Exam 1: Introduction to Tax Practice and Ethics

A) Public accounting firms may no longer provide any actuarial services.
B) Accounting firms may no longer offer tax shelters.
C) Auditors may never do tax compliance work for their clients.
D) Public accounting firms may provide some nonaudit services to their audit clients if the services are approved in advance by an audit committee.

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A) responsibilities
B) public interest
C) integrity
D) All of these are correct

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False

A) the Internal Revenue Service
B) the FASB
C) the AICPA
D) the American Bar Association
E) the AICPA and the American Bar Association jointly

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A) The transaction is not yet completed.
B) The practitioner can suggest changes to achieve a better tax result.
C) A tax practitioner has some degree of control over the client's tax liability.
D) The practitioner can fix the problem by amending the client's tax return.

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A member must advise the taxpayer promptly, regardless of whether the member prepared or signed the return in question, when he or she learns of an error in a previously filed tax return, an error in a return that is the subject of an administrative proceeding, or a taxpayer's failure to file a required return. Such advice should include a recommendation for appropriate measures the taxpayer should take. However, the member is neither obligated to inform the IRS of the situation, nor may he or she do so without the taxpayer's permission, except as provided by law.The term "error" includes any position, omission, or method of accounting that, at the time the return is filed, fails to meet the standards set out in SSTS No. 1. An error also includes a position taken on a prior year's return that no longer meets these standards due to legislation, judicial decisions, or administrative pronouncements having retroactive effect. However, an error does not include an item that has an insignificant effect on the taxpayer's tax liability. If the member is requested to prepare the current year's return, and the taxpayer has not taken action to correct an error in a prior year's return, the member should consider whether to proceed with the preparation of the current year's return. If the current year's return is prepared, the member should take reasonable steps to ensure that the error is not repeated. A member should advise a taxpayer, either orally or in writing, as to the correction of errors in the prior year's return. In a case where there is a possibility that the taxpayer may be charged with fraud, the taxpayer should be referred to an attorney.

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A) always allowed by Circular 230
B) a fee that is out of line with the value of the service provided
C) a fee based on a percentage of a taxpayer's refund on a tax return
D) all of these are correct

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C

A) The CPA drafts a contract for his small business client.
B) The CPA files a client's state tax return.
C) The CPA answers estate tax questions for his client.
D) The CPA represents his client before the IRS.

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A) who is authorized to practice before the IRS
B) standards for "covered opinions"
C) compliance with state ethical requirements
D) a set of best practices to guide practitioners

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