Ethics Flashcards
(10 cards)
Who can issue/revoke a CPA license?
State board of Accountancy
What is Circular 230?
The IRS’s rules of practice governing CPAs and others who practice before the agency.
When can contingent fees be charged?
a. For services rendered in connection with an IRS examination or challenge to either
(i) an original tax return or
(ii) an amended return or claim for refund when they were filed within 120 days of receiving a written notice of examination or written challenge to the original exam
b. Where a claim for refund is filed solely in connection with determination of statutory interest or penalties
c. When the accountant is representing the client in judicial proceedings.
3 Types of covered options subject to high tax standards are?
a. A transaction that is the same or substantially similar to a transaction that the IRS has already determined to be a tax avoidance transaction.
b. Any partnership or other entity, any investment plan or arrangement, or any other plan or arrangement, the principal purpose of which is to avoid or evade income tax obligations.
c. Transactions where tax avoidance is not the principal purpose of the arrangement but is nonetheless a significant purpose. Four categories of these opinions are deemed covered opinions by Section 10.35.
What is SSTS’s #1?
Instructs members that they should comply with standards, imposed by applicable taxing authorities. Congress has provided that a tax return preparer who takes an “unreasonable position” may be punished. If a taxing authority has no written standards for preparing or signing tax returns, or if its standards are lower, then two AICPA standards apply.
Substantial Authority (26 U.S.C. Section 6694)
There is at least a 40% chance that the IRS would accept a particular position.
Tax Shelters (26 U.S.C. Section 6694)
It is unreasonable unless it is “more likely than not” (more than 50%) to be sustained on its merits.
What needs to be proven by a plaintiff in a negligence case?
A. Duty
B. Breach
C. Damages
D. Proximate cause
What needs to be proven by a plaintiff in a fraud case?
A. False Representation of Fact
B. The misrepresented (or omitted) fact was material.
C. The accountant knew or recklessly disregarded the falsity
i. Knowledge (scienter) = actual fraud
ii. Reckless disregard or gross negligence = constructive fraud
D. The accountant intended to and did induce plaintiff’s reasonable reliance on the misstatement or omission.
E. The client suffered damages.
What is the restatement view?
An accountant is liable to a limited class of nonclients where the accountant knows:
- The information being supplied to the client will be given to, or is for the benefit and guidance of, a limited group of third persons.
- The information will influence those third persons in a specific transaction or type of transaction.
