REG mod 23b Flashcards
Describe the duties of the PCAOB.
Register and conduct investigations of public accounting firms
Set standards on auditing, quality control, independence, and reporting requirements
What must a plaintiff prove in order to obtain monetary damages from a CPA if the plaintiff is filing a lawsuit under the Securities Act of 1934?
Plaintiff purchased the securities
Plaintiff suffered a loss
Material misrepresentation / omission
Plaintiff must show Scienter (if suing for actual fraud)
Plaintiff must show reckless disregard for the truth (if suing for constructive fraud)
Plaintiff relied on the information
Describe the circumstances when a tax return preparer may disclose the information furnished for the preparation of a tax return.
When subpoenaed or when undergoing peer review
List some of the services that a CPA is prohibited from providing to a SEC registered audit client.
Bookkeeping Financial information system design / implementation Appraisal services Internal audit outsourcing services Management functions Actuarial services Investment services Certain tax services (tax planning for abusive tax shelters)
Are practitioners required to inform taxpayer’s of potential penalties related to positions taken on the taxpayer’s return?
Yes. Practitioners must inform the taxpayer’s of potential penalties.
Is a practitioner permitted to negotiate a client’s refund check from the IRS?
No. The practitioner is not permitted to negotiate the check.
Name two torts that may result in an accountant being sued.
Negligence & Fraud
Name the defenses that a CPA may successfully use to defend a lawsuit brought under the Securities Act of 1933.
The CPA followed GAAP and GAAS (Due diligence).
The damages were not caused by the CPA’s work.
The plaintiff was aware of the material misstatement.
An accountant may be held liable under the Securities Act of 1933 if the plaintiff can prove ____ and _____.
The information contained Material Misstatements and Damages occurred.
Under what circumstances is it appropriate for a CPA to leave information blank on a tax return?
If the information is difficult to obtain and not significant. There is uncertainty related to the meaning of the question. If the information is voluminous, a CPA may state the information will be supplied, if requested.
Which licensing body grants a CPA the right to practice?
The state board of accountancy.
Name the board that performs investigations and disciplinary proceedings on CPA firms that provide services to SEC registered entities.
Public Company Accounting Oversight Board (PCAOB)
Does a plaintiff have to prove a reckless disregard for the truth in order to have a successful constructive fraud lawsuit against a CPA under the Securities Act of 1933?
No
What must be proven by a plaintiff to have successful lawsuit against an accountant under the Securities Act of 1933?
Acquired the stock
Suffered a loss
Material misrepresentation / omission
Are accountants generally liable for ordinary negligence to third parties? Why / Why not?
Accountants are not generally liable to third parties because third parties are generally not parties to the contract.
