CTC Ethical Standards & Professional Conduct 4

Question 1

A CTC advertises that they guarantee clients will receive a tax refund. This advertisement is:

Accepted Answer

Prohibited because guaranteeing results is misleading and violates advertising ethics

Answer

Guaranteeing specific outcomes in tax matters is misleading advertising that violates Circular 230 and professional ethics standards because tax results depend on many uncontrollable factors.

Question 2

Under the concept of professional independence, a CTC should:

Accepted Answer

Exercise objective judgment even when the conclusion is unfavorable to the client

Answer

Professional independence requires objective judgment; a practitioner who simply validates whatever the client wants is not providing genuine professional service.

Question 3

A client provides a CTC with cash receipts to document deductible business expenses. The practitioner notices the amounts appear inflated. What should the practitioner do?

Accepted Answer

Make further inquiry and, if the client cannot substantiate the amounts, exclude or adjust the entries

Answer

When data appears suspicious, due diligence requires inquiry; if the client cannot substantiate the amounts, the practitioner must not include unsupported deductions.

Question 4

Which of the following describes 'pattern of disregard' under Circular 230?

Accepted Answer

Repeated failures to follow IRS rules or regulations across multiple engagements

Answer

A pattern of disregard involves repeated, intentional failures to comply with IRS rules across multiple returns or matters, which is a basis for sanctions under Circular 230.

Question 5

A CTC is asked to sign a tax return prepared entirely by the client. Before signing as preparer, the practitioner must:

Accepted Answer

Review the return and ensure it meets the same standards as if the practitioner had prepared it

Answer

A practitioner who signs a return as preparer takes responsibility for its accuracy and must apply the same due diligence standards regardless of who originally drafted it.

(CTC) Chartered Tax Consultant Practice Test

(CTC) Chartered Tax Consultant Practice Test

CTC Ethical Standards & Professional Conduct 4