Tax and Ethics Homework:

1. A CPA is preparing a tax return and has reasonable grounds for not answering an applicable question on a clients return then the CPA should:

2. If, during an IRS audit of a clients tax return, the CPA discovers that the clients return contains a mathematical error the CPA should:

3. During the course of an engagement for a married couple the parties become embroiled in a nasty divorce. One party asks the CPA to assist in providing tax advice on that partys behalf. The CPA should:

4. A CPA discovers an error on a prior tax return prepared and filed by the CPA. The CPA should:

5. A client refuses to correct or amend a material error on a prior years return. The error is a significant inventory misstatement that materially impacts the current year's numbers. In the current year the CPA should:

6. The client tells the CPA that she paid about $500 for office supplies during the year but has lost her receipts. The client tells the CPA to make up a number like $491 to make the return look more accurate. The CPA should:

7. The client is running a little short of cash and indicates that the client plans to defer making deposits of Trust Fund monies withheld from employee paychecks for federal withholding and FICA taxes. The CPA should:

8. The CPA was pressed for time at a deadline and neglected to carefully quality control a tax return. Upon further investigation, the CPA determines that the client provided fictitious expenses to the CPA. The IRS, on audit, found the fraudulent expenses on the tax return. The CPA should:

9. The CPA helped the client conceal cash receipts in the preparation of a clients tax return. The CPA has violated what rule(s) in Circular 230 and the SSTS?

10. In taking a tax position, what is the difference between frivolous, a reasonable basis, realistic possibility, substantial authority, and more likely than not? Assign a percentage chance of being upheld in your answer.

11. A CPA asks a client if the client has any foreign financial assets. The client responds in writing that she does not have any foreign financial assets. A disclosure of foreign financial assets is required on the clients tax return. The CPA has visited the client at the clients house in the Bahamas and knows that the client owns a digital media business in the Bahamas. Has the CPA violated any rules in completing a tax return relying on the clients written representation?

12. During an audit the CPA discovers an error on the clients tax return. The client tells the CPA to keep quiet about this. Should the CPA tell the IRS that there is an error when asked? If not, what should the CPA do?