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Flashcards in R5- Pt2/3 Deck (52)
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How long does the taxpayer have to petition the court for appeal after an audit?

90 Days


If no petition to appeal is filed, how long does a taxpayer have to pay tax due after an audit?

10 Days


The board is subject to Oversight by the SEC & has duty to:

- Register Public accounting Firms

- Establish Rules relating to the prep. of audit reports

- Conduct inspection, investigations


Each firm registered with the PCAOB must adhere to the Auditing Standards:

- Audit Documentation for 7 years

- Provide a concurring or 2nd partner review of each report


A registered Public Accounting firm that performs SEC may only provide Tax Services to an Audit Client IF:

- Pre-Approved by the Audit Committee


The Lead Audit or Coordinating partner & reviewing partner must rotate off the audit in how many years?

- Every 5 Years


Public Company Audit Committee is directly responsible for?

- Compensation
- Appointment
- Oversight of the work


What is the Relationship between the Auditor & Audit Commitee?

- Auditor Reports directly to the Audit Committee

- Audit Committee Resolves Disputes betwn Auditor & MG.


Audit Committee members are to be members of the issuer's board of directors BUT are to be?

- Independent

- Can't be officers, employees, etc


What are the Corporate Responsibility for Financial Reports?

- The CEO & CFO must sign representations regarding Annual & Quarterly Reports


Once the CEO & CFO signed the Annual & Quarterly Reports, it includes their assertion that?

- Reviewed the report

- Report does Not contain untrue Statements or Omit material Information

- FAIRLY present all material respects to financial condition


The CEO & CFO signing the report have Assumed the responsibility for Internal Controls, including that:

The Internal Controls:

- Designed to ensure that material info has been made available

- Evaluated for effectiveness

- Conclusions as to the Effectiveness of I/C


When the CEO & CFO signs the report, they made the disclosures to the Issuer's Auditors & Audit Committee that:

- All significant deficiencies of I/C

- Any Fraud involving MG or any employee


If there is an accounting Restatement due to material Noncompliance, the CEO & CFO may be required to reimburse the issuer for:

- Bonuses or incentives-based or equity based Compensation

- Gain on Sale of securities during that 12-month period


The F/S should disclose all Material Off-Balance Sheet Transactions, including?

- Contingent Obligations
- Unconsolidated Subsidiaries


Form 10-K & 10-Q reports must include an Internal Control Report stating:

- That MG. is responsible for establishing & maintaining an adequate I/C

- Assessment of the Effectiveness of the I/C structures


The Code of Ethics contemplates standards that Promote:

- Honest & Ethical Conduct

- Full, Fair, Accurate & Timely Disclosures

- Compliance with laws, rules & Regulations


The Audit Process is part of the enforcement system to ensure that :

- This 'Voluntary' assessment & payment is actually occurring.


The IRS utilizes statistical models, a form of discriminant analysis called?

- Discriminant Inventory Function System or DIF


The Discriminant Inventory Function System does what?

- Select Tax Returns that are most likely to contain Errors
- Yield significant amounts of additional tax revenue upon audit

- The criteria is not disclosed


What is a Information Return Discrepancy?

- W-2s & 1099s do not match the amounts reported on a return


If an individual's Itemized deductions are in excess of norms established fro certain income levels,

- The return may be selected for an Audit


Upon Submission of a tax return, it is immediately reviewed for?

- Math Errors
- Soc. Sec numbers are accurate
- Signatures are not missing


After the audit, if the Revenue agents agrees with tax return then?

- Taxpayer signs a Form 870

- Normally closes the case, But may review for fraud


When the Taxpayer signs Form 870, waives rights to?

- Rights to appeal

- Receive statutory notices

- Petition the US Tax Court


The Revenue Agent can't settle an unresolved issue based on?

- Probability of winning the case in court


If an agreement can't be reached at the Revenue Agent level then?

- Taxpayer receives a copy of the Revenue Agent's Report & 30day letter of the right to appeal.

- Adms Appeal


The taxpayer can't take a case to the US Tax Court before?

- IRS sends a notice of deficiency


The Appeals division is authorized to settle?

- All tax disputes

- Based on the hazards of litigation


If an agreement is reach with the Appeals Division, the taxpayer signs?

- Form 870-AD


If no agreement after Appeals Conference, taxpayer is entitled to take the case to?

- US Tax Court
- US Court of Federal Claims
- US District Court


Who can Initiate the Process to take the Tax case to court when no agreements have been made?

- Either the IRA or Taxpayer


Unique Characteristics of the US Tax Court:

- No Jury
- Only Federal Cases
- No full Payment is Req,
- 19 Judges travel to hears cases


US Tax Court's decisions can be Appealed to?

- Various US Courts of Appeals

- Tax Court will follow the Court of Appeals that has Direct Jurisdiction


Unique Characteristics of the US District Court:

- 1 Judge & option for jury

- Not just Tax Cases

- Must first pay disputed tax Liability & sue IRS for refund


Unique Characteristics of the US Court of Federal Claims:

- 16 Judges & No Jury

- Must first pay disputed tax Liability & sue IRS for refund

- Nationwide


The Court of Federal Claims follows the decisions of the Fed. Court of Appeals, NOT?

- The Geographic Court of Appeals


Unique Characteristics of the US Courts of Appeals:

- First level of Appellate court

- 3 Judge Panel, No Jury

- Handles tax & non-tax issues brought from tax court or district court from geographic area


What are the Exceptions to Penalties?

- No more then $1,000

- At least 90% of the current yr tax

- At Least 100% of prior year


What is the Failure to File Penalty?

- 5% of the Amount of Tax due for each month


What is the Failure to Pay Penalty?

- 1/2 of 1% per month

- Up to a Max. of 25% of Unpaid Tax


What is the Penalty for Negligence with respect to an Understatement of Tax?

- 20%

- When understatement is not Substantial


What is the Defense for Negligence with respect to understatement of tax?

- Reasonable Basis


What is the Penalty for Substantial Understatement of Tax?

- 20%

- Accuracy-related Penalty

- More difficult for the taxpayer to avoid the penalty


If the Taxpayer adequately Discloses the tax position, taxpayer can avoid the penalty IF?

- Has Reasonable Basis

- Other then a Tax Shelter


If the Taxpayer does NOT disclose the tax position, can avoid the penalty if?

- Substantial Authority for the Tax Position

- Except a Tax Shelter


What is the Penalty for Fraud ?

- 75%

- Willful, Intentional, Reckless


For the IRS to prevail for a Civil Penalty, then?

- IRS Must prove by a Preponderance of evidence


For the IRS to prevail for a Criminal Penalty, then?

- IRS must prove beyond a Reasonable Doubt


What is a Frivolous Position?

- Position taken on the return that is Patently Improper, but Arguable

- Less then 20%

- NOT: Defense to avoid any penalty


SOX prohibits Executives & Officers who worked for the Accounting Firm within how many years?

- Within one year before the Audit


What is the order of events in the Legislative Process for a specific tax law, in logical order?

- The Legislation originates in the House Ways & Means Committee
- The Legislation is voted on & approved by the full house
- The Legislation is voted on & approved by the full Senate
- The Legislation is considered by a Joint Conference Committee
- The Legislation is vetoed by the President
- The President's veto is overwritten by 2/3 votes of the House & Senate