REG mod 23a Flashcards
The PCAOB regulates the nature and the extent of the non-audit services that a CPA may provide to an audit client that is an issuer. True / False
TRUE
Who is required to have a PTIN?
All paid tax return preparers
Under what circumstances may an incidental beneficiary sue an accountant for ordinary negligence?
Under no circumstances may an incidental beneficiary sue an account for ordinary negligence
How often must a CPA firm, servicing public companies, be inspected by the PCAOB?
If the CPA services less than 100 public companies, the requirement is one inspection every three years. If the CPA services more than 100 public companies, the requirement is one inspection every year.
When an auditor identifies an illegal activity of a publicly traded entity, this information must be communicated to ______ or ______.
The audit committee or the board of directors
Practitioners may charge an unconscionable fee. True / False
FALSE
What is the potential punishment if a paid tax return preparer fails to sign the return as the preparer?
A penalty may be imposed
Working papers belong to the accountant. True / False
TRUE
What power does the SEC have over a CPA?
The SEC may prevent a CPA from providing services to public companies.
A CPA is engaged to perform an audit of an entity’s financial statements and the CPA knows the entity will be providing the financial statements to Big Bank in order to renew the line of credit agreement. Can the CPA be sued by Big Bank for ordinary negligence?
Yes, the CPA is liable to Big Bank, because the CPA knew that Big Bank would be relying on the information.
What is the difference between a confidential client relationship and a privileged client relationship?
The level of confidentiality. If subpoenaed, a CPA would have to divulge information to the court, if requested to do so, if the CPA’s relationship is that of a confidential client relationship. If the relationship is privileged, the CPA is not required to divulge client information, even if subpoenaed.
What is the CPA’s best defense if being sued for constructive fraud?
Lack of reckless disregard for the truth.
When must a tax return preparer provide a copy of the return to the taxpayer?
No later than the when the taxpayer signs the tax return.
Describe Peer Review.
This is when one public accounting firm reviews the work of another firm. This may also be called a quality control panel.
Practitioners may advise clients to take a position on a tax return, even if the position is frivolous. True / False
False. A practitioner may not advise clients to take a frivolous position.
