REG 5.0

Question 1

*When can a tax preparer disclose confidential client data?

Answer 1

• 1.If the client specifically consents
  2. Subpoena
  3. State CPA society quality control panels

4.Not just from SEC audit request

Question 2

*What are the three categories of misconduct as related to state boards of accountancy?

Answer 2

• 1.Misconduct while performing accounting services
  2. Misconduct outside the scope of performing accounting services
  3. Criminal conviction

Question 3

• What is the judicial process within the following courts?
• US Tax Court
• US District Court
• US Court of Fed Claims
• US Court of Appeals

Answer 3

• US Tax Court: Only court can litigate without first having paid the disputed tax in full. 19 Judges no jury. Travel and hear cases
• US District Court: Jury and trial
• US Court of Fed Claims: 16 Judges no jury. Jurisdiction over most claims for money damages against US i.e tax refunds
• US Court of Appeals: 3 Judge no jury only hear cases involving question of law and not fact

Question 4

• Accuracy related penalties apply to what?

* If an agreement is reached after a tax audit what form is signed?

Answer 4

• Underpayments attributable to
• Negligence
• Disregard of tax rules

*Form 870

Question 5

• Describe Section 10b-5?
• Describe Section 11?
• Negligence includes what 4 elements?
• Elements of Fraud?

Answer 5

• 10b-5
• Material misstatement or omission,
• Made with a scienter
• Intentional conduct by CPA designed to deceive investors
• *Best defense lack of criminal intent
• 11
• Plaintiff acquired security
• Material misstatement or omission
• Plaintiff suffered damages
• *Do not need fraud, neg, or reliance
• *Best defense due diligence
• *Only monetary damages possible
• Negligence:
• Duty of care
• Breach (with lack of due care)
• Cause/Causality
• Injury/Damages

*Fraud:
Misrep of material fact
Actual and justifiable reliance on miss
Intent to induce reliance
Damages
Scienter (Intent to deceive)

Question 6

• Explain the different levels of fault?
• Reasonable Care
• Lack of Reasonable Care
• Lack of Even Slight Care
• Actual Fraud
• Criminal Fraud

Answer 6

• Reasonable Care
• Due Care taken
• No Neg
• Not Liable
• Lack of Reas Care
• Ordinary Neg
• Liable to anyone who knows or should expect to rely
• Lack of Slight Care
• Gross Neg
• Constructive Fraud (recklessness does not require intent)
• Liable to all
• Actual Fraud
• Intent to Deceive
• Liable to all
• Criminal Fraud
• Intent to Deceive
• Level 1-4 civil this level CRIMINAL

Question 7

*SEC Act of 1933 (section 11) Facts?

Answer 7

• Issuance of a security
• Resales of offering must be made under a registration or different exemption provision
• Anti fraud provisions not limited to registered securities, action can be brought on by Section 12 (civil), 17 (criminal), or public citizen
• Concerned with issuers, underwriters, and dealers

Question 8

*SEC Act of 1934 (section 10b) Facts?

Answer 8

• Sale or purchase of a security
• Must register with SEC and make certain periodic reports under the 1934 Act
• Applies to the following:
• 500 shareholders
• 10 Million in assets

Question 9

• Define Reg A?
• Define Reg D?
• Define Section 18?
• Define Section 12?
• Registration Statement Contains?

Answer 9

• Reg A
• Partial exemption for registration
• File offering statement
  1. Notification
  2. Offering Circular
• Reg D
• Exempts certain securities from registration, private offerings
• SEC must be notified within 15 days after the first sale of the offering
• Make time period for an exempt offering is 12 months
• Section 18
• Subjects a defendant to a liability for false or misleading information in the registration statement
• Intentional, therefore to avoid need good faith and lack of knowledge of falsity
• Section 12
• A company must register if it is listed on a national securities exchange and has at least 500 shareholders not accredited or 2,000 shareholders in any class and more than $10M in assets
• If issuer fails to meet disclosure requirements purchaser may sell back security
• 1. Prospectus
     
     2. Audited financial information
• Other materials requiring disclosure