AICPA Regulation 4

Question 1

When a taxpayer uses the accrual method of accounting, income is generally recognized when:

Accepted Answer

All events have occurred fixing the right to receive income and the amount can be determined with reasonable accuracy

Answer

Under the all-events test for accrual-basis taxpayers, income is recognized when all events fixing the right to receive it have occurred and the amount is reasonably determinable.

Question 2

Which of the following correctly describes the statute of limitations for the IRS to assess additional tax when a taxpayer omits more than 25% of gross income from a return?

Accepted Answer

6 years from the date the return was filed

Answer

Under IRC §6501(e), when a taxpayer omits more than 25% of gross income, the assessment period is extended to 6 years from the filing date.

Question 3

Which type of agency relationship is created when a principal's words or conduct lead a third party to reasonably believe an agent has authority, even if the principal did not actually grant it?

Accepted Answer

Apparent authority

Answer

Apparent authority arises when the principal's conduct causes a third party to reasonably believe the agent has authority, binding the principal even without actual authorization.

Question 4

For federal estate tax purposes, which deduction allows a decedent's estate to deduct the full value of property passing to a surviving U.S. citizen spouse?

Accepted Answer

Marital deduction

Answer

The unlimited marital deduction under IRC §2056 allows an estate to deduct the entire value of qualifying property transferred to a surviving U.S. citizen spouse, eliminating estate tax on that amount.

Question 5

Under AICPA ethics rules, a CPA firm's independence is considered impaired if a covered member has which of the following interests in an attest client?

Accepted Answer

A direct financial interest, regardless of materiality

Answer

AICPA rules impair independence when a covered member has any direct financial interest in an attest client, regardless of materiality or dollar amount.

(AICPA) American Institute of Certified Public Accountants Practice Test

(AICPA) American Institute of Certified Public Accountants Practice Test

AICPA Regulation 4