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2 Autove Documenti Home Insert Draw Design Layout References Mailings Review View Tell me Times New... 12 Share Aa A - A A x 21

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2 Autove Documenti Home Insert Draw Design Layout References Mailings Review View Tell me Times New... 12 Share Aa A - A A x 21 41 Asubcode Abete AaBbce Ac AaBb ADID B TV Du For each of the following independent cases, indicate whether you believe any penalty would be assessed under ITA 163.2 on any of the parties involved. Explain your conclusion. Case 3 An accountant has been engaged by a new client to use his records to prepare an income state- ment and to use the information in this statement to prepare a tax return. As part of this engagement, the accountant reviews both the expense and revenue information that has been provided to him by the new client. He finds revenues of $285,000 and expenses of $201,000. The information used to arrive at these figures seems reasonable and, given this, the accountant files the required tax return. When the client is audited, the CRA finds a large proportion of the expenses claimed cannot be substantiated by adequate documentation and may not have been incurred. Furthermore, it appears that the client has a substantial amount of unreported revenues. Case 4 An accountant who lives in an expensive neighbourhood notices that the house next door has just been sold. It was listed for $1 million. The accountant introduces himself to the new neighbour and they become friends. At tax time the friend hires the accountant to prepare his return. The accountant is given a T4 with $25,000 in income reported. Thinking that the gross income is on the low side, the accountant asks if this is all the income he has and the friend replies that it is so. The accoun- tant is still not satisfied with the answer as the income seems to be out of proportion with the living standard of the friend, so he then asks him if he has received money from any source other than his employment and the friend replies that he received a substantial inheritance from his mother last year. The accountant does not ask any further questions and prepares and files the return. When the friend is audited it is discovered that he has over $200,000 in unreported income. Focus 533 words English (Canada)

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