Tax Consulting Tax Ethics and Professional Standards

Question 1

Circular 230 governs the practice of whom before the Internal Revenue Service?

Accepted Answer

Attorneys, CPAs, enrolled agents, and other tax professionals authorized to practice before the IRS

Answer

Only licensed CPAs

Answer

Only attorneys

Answer

Only enrolled agents

Question 2

Under Circular 230, a practitioner must NOT do which of the following?

Accepted Answer

Willfully assist in the preparation of a return with a position lacking a reasonable basis

Answer

Advise clients on aggressive but legal tax positions

Answer

Charge a reasonable contingent fee for audit representation

Answer

Represent multiple clients with similar but not conflicting interests

Question 3

What is the 'reasonable basis' standard for a tax position under IRC Section 6662?

Accepted Answer

A roughly 5-10% chance of being sustained if challenged

Answer

A more than 50% chance of being upheld on the merits

Answer

A less than 5% chance of being sustained

Answer

Absolute certainty the position is correct

Question 4

Enrolled Agents (EAs) are authorized to practice before the IRS by:

Accepted Answer

Passing the Special Enrollment Examination or having former IRS employment

Answer

Passing the bar exam

Answer

Obtaining a CPA license

Answer

Registering with the SEC

Question 5

Under the AICPA Code of Professional Conduct, what is the primary obligation when a CPA discovers a prior year error in a client's tax return?

Accepted Answer

Inform the client of the error and its implications, and recommend corrective action

Answer

Immediately report the error to the IRS without client consent

Answer

Ignore it if the statute of limitations has expired

Answer

Automatically amend the return without client permission

Question 6

The 'more likely than not' standard for tax positions means the position has what probability of being sustained?

Accepted Answer

More than 50% chance of being upheld

Answer

More than 25% chance of being upheld

Answer

More than 75% chance of being upheld

Answer

Absolute certainty of being upheld