured claims of the petitioners equals or exceeds $13,425.

Question 13

time limit of presumed insolvency

Answer 13

normally 90 days, but can be extended for up to one year if the payments were made to insiders or creditors with a close relationship to the debtor

Question 14

antecedent debt

Answer 14

one that was incurred before the bankruptcy petition was filed; antecedent debt cannot receive preferential payments from the debtor

Question 15

A trustee in bankruptcy has these rights or powers

Answer 15

• the power to prevail against a creditor with an unperfected security interest
• the power to require persons holding the debtor’s property at the time the bankruptcy petition is filed to deliver the property to the trustee
• the right to use any grounds available to the debtor to obtain the return of the debtor’s property

Question 16

Who can claim exemptions in bankruptcy?

Answer 16

Only individuals, not partnerships, corporations, or other organizations can claim exemptions

Question 17

Is a debtor’s interest in a motor vehicle exempt?

Answer 17

All states allow at least some value interest in a personal motor vehicle, and federal exemption law allows an amount up to the value of a motor vehicle.

Question 18

Can a debtor choose either the state or federal-listed exemptions in bankruptcy?

Answer 18

Yes, where permitted. Unless a state has limited a bankrupt debtor to use the state-exemption statutes, the debtor can choose either the state or federal-exemption statutes.

Question 19

Debtor’s estate in bankruptcy

Answer 19

All tangible and intangible property of the debtor held at the commencement of the bankruptcy proceedings, as well as any after-acquired income from such property.

Payments received after filing the petition such as alimony, social security, and giftware not considered income from the existing debtor’s estate

Question 20

Is a perfected security interest affected by a bankruptcy proceeding?

Answer 20

No. Creditor retains the right to receive repayment of its debt without having the payments set aside