REG mod 23c

Question 1

What is an ultra vires act? Is it illegal for a corporation to perform an ultra vires act?

Answer 1

An ultra vires act is when a corporation acts outside of its powers, as described in the Articles of Incorporation. An ultra vires act does not have to be illegal.

Question 2

What must a plaintiff prove in a lawsuit under the Securities Act of 1934 that the plaintiff does not have to prove in a lawsuit under the Securities Act of 1933?

Answer 2

Scienter / Reckless disregard for the truth / Reliance on the information

Question 3

Name the two types of fraud.

Answer 3

Actual fraud & constructive fraud

Question 4

When a CPA prepares his mother’s tax return for free, is the CPA considered to be a preparer?

Answer 4

No. This is because the service was performed for free, and therefore the CPA does not meet the requirement to be a preparer.

Question 5

What is a CPA’s best defense if being sued for ordinary negligence?

Answer 5

Conformed to GAAS

Question 6

The due diligence defense may be successfully used when being sued under which Securities Act?

Answer 6

This is only a valid defense under the Securities Act of 1933.

Question 7

What must be proven for a person to sue a CPA under Section 10 of the Securities Exchange Act of 1934?

Answer 7

(MRS. D)
Material misstatement / omission
Reliance
Scienter
Damages suffered

Question 8

What must a third party prove in a lawsuit against a CPA?

Answer 8

(P N L)
Proximate cause
Negligence
Losses were suffered

Question 9

What does PTIN stand for?

Answer 9

Preparer Tax Identification Number

Question 10

In order for a client to sue a CPA for constructive fraud or gross negligence, what must be proven?

Answer 10

(MR. RID)  Material misrepresentation
Reckless disregard for the truth
Reasonable reliance – CPA intended that the client would rely on the information
Intent
Damages were suffered

Question 11

The purchaser of securities may hold the issuer, directors, any signer of the registration statement and other experts liable for losses if the purchaser can prove _______ & ______.

Answer 11

The registration had material misstatements or omissions & the purchaser suffered a loss.

Question 12

A CPA must have the client’s written permission prior to providing working papers to a firm performing a peer review. True / False

Answer 12

FALSE

Question 13

A CPA is required to audit a client’s financial records prior to preparing a tax return. True / False

Answer 13

False. Tax return preparers, including CPAs, may, in good faith, rely on upon the information provided by the individual client. However, if information is conflicting or appears to be missing the preparer should inquire of the client

Question 14

Describe a few actions that constitute practicing before the IRS according to Treasury Department Circular 230.

Answer 14

Preparing & filing documents with the IRS
Communicating with the IRS
Corresponding with the IRS
Providing written advice
Representing a client in meetings or hearings