Regulatory Frameworks & Compliance Flashcards
7 cards from real Certified Public Accountant practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Regulatory Frameworks & Compliance flashcards as text
Which element is NOT required for a valid written tax opinion to meet the 'more likely than not' standard under Circular 230?
Answer: A guarantee that the IRS will not challenge the position
No tax opinion can guarantee IRS acceptance; the more-likely-than-not standard requires analysis and a conclusion but not certainty of outcome.
Under the USA PATRIOT Act, financial institutions are required to implement a Customer Identification Program (CIP). Which information is NOT typically required to be collected for individual customers?
Answer: Credit score
CIP requires name, date of birth, address, and identification number (SSN/TIN) for individuals; credit scores are not a CIP requirement.
Under the Securities Exchange Act of 1934, Section 10(b) and Rule 10b-5, insider trading liability requires proof of which element?
Answer: The defendant traded on material, nonpublic information in breach of a duty
Section 10(b)/Rule 10b-5 requires proof that the defendant traded on material nonpublic information in breach of a duty of trust or confidence.
COSO's Internal Control – Integrated Framework identifies five components of internal control. Which component includes the 'tone at the top' concept?
Answer: Control Environment
The Control Environment component encompasses the organization's ethical values, management philosophy, and organizational structure, including tone at the top.
Which IRS penalty applies when a taxpayer substantially understates income tax, defined as an understatement exceeding the greater of 10% of the correct tax or $5,000?
Answer: 20% accuracy-related penalty under IRC Section 6662
The 20% accuracy-related penalty under IRC Section 6662 applies to substantial understatements of income tax meeting the 10%/$5,000 threshold.
When a CPA performs a compilation engagement under SSARS, which of the following statements is correct?
Answer: The CPA provides no assurance on the financial statements
In a compilation, the CPA assists in presenting financial information but provides no assurance that the statements are free from material misstatement.
The AICPA's conceptual framework for independence identifies threats that may impair a CPA's independence. Which threat arises when a CPA audits their own firm's work?
Answer: Self-review threat
A self-review threat occurs when a CPA is in a position of auditing or reviewing their own previous work or the work of their firm.