REG: Diag Assessment: 5/1/2018 Flashcards
Under Circular 230, it is proper to delay as long as possible in fulfilling an IRS request for records or information if:
1) You have investigated and believe in good faith that the information is privileged.
2) It would benefit your client strategically in his tax dispute with the IRS.
3) A and B
4) None of the above.
You have investigated and believe in good faith that the information is privileged.
Section 10.20 requires prompt compliance with an IRS request for information or records unless the practitioner believes in good faith and on reasonable grounds that they are privileged.
Which agency is responsible for determining the continuing professional education requirements for licensed CPAs?
1) The Securities and Exchange Commission
2) The board of accountancy for the state in which the licensed CPA practices
3) The American Institute of Certified Public Accountants
4) The National Association of State Boards of Accountancy
The board of accountancy for the state in which the licensed CPA practices
State boards of accountancy establish CPE requirements.
To whom must a CPA pay license fees in order to maintain a CPA license?
1) The Public Company Accounting Oversight Board
2) The American Institute of Certified Public Accountants
3) The state board of accountancy of the CPA’s state of licensure
4) The state society of certified public accountants of the CPA’s state of licensure
The state board of accountancy of the CPA’s state of licensure
State boards of accountancy both license CPAs and collect the fees for the CPA license.
CPA Smithers has had some professional difficulties. Which of the following is true?
1) If the state board of accountancy revokes Smithers’ CPA license, s/he will be automatically expulsed from the AICPA.
2) If the state society of CPAs expulses Smithers, the state board of accountancy will automatically revoke his/her CPA license.
3) Both A and B.
4) Neither A nor B.
If the state board of accountancy revokes Smithers’ CPA license, s/he will be automatically expulsed from the AICPA.
If the state agency revokes Smithers’ license, s/he will no longer be a CPA, which is requisite to membership in the state society of CPAs.
Iola has had a few serious professional problems. Which of the following will probably cause a state board of accountancy to revoke her license or order a lesser punishment?
1) Failing to complete required continuing professional education.
2) Failing to pay her own income tax.
3) Violating professional standards.
4) All of the above.
All of the above
All four listed acts will likely be cause for serious sanction.
Which of the following courts is not a court of original jurisdiction?
1) United States Tax Court.
2) United States District Court.
3) United States Court of Appeals.
4) United States Court of Federal Claims.
United States Court of Appeals
The United States Court of Appeals hears appeals from the U.S. Tax Court and the U.S. District Court. It is not a court of original jurisdiction.
Which of the following documents does NOT govern the conduct of a CPA who is engaged in providing tax services?
1) AICPA’s Code of Professional Conduct
2) AICPA’s Statements on Standards for Tax Services
3) Circular 230
4) Internal Revenue Service Audit Guides
Internal Revenue Service Audit Guides
IRS Audit Guides provide guidance to revenue agents who are conducting audits but they do not govern the conduct of CPAs engaged in providing tax services.
If a taxpayer receives a 30-day letter from the Internal Revenue Service, the taxpayer:
1) Must pay the tax deficiency or respond to the issues raised through written correspondence to the IRS within 30 days of the date of the letter.
2) May ignore the letter and take no action.
3) Must pay the tax deficiency or file a petition with the Tax Court within 30 days of the date of the letter.
4) Must pay the tax deficiency and file a petition with the District Court within 30 days of the date of the letter.
May ignore the letter and take no action
The taxpayer is not required to respond to a 30-day letter, although if there is no response the IRS will follow with a 90-day letter.
Generally, a disclosed principal will be liable to third parties for its agent's unauthorized misrepresentations if the agent is an Employee Independent contractor A. Yes No B. Yes Yes C. No Yes D. No No
Row A
Row B
Row C
Row D
Row A
A principal is liable for all torts of its agents if the agent was acting in the scope of its agency. A misrepresentation is a tort, and employees are agents. Thus, a principal is usually liable for misrepresentations of employees. Independent contractors are not agents because they are not subject to the same degree of control. A principal is not usually liable for torts of independent contractors because of the lack of control the principal has over their actions.
Which of the following would not have capacity to create an agency relationship?
1) An unincorporated association
2) A corporation
3) An individual
4) A government agency
An unincorporated association
An unincorporated association does not have capacity, because it is not an individual or an entity, and therefore has no contractual capacity.
Ogden Corp. hires Thorp as a sales representative for nine months at a salary of $3,000 per month, plus 4% of sales.
Which of the following statements is correct?
1) Thorp is obligated to act solely in Ogden’s interest in matters concerning Ogden’s business.
2) The agreement between Ogden and Thorp formed an agency coupled with an interest.
3) Ogden does not have the power to dismiss Thorp during the nine-month period without cause.
4) The agreement between Ogden and Thorp is not enforceable, unless it is in writing and signed by Thorp.
Thorp is obligated to act solely in Ogden’s interest in matters concerning Ogden’s business.
Thorp is an agent, as he has been hired to act on Ogden’s behalf by representing it. A primary duty of an agent is one of loyalty - an agent must act in his principal’s interests and not his own when participating in matters affecting the principal’s business.
Young Corp. hires Wilson as a sales representative for six months at a salary of $5,000 per month, plus 6% of sales.
Which of the following statements is correct?
1) Young does not have the power to dismiss Wilson during the six-month period without cause.
2) Wilson is obligated to act solely in Young’s interest in matters concerning Young’s business.
3) The agreement between Young and Wilson is not enforceable, unless it is in writing and signed by Wilson.
4) The agreement between Young and Wilson formed an agency coupled with an interest.
Wilson is obligated to act solely in Young’s interest in matters concerning Young’s business.
Agents such as Wilson have a fiduciary duty of the utmost good faith and loyalty toward their principals. Failing to act in Young’s interest is a clear violation of this duty.
Able, as agent for Baker, an undisclosed principal, contracts with Safe to purchase an antique car. In payment, Able issues a personal check to Safe. Able cannot cover the check but expects Baker to give him cash to deposit before the check is presented for payment.
Baker did not do so and the check was dishonored.
Baker’s identity became known to Safe.
Safe may not recover from:
1) Baker, individually, on the contract.
2) Able, individually, on the contract.
3) Baker, individually, on the check.
4) Able, individually, on the check.
Baker, individually, on the check.
The relationship between a drawer of a check and a payee is unrelated to that between an agent and principal. A principal is not responsible for the payment of an agent’s personal checks.
Kent, without authority, contracts to buy computer equipment from Fox Corp. for Ace Corp. Kent tells Fox that Kent was acting on Ace’s behalf.
For Ace to ratify the contract with Fox,
1) Kent must be a general agent for Ace.
2) Ace must know all material facts relating to the contract at the time it is ratified.
3) Ace must notify Fox that Ace intends to ratify the contract.
4) Kent must have acted reasonably and in Ace’s best interest.
Ace must know all material facts relating to the contract at the time it is ratified.
To ratify such a contract, the principal must know all material facts, affirm the entire contract, have capacity to ratify the contract, act within certain time constraints, and follow the same formalities (as far as a writing requirement) that the original contract had to follow.
Your client, Sanitary Dairies, Inc., employs Harold Stone as a milk-truck driver. Stone negligently runs the truck into the car of Ronald Green, injuring Green, his wife, and damaging Green’s car. Stone is also injured in the collision. Which of the following is correct?
1) If Stone had never had a previous accident, Sanitary Dairies would not be liable.
2) Stone can avoid liability, because he was engaged in the performance of his principal’s business.
3) If Green is shown to have been contributorily negligent, he cannot recover for his injuries, or for the damage to the car.
4) Stone is not entitled to receive worker’s compensation.
If Green is shown to have been contributorily negligent, he cannot recover for his injuries, or for the damage to the car.
This question brings in another aspect of law - negligence and the defense of contributory negligence, which is a bar to recovery if established.
