REG mod 23d Flashcards
What is another term for constructive fraud?
Gross Negligence
Which act created the PCAOB?
The Sarbanes-Oxley Act
Define a preparer (tax preparer).
A person that prepares, for compensation, any federal tax return.
What is the CPA’s best defense if being sued for actual fraud?
Lack of Scienter
Who has the burden of proof in a lawsuit brought under the Securities Act of 1933?
The defendant
Describe what is meant by the phrase ‘lack of privity’.
It means ‘not a party to the contract’.
How many consecutive years may a CPA be a partner on an audit of a public company?
Five years. There is a mandatory partner rotation every five years.
A CPA may have civil liability under the Securities Act of 1933. True / False
TRUE
Leasehold improvements are depreciated for 10 years. True / False
False. Leasehold improvements are depreciated using the straight line method for 15 years.
Who may sue a CPA for fraud?
Any third party may sue a CPA for fraud
In order for a client to sue a CPA for negligence, what must be proven?
CPA had a duty to exercise due care.
CPA breached the duty owed.
Damages were incurred.
Damages were caused by the CPA.
What document is typically used as a contract between an accountant and a client?
An engagement letter
What is the difference between actual fraud and constructive fraud?
Actual fraud requires Scienter and constructive fraud requires a reckless disregard for the truth
In general, a CPA must provide records / information to the IRS when requested. What is the exception to this rule?
When the CPA, in good faith, believes the information is privileged.
In general, may a tax return preparer charge a contingent fee?
Generally, the tax return preparer may not charge a contingent fee.
