PFIN 7:STUDENT EDITION-MINDTAP (1 TERM)
7th Edition
ISBN: 9780357033647
Author: Billingsley
Publisher: CENGAGE L
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Chapter 3, Problem 8FPE
Summary Introduction
To discuss: The preparations for a tax audit.
A taxable income is termed to any person's or business' remuneration that is utilized to decide tax liability. The gross income or total income is utilized as the origin to ascertain the amount of taxes an individual or a business owes to the government for the regular tax period.
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What is a key step in the tax audit process? a) Submitting financial statements to the tax
authority b) Reviewing the taxpayer's records and documents c) Negotiating a settlement
with the tax authority d) Publishing the audit findings to the public
1. Bob is issued with a notice of assessment. What does the Commissioner rely on when issuing a notice of assessment?a. Taxpayer's honesty.b. Asset register.c. Taxpayer's income tax return.d. Material collected from auditing an accountant.
The AICPA has issued standards for CPAs in tax practice, called Statements on Standards for Tax Services (SSTS). Download the Statement on Standards for Tax Services No. 1-7Links to an external site.. What does the SSTS say about a CPA relying on information supplied by the client (see SSTS #3)? Are estimates ever permitted to be used in preparing a tax return (see SSTS #4)?
Chapter 3 Solutions
PFIN 7:STUDENT EDITION-MINDTAP (1 TERM)
Ch. 3 - Discuss the basic principles of income taxes and...Ch. 3 - Prob. 2LOCh. 3 - Prob. 3LOCh. 3 - Explain who needs to pay estimated taxes, when to...Ch. 3 - Know where to get help with your taxes and how...Ch. 3 - Implement an effective tax planning strategy.Ch. 3 - Calculating marginal tax rates. Lacey Hansen is...Ch. 3 - Estimating taxable income, tax liability, and...Ch. 3 - Calculating taxes on security transactions. If...Ch. 3 - Prob. 4FPE
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- Explain who needs to pay estimated taxes, when to file or amend your return, and how to handle an audit.arrow_forwardIf the audit does not turn out favorably: (Select all that apply.) A. Mrs. Hubbard can file an appeal with the auditor by presenting additional materials. B. Mrs. Hubbard can file an appeal with the auditor's manager. C. Mrs. Hubbard can go to a tax court. D. Mrs. Hubbard can file a formal appeal with the IRS.arrow_forwardYour spouse has just accepted a new job as an Accountant at an SEC restricted audit client. Which factors must you consider in order to determine whether this impacts your independence?arrow_forward
- Explain what is meant by determining the degree of correspondencebetween information and established criteria. What are the information and establishedcriteria for the audit of Jones Company’s tax return by an internal revenue agent? Whatare they for the audit of Jones Company’s financial statements by a CPA firm?arrow_forwardMrs. Hubbard, a mother of two, has been selected for an audit. Advise her on what to do to prepare for the audit and what to do if the audit does not turn out favorably. Question content area bottom Part 1 To prepare for the audit: (Select all that apply.) A. Mrs. Hubbard should hire an accountant or tax attorney, if necessary. B. Mrs. Hubbard should anticipate probable questions and develop responses. C. Mrs. Hubbard should gather all supporting documents. D. Mrs. Hubbard should reexamine the areas where the IRS raised questions.arrow_forwardBefore taking a job as an auditor, what things should they keep in mind? Explain.arrow_forward
- As a taxpayer referring to the information provided by your classmates related to the informational needs of the user group you have chosen, state whether the objectives of financial reporting they have listed meet your needs, whether any additional information is needed by your user group, and why this information would be beneficial to the financial decisions you would need to make. Are there any additional objectives that should be listed for your user group, if so what are they? How do your needs differ from the other user groups? how would I respond to the following: In reviewing the FASB concepts, I will address them from the school department point of view, which operates under the city government. Concept no.1 requires that financial statements help users to assess whether to donate to an organization, and to understand how (if they choose to donate) their resources will be used. For a school department it is imperative that the public know what their tax dollars are used for,…arrow_forwardHow are medical expenses, mortgage interest, casualty losses used when it comes to filing a tax report? Any examples?arrow_forwardIndicate whether the following statements are "True" or "False" regarding AICPA Statements on Standards for Tax Services. a. The Statements are enforceable standards of professional practice for AICPA members working in state or Federal tax practice. b. In preparing a return, a CPA must verify information furnished by the client or by third parties. c. A CPA should make a reasonable effort to obtain from the client, and provide, appropriate answers to all questions on a tax return before signing as preparer. d. The CPA should not take a questionable position based on the probabilities that the client's return will not be chosen by the IRS for audit. e. A CPA may prepare a tax return using estimates received from a taxpayer if it is impracticable to obtain exact data.arrow_forward
- The Code of Conduct in use at a well-known national tax preparation firm says that if you are contacted by law enforcement; a governmental agency such as the IRS, SEC, or FBI; or the media about “actual or suspected improper or illegal activity of any kind by you or anyone connected with the Company, you must immediately report the contact to your manager (unless that would be inappropriate under the circumstances) and the Legal Department.…” Is this Code of Conduct provision ethical?arrow_forwardWhich of the following professional services is an attestation engagement?(1) A consulting service engagement to provide computer-processing advice to a client.(2) An engagement to report on compliance with statutory requirements.(3) An income tax engagement to prepare federal and state tax returns.(4) The preparation of financial statements from a client’s financial records.arrow_forwardDescribe the nature of the evidence the internal revenue agentwill use in the audit of Jones Company’s tax return.arrow_forward
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