Question 1

What should an AICPA member do upon learning about an error in a prior year's tax return?

Accepted Answer

A member must advise the taxpayer prompt...

Question 2

Circular 230 bans tax practitioners from giving written advice on a Federal tax issue based on the likelihood of an audit.

Accepted Answer

A) True 
 B)False

Question 3

Under Circular 230, "covered opinions" include oral advice on tax avoidance transactions.

Accepted Answer

A) True 
 B)False

Question 4

Regarding open transactions, which of the following statements is INCORRECT?

Accepted Answer

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 returnE) B) and C)
F) All of the above

Question 5

Drafting wills is a part of a CPA's professional duties.

Accepted Answer

A) True 
 B)False

Question 6

Tax planning has a more likelihood of success when a tax practitioner is dealing with an open transaction instead of a closed transaction.

Accepted Answer

A) True 
 B)False

Question 7

According to Rule 101 of the AICPA Rules of Professional Conduct, a CPA in public practice must:

Accepted Answer

A)   comply with Circular 230
B)   disclose any conflict of interest with another client
C)   keep client information confidential
D)   be independent of his or her clientsE) A) and B)
F) A) and C)

Question 8

Does the IRS regulate unenrolled tax preparers? Explain your answer.

Accepted Answer

Yes, unenrolled preparers are now regula...

Question 9

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:

Accepted Answer

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 metE) A) and B)
F) None of the above

Question 10

Explain which types of services a CPA can and cannot provide to avoid engaging in the unauthorized practice of law.

Accepted Answer

Frequently, legal and accounting questio...

Question 11

Under AICPA Rule 502, which of the following actions would constitute deceptive advertising?

Accepted Answer

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)   Only b and cE) B) and D)
F) A) and B)

Question 12

Explain the concept of "limited practice without enrollment" under Circular 230 and list several of the special
situations in which the IRS allows this type of representation.

Accepted Answer

Under Section 10.7 of Circular 230, cert...

Question 13

The ABA Model Code of Professional Responsibility has the force of law and covers all attorneys practicing in the United States.

Accepted Answer

A) True 
 B)False

Question 14

If a CPA becomes aware of an error in a tax return, he or she must immediately notify the IRS.

Accepted Answer

A) True 
 B)False

Question 15

CPAs may never disclose confidential taxpayer information under the AICPA rules.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements best explains the need for tax practitioners to understand nonregulatory ethical models of behavior?

Accepted Answer

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.E) A) and D)
F) B) and C)

Question 17

A contingent fee is:

Accepted Answer

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 the aboveE) All of the above
F) A) and B)

Question 18

Which of the following statements is CORRECT regarding unauthorized practice of law?

Accepted Answer

A)   Taxpayers may draft not their own contracts.
B)   Taxpayers may not represent themselves in Tax Court.
C)   A CPA cannot express a legal opinion on a non-tax matter.
D)   A CPA cannot express a legal opinion on a tax matter.E) A) and C)
F) A) and B)

Question 19

The Lowell Bar Association v. Loeb case addressed the issue of:

Accepted Answer

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 the aboveE) A) and B)
F) A) and C)

Question 20

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) :

Accepted Answer

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 the above statements are correct.E) A) and B)
F) All of the above

Exam 1: Introduction to Tax Practice and Ethics

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) :

Correct AnswerverifiedShow Answer

The Lowell Bar Association v. Loeb case addressed the issue of:

Correct AnswerverifiedShow Answer

Regarding open transactions, which of the following statements is INCORRECT?

Correct AnswerverifiedShow Answer

A contingent fee is:

Correct AnswerverifiedShow Answer

CPAs may never disclose confidential taxpayer information under the AICPA rules.

Correct AnswerverifiedShow Answer

Tax planning has a more likelihood of success when a tax practitioner is dealing with an open transaction instead of a closed transaction.

Correct AnswerverifiedShow Answer

Drafting wills is a part of a CPA's professional duties.

Correct AnswerverifiedShow Answer

Under Circular 230, "covered opinions" include oral advice on tax avoidance transactions.

Correct AnswerverifiedShow Answer

According to Rule 101 of the AICPA Rules of Professional Conduct, a CPA in public practice must:

Correct AnswerverifiedShow Answer

If a CPA becomes aware of an error in a tax return, he or she must immediately notify the IRS.

Correct AnswerverifiedShow Answer

Explain the concept of "limited practice without enrollment" under Circular 230 and list several of the special situations in which the IRS allows this type of representation.

Correct AnswerverifiedUnder Section 10.7 of Circular 230, cert...View AnswerShow Answer

Which of the following statements best explains the need for tax practitioners to understand nonregulatory ethical models of behavior?

Correct AnswerverifiedShow Answer

Does the IRS regulate unenrolled tax preparers? Explain your answer.

Correct AnswerverifiedYes, unenrolled preparers are now regula...View AnswerShow Answer

Which of the following statements is CORRECT regarding unauthorized practice of law?

Correct AnswerverifiedShow Answer

The ABA Model Code of Professional Responsibility has the force of law and covers all attorneys practicing in the United States.

Correct AnswerverifiedShow Answer

Under AICPA Rule 502, which of the following actions would constitute deceptive advertising?

Correct AnswerverifiedShow Answer

Explain which types of services a CPA can and cannot provide to avoid engaging in the unauthorized practice of law.

Correct AnswerverifiedFrequently, legal and accounting questio...View AnswerShow Answer

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:

Correct AnswerverifiedShow Answer

Circular 230 bans tax practitioners from giving written advice on a Federal tax issue based on the likelihood of an audit.

Correct AnswerverifiedShow Answer

What should an AICPA member do upon learning about an error in a prior year's tax return?

Correct AnswerverifiedA member must advise the taxpayer prompt...View AnswerShow Answer

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Under Section 10.7 of Circular 230, cert...
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Yes, unenrolled preparers are now regula...
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Frequently, legal and accounting questio...
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A member must advise the taxpayer prompt...
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