Question

1 A CPA takes on a new individual tax client. The client drops off the information on February 10, 20xx. The CPA extends the return and notifies the client that it was extended. The client calls and emails multiple times during the year and the CPA is unresponsive or says that they are working on it. The tax return is completed on 10/15/20xx. The client owes significant taxes and penalties for non payment.

a If the information for determining the tax payment was available before April 15, 20xx, then the CPA had an obligation to prepare enough of the estimate to know this before the extension. This is the principle of competence, with the diligence specficically being overlooked.

b If the information for determining the tax payment was available before April 15, 20xx, then the CPA does not have an obligation to calculate the estimate since no engagement letter was signed and it is outside the scope of the work to make the CPA responsible for someone's taxes.

c If the information for determining the tax payment was available before April 15, 20xx, then the CPA could be accused of professional neglience if the engagement letter does not spell out the obligation clearly.

d None of the above.

2 For scope of services, a CPA should have which of the following:

a Practice in firms that have in place internal quality control procedures to ensure that services are competently delivered and adequately supervised; determine, in their individual judgments, whether the scope and nature of other services provided to a client have an engagement letter; assess, in their individual judgments, whether an activity is consistent with their role as professionals.

b Practice in firms that have in place internal quality control procedures to ensure that services are competently delivered and adequately supervised; determine, in their individual judgments, whether the scope and nature of other services provided to a client have a engagement letter; assess the scope of the engagement for ability to complete is a normal time.

c Practice in firms that have in place internal quality control procedures to ensure that services are • competently delivered and adequately supervised; determine, in their individual judgments, whether the scope and nature of other services provided to an audit client would create a conflict of interest in the performance of the audit function for that client; assess, in their individual judgments, whether an activity is consistent with their role as professionals.

d None of the above.

3 You are a partner at a Big 4 firm, under which scenario would your independence be impaired?

a Your new son-in-law is the son of an audit client.

b You have been on an audit client for three years.

c You hire a staff accountant from an audit client.

d None of the above.

Answer 1

1) A CPA takes on a new individual tax client. The client drops off the information on February 10, 20xx. The CPA extends the return and notifies the client that it was extended. The client calls and emails multiple times during the year and the CPA is unresponsive or says that they are working on it. The tax return is completed on 10/15/20xx. The client owes significant taxes and penalties for non payment.

Answer :option (a)

If the information for determining the tax payment was available before April 15, 20xx, then the CPA had an obligation to prepare enough of the estimate to know this before the extension. This is the principle of competence, with the diligence specficically being overlooked.

2) For scope of services, a CPA should have which of the following:

Practice in firms that have in place internal quality control procedures to ensure that services are • competently delivered and adequately supervised; determine, in their individual judgments, whether the scope and nature of other services provided to an audit client would create a conflict of interest in the performance of the audit function for that client; assess, in their individual judgments, whether an activity is consistent with their role as professionals.

Answer option (c)

3 You are a partner at a Big 4 firm, under which scenario would your independence be impaired?

Your new son-in-law is the son of an audit client.

answer option (a)