d. all of these are correct
ANSWER: c
14. According to Circular 230, the “best practices” rules are:
a. mandatory for all tax practitioners
b. restricted only to attorneys and CPAs
c. aspirational, to act as goals for tax practitioners
d. enforced by disbarment from practice before the IRS
ANSWER: c
15. The six principles of professional conduct under the AICPA Code include:
a. responsibilities
b. public interest
c. integrity
d. All of these are correct
ANSWER: d
16. Under the AICPA Code of Professional Conduct, which of the following actions would constitute deceptive advertising?
a. advertising too frequently
b. implying that the CPA had the ability to influence an IRS official
c. promising a favorable result without justification
d. implying that the CPA had the ability to influence an IRS official and
promising a favorable result without justification
ANSWER: d
17. Under Statements on Standards for Tax Services No. 3 (SSTS No. 3), a CPA preparing a tax return should perform all of the actions EXCEPT:
a. independently confirm the accuracy of the taxpayer’s information
b. obtain additional information if the taxpayer’s information appears to be incorrect or incomplete
c. review the prior year’s return when feasible
d. determine when conditions for a deduction have been met
ANSWER: a
18. Which of the following is CORRECT about a CPA’s responsibility with regard to tax return positions under Statements on Standards for Tax Services No. 1 (SSTS No. 1)?
a. A CPA may not base his or her position on authority that is not approved by the IRS under Section 6662 (accuracy-related penalty).
b. A CPA may sign a return which has a tax position that has a realistic possibility of being sustained on the merits.
c. A CPA may not sign a return which has any tax position that is not fully disclosed.
d. All of these are correct.
ANSWER: b
19. The Statements on Standards for Tax Services (SSTS) are issued by:
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
ANSWER: c
20. The Statements on Standards for Tax Services are:
a. part of the ABA Code of Professional Responsibility
b. intended to replace Circular 230
c. intended to supplement the AICPA Code of Professional Conduct and Circular 230
d. none of these are correct
ANSWER: c
21. Which of the following statements best explains the need for tax practitioners to understand nonregulatory ethical models of behavior?
a. Competing ethical solutions must be resolved by the courts.
b. There is more to ethical behavior than just following the rules of professional organizations.
c. Practitioners must always choose the action with the greatest benefit for their client.
d. Ethical choices are clearly spelled out by IRS regulations.
ANSWER: b
22. The primary change made by the Sarbanes-Oxley Act which affects the practice of public accounting is:
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.
ANSWER: d
23. The Lowell Bar Association v. Loeb case addressed the issue of:
a. unauthorized practice of law by nonattorneys engaged in tax practice
b. legal research by taxpayers
c. attorneys and CPAs working together in a practice
d. all of these are correct
ANSWER: a
24. In which of the following situations would a CPA be engaged in the unauthorized practice of law?
a. The CPA drafts a contract for his small business client.
b. The CPA files a client’s state tax return.