The tax practice standards in Treasury Circular 230 do notapply to which of the following individuals:

a. A CPAs preparing tax returns.

b. An attorney assisting a client who is being audited by the IRS.

c. Enrolled Agents

d. An accountant responsible for preparing financial statements in accordance with GAAP.

Deebais the newest CPA hired on by the Tax Department of Feel Better Surgical Center, L.P. Her supervisor has asked her to take an extraordinary position in reporting a transaction on the tax return. Even though Deebais a recent graduate and has very little accounting experience, she feels certain based on some research she has done that the position is unsupported by the Internal Revenue Code, Treasury Regulations and case law. Deebamust:

a.Cave in to her boss's demands since her boss has more experience than Deeba.

b.Do what her supervisor says since Deebais being paid only to fill out the tax return, not to use independent judgment.

c.Not sign off of a position for which the CPA cannot find proper support.

d.Take the extraordinary position since she is protected from liability as she is just obeying orders.

Alexander, CPA, becomes aware that his biggest and most important client, hedge fund Greenrock, Inc., has been systematically under reporting material amounts of taxable income. Which of the following is the correct course of action according to Treasury Circular 230?

a. Call the IRS directly and tell them about the underreporting.

b. Inform the client that they need to disclose the income to the IRS.

c. Withdraw from the engagement if the client refuses to disclose.

d. Both b. and c.

Amanda, EA, is helping a married couple, Homer and Wanda, prepare their tax return. Amanda accidentally uncovers the fact that Homer is under-reporting some of their income and diverting the funds to pay for a bass boat. Amanda does nothing to correct the situation since she doesn't want to be fired by Homer. She prepares the return with the incorrect income numbers and sends it to the taxpayers for signing and filing. Which of the following statements is false?

a. Amanda has committed an acts discreditable under the AICPA Code of Professional Conduct since she knowingly allowed Wanda to sign a return in which there was a material error.

b. Amanda has violated Treas. Circ. 230 10.51(a)(4)Disreputable Conduct provisions since she assisted a client in evading Federal taxes.

c. Amanda has done nothing wrong since all she is doing to making the client happy.

d. Amanda may be subject to probation, suspension or disbarment.

Raj'sclient, Sally, has told him that she nets $40K a year in self-employment income. Raj knows that Sally does not have any other source of income, substantial savings, or inheritance, yet Sally owns a mansion in a tony neighborhood, drives an expensive imported roadster, and shops in high-end shops. Does Raj have a duty to make further inquiry?

a. No, because he can accept anything a client tells him without further inquiry.

b. Yes, because Raj has a duty to make further inquiry since there is a possible inconsistency between the $40K in income and what the client really earned.

c. No, because Sally's lifestyle is none of his business.

d. Both a. and c.

Marcus prepares the tax return for superstar Justin Timberwood. He sells information to a national tabloid regarding Justin's charitable contributions. Which of the following is true?

a. Marcus has not done anything wrong since he only revealed part of the client's tax return, not the whole document.

b. Marcus has violated tax practitioner standards since he did not maintain client confidentiality.

c. Marcus' actions are acceptable since anybody in his position would have done the same thing.

d. None of the above

Austin, CPA, has been assessed by the IRS a Section 6694 understatement penalty because of allegedly faulty work in advising a client the taxability of a transaction. What is the best way of defeating this penalty?

a. Ask the IRS for a do-over so Austin can re-prepare the return correctly this time.

B. Austin has no liability since it is ultimately the taxpayer's responsibility to file a correct return.

c. Demonstrate that Austin had a better than 1 in 3 change of prevailing based on an analysis of the IRC, Treasury Regulations, Case Law and Treasury publications.

d. None of the above.

Which of the following is NOT a way of defending a tax preparer from a negligence lawsuit?

a. Demonstrate that the tax practitioner acted reasonably by meeting tax practice standards.

b. Show that the tax practitioner's actions, even if wrong, did not cause the client's losses.

c. Bring evidence that the taxpayer's controller gave the tax preparer bad information and there was no way the preparer would have known this fact.

d. Ignore the lawsuit and hope it will go away.