What if I have other questions about the disciplinary process?

A: Contact our office at: TNSBA Davy Crockett Tower, 2nd Floor, 500 James Robertson Parkway, Nashville, TN 37243-1141.

CHAPTER 3 – REVIEW QUESTIONS

The following questions are designed to ensure that you have a complete understanding of the information presented in the chapter. They do not need to be submitted in order to receive CPE credit. They are included as an additional tool to enhance your learning experience.

We recommend that you answer each review question and then compare your response to the suggested solution before answering the final exam questions related to this chapter.

1. Which of the following is the primary purpose of the Board of Accountancy: a) promoting the CPA profession

b) protecting the general public

c) setting minimum competency standards d) collecting CPA permit fees

2. Which of the following is true regarding the AICPA’s Code of Professional Ethics and Tennessee CPAs:

a) AICPA rules are voluntary guidelines

b) AICPA ethics rules need not be followed by non AICPA members c) the AICPA does not have a Code of Professional Ethics

d) a Tennessee CPA must generally comply with the AICPA Code of Professional Ethics when Board rules are silent on any matter

Use the following fact pattern for the next 4 questions.

Jim Doe, CPA (Doe) prepares tax returns for a large number of clients. Doe has prepared the Form 1040 and Schedule C for Joe Plumber for the last ten years. Joe Plumber (Plumber) keeps no business records except for a profit/loss summary that Plumber’s wife prepares using Quicken. Doe has always calculated depreciation and made all other tax related adjustments to Plumber’s Quicken report to prepare Plumber’s Form 1040. Plumber provides all the necessary documents to Doe and asks Doe to prepare Plumber’s current year tax return. Doe prepares Plumber’s current year tax return even though Plumber still owes Doe fees for preparing last year’s tax return as well as year-end tax planning. Doe does not use any type of client engagement letter since he only prepares tax returns.

3. Assume that Doe demands payment of all past due fees as well as payment for the current year tax return preparation prior to releasing the tax return to Plumber. Which of the following is true regarding releasing the current year tax return to Plumber: a) Doe may withhold releasing the current year tax return until all current and past

due fees are paid

b) Doe may withhold releasing the current year tax return pending the payment of past due fees but may not demand payment of current year fees prior to issuing the tax return

c) Doe must release the current year tax return regardless of the status of unpaid fees

d) neither the Board of Accountancy nor the AICPA have any rules relating to releasing client records

4. Plumber refuses to pay any of the current or past due fees and demands a copy of all of Doe’s workpapers as well as the return of all documents provided to Doe. Which of the following is true:

a) Doe need not return any client records nor supply copies of any workpapers b) Doe must return any client supplied records but need not provide copies of any

workpapers

c) Doe must return any client supplied records and prior year depreciation records that are in Doe’s prior year workpapers but not contained in prior year tax return d) Doe must return any client supplied records and copies of all workpapers

5. Plumber decides to prepare his current year tax return himself. Plumber demands that Doe provide a copy of Plumber’s prior year tax return and the depreciation workpapers for the current year that Doe prepared for Plumber’s current year tax return. Which of the following is true:

a) Doe must provide Plumber a copy of the prior year tax return and the current year depreciation workpapers

b) Doe must provide Plumber a copy of the prior year tax return but not the current year depreciation work papers

c) Doe must provide Plumber a copy of the current year depreciation workpapers but not a copy of the prior year tax return

d) Doe is not required to provide Plumber a copy of the prior year tax return or the current year depreciation workpapers

6. At this point, both Doe and Plumber have spent numerous unproductive hours arguing over client records, releasing tax returns, and collecting payment. Plumber has threatened to file a complaint against Doe with the Board of Accountancy. Doe has looked into filing a lawsuit in Small Claims Court against Plumber. What could Doe and Plumber have done to avoid this mess:

a) nothing; problems like this occur in business and are simply a fact of life b) use an engagement letter

c) communicated with each other before the problem arose d) both b and c would have helped

CHAPTER 3 – SOLUTIONS AND SUGGESTED RESPONSES

1. A: Incorrect. The CPA societies try to promote the profession. B: Correct. A secondary objective is to set competency standards. C: Incorrect. Setting competency standards is a secondary purpose. D: Incorrect. All fees collected are used in the regulation of the profession. (See the Introduction in the course material.)

2. A: Incorrect. Tennessee CPAs must comply with AICPA standards when the state specific rules are silent on any matter.

B: Incorrect. Tennessee CPAs must comply with AICPA standards when the state specific rules are silent on any matter.

C: Incorrect. Tennessee CPAs must comply with AICPA standards when the state specific rules are silent on any matter.

D: Correct. This includes any changes in the rules and interpretations. (See Rule 0020-3-.02 in the course material.)

3. A: Correct. Prior to being released, the completed tax return is considered to be part of the CPA’s workpapers and is the property of the CPA. Accordingly, the tax return need not be released to the client. The CPA may set the terms for releasing the tax return. Such terms may include receiving payment for some or all fees.

B: Incorrect. Prior to being released, the completed tax return is considered to be part of the CPA’s workpapers and is the property of the CPA. Accordingly, the tax return need not be released to the client. The CPA may set the terms for releasing the tax return. Such terms may include receiving payment for some or all fees. The client has no right to pay only a portion of the fees and demand release of the tax return.

C: Incorrect. Prior to being released, the completed tax return is considered to be part of the CPA’s workpapers and is the property of the CPA. Accordingly, the tax return need not be released to the client. The CPA may set the terms for releasing the tax return. Such terms may include receiving payment for some or all fees. The client has no right to demand the release of the return prior to paying fees as required by the CPA.

D: Incorrect. Both the Board of Accountancy and the AICPA have extensive rules relating to CPA workpapers and the return of client records. In fact, failure to return client records is one of the most common complaints received by the Board of Accountancy.

(See Rule 0020-3-.11 in the course material.)

4. A: Incorrect. Rule 0020-3-.11 requires the return of all client records upon request. See Rule 0020-3-.11.