1. Velma, CPA, works in the Tax Department of Scooby Pharmaceuticals, Inc, which is located in Honolulu, HI. Fred, who is a partner in a public accounting firm, is anxious to win some business from Velmo, who is a key decision maker on hiring outside consultants. Fred knows that Velma is fond of NASCAR racing and offers to sponsor an all-expense paid weeklong trip for Velma to meet with other members of Fred's firm at their hospitality suite at the Indianapolis Motor Speedway. The meeting coincides with the Indianapolis 500 race being held. The firm will provide to Velma free of charge an all-access pass to the event. The business matters that Velma and Fred's firm need to discuss is scheduled to take about one hour. Velma will be free to spend the rest is the week. However she would like. If Velma were to accept Fred's offer of the trip, this would be an example of what type of threat to independence?

a. Undue influence.

b. Adverse interest.

c. Self-review threat.

d. None of the above.

1. Teri, CPA, works for the Internal Revenue Service as a field auditor. Which are the following statements are false?

a. The Rules of Professional Conduct applies to CPAs working in government

b. Teri is not bound by the Rules of Professional Conduct since she works for the IRS and therefore, need only adhere to rules issued by the Treasury Department.

c. Teri is subject to license suspension and/or expulsion if she commits an Acts Discreditable.

d. Teri must discharge her professional responsibilities with due care-meaning that she must demonstrate competence and diligence- even though she is not working in public accounting.

1. Daphne, CPA, is preparing a joint tax return for a married couple, Ben and Jennifer, who are in the process of a divorce. The clients live and work in a community property state. There are no pre- or post- nuptial ogreements overriding the community nature of wages earned during the marrioge. Jennifer has secretly started a successful online business selling sports apparel. When Daphne questions Jennifer about the Forms 1099 she received from the online business, Jennifer requests that Daphne not report the income on the joint tax return and to make it "our little secret."

a. Daphne is unable to inform Ben about Jennifer's income due to client confidentiolity rules.

b. Daphne can keep the information from Ben if the couple were filing separately.

c. Daphne can and should disclose Jennifer's income to Ben. Dophne will not violate the Confidential Client Information Rule* under TX RPC 501.75 if she does so. Daphne should also, at a minimum, consider withdrawing from engagement.

D. None of the above