If you have access to the AICPA Professional Library database, attempt to complete the following practice exercises. (Note: You can also complete these exercises with a hard copy of the AICPA Professional Standards.) You have been requested by a potential client to conduct an agreed-upon procedures engagement related to the client’s pension plan. Access the AICPA database and determine what type of service this is: audit, attestation, or consulting engagement. Also identify the specific standard governing this type of service.
> In 2015, the proxy vote for Apple’s annual meeting had six proposals: 1. The election of the directors, 2. The ratification of the auditor, 3. An advisory vote on executive compensation (“say on pay”), 4. An amendment to the employee stock purchase
> The Heather Company’s fiscal year ends on June 30. Its employees (with at least three months of experience) are entitled to 12 paid sick days annually for each calendar year beginning on January 1. An employee not taking his/her earned sick days would
> What is included in CCH® Accounting Research Manager?
> Access the Association of Certified Fraud Examiners website (www.acfe.com), and: a. List three qualifications for becoming a CFE. b. List three items located in the ACFE’s resource library.
> Identify the topic of the following Treasury Regulations, Revenue Rulings, or Revenue Procedures: a. Treas. Reg. 1.385-4T e. Rev. Proc. 2017-29, 2017-14 I.R.B. 1065 c. Rev. Rul. 68-609, 1968-2 C.B. 327
> List the following topics for IRS Publications or Form: a. IRS Publication 17 b. IRS Publication 334 c. Form 941
> List the major Code section for the following topics: a. Charitable deductions b. Accrual accounting for deductions c. Foreign income exclusion
> Identify the general contents of each of the following subchapters and parts of the Code: a. Subtitle A, Chapter 1, Subchapter O b. Subtitle C – employment taxes c. Subtitle F, Chapter 67, Subchapter B
> Identify the general content of each of the following Internal Revenue Code sections: a. §274(d)(1) b. §751(b)(3)(A) c. §1221(a)(7)
> You are auditing the financial statements of Air Service Inc., an airplane wholesaler that purchases various types of corporate jets for sale to different companies or individuals. Prior to the sale of an airplane, Air Service utilizes the jet for chart
> In auditing Crispy Inc., the auditor has determined that certain information that is not required by an applicable financial reporting framework, has been included in the company’s basic financial statements which is clearly differentiated and identified
> Alex Curtis, during the audit of Landon Company, has determined that the company will be preparing its financial statements on a liquidation basis of accounting due to the fact that management has decided to liquidate Landon Company at the end of the fir
> After the Julie Company issued its previous years’ financial statements, it noticed that it incorrectly calculated depreciation expense and, thus, disclosed this fact as a prior period adjustment in its current years’ financial statements. (This differe
> Johnson & Young, LLP have been requested to be the auditors of Payroll Inc., an outside service company that processes payroll for over 200 clients. In considering the request, Johnson & Young are concerned that they might be required to be independent o
> Gates Inc. has its reviewed interim financial information included with the audited financial statement. However, after the review the auditor believes that the interim financial information is not prepared in accordance with an applicable financial repo
> In year 1, Joe Josephs, CPA, reviewed Lander Company’s financial statements. However, in year 2, the Lander Company hired Tom Holstrum, CPA, to audit its financial statements. Should Tom meet with Joe, and would Joe be considered as a predecessor audito
> Horizons Inc. has agreed to sell an investment in a subsidiary that has been accounted for on the equity method of accounting to a minority stockholder in exchange for the stockholder’s share in Horizons. Since the fair value of the investment exceeds it
> Albright Inc. has recently issued a 10% stock dividend to its existing stockholders. As a result of the issuance of the stock dividend the market price of the stock declined 25%. Albright has requested your assistance as to treating this stock dividend a
> Alex Corporation is planning this year to present comparative income statements but only the current year’s balance sheet. James Johnston, president of Alex Corporation requests your advice as to whether comparative cash flow statements for both the curr
> The Bootsie Holding Company has sales exceeding $10 billion and each of its three, wholly-owned subsidiaries has sales exceeding $2 billion. Three years ago, the subsidiaries had “complex” capital structures—until Bootsie acquired them. Bootsie’s annua
> In order to help induce Jill Gregory to remain as president of the Reed Company, in 2000 it promises to pay her (or her estate) $200,000 per year for the next 15 years—even if she leaves the company or dies. Reed wants to properly record this transactio
> James Olds buys a four-year, $1,000,000 certificate of deposit from the Second National Bank. James will receive 5% interest in year 1; 5.5% in year 2; 6% in year three; and 6.5% interest in year 4. If James “redeems” this certificate before the maturi
> As of January 1, the Lohse Company owes the First Arbor Bank $350,000 which is due on December 31. Since Lohse seems unable to repay the note, the bank agreed that Lohse can “settle” this balance by agreeing to make four, annual installments on each of t
> Leila Company began an operating lease arrangement with Debco Industries, which was slated to begin on January 1, at monthly lease payments of $10,000. However, Debco’s negligence prevented Leila from moving in on time—since it failed to clean up the pl
> Narda Corporation agreed to sell all of its capital stock to Effie Corporation for three monthly payments of $200,000. After Effie made the first required payment, it ceased making other payments. The stock subscription agreement states that Effie, thu
> Mead Motors purchases an automobile for its new car inventory from Generous Motors, which finances this transaction through its financial subsidiary, Generous Motors Credit Company (GMCC). Mead pays no funds to Generous Motors or GMCC until it sells the
> On January 1, the Old Town Heart Association received a $1,000,000 endowment from the Chamber family. Under terms of the gift, the Association must permanently restrict the endowment—but may spend up to half of the interest earned on the gift or half of
> Find an example of data analytics in tax, one that is not discussed in the text.
> Use a tax service to find the definition of a material adviser in the Code. What type of list must the material adviser maintain? Give the authorities for your answers, using proper citation format.
> Assume that the taxpayer has a tax issue in which the only authorities on point are as follows: (a) a private letter ruling that favors the taxpayer’s position and (b) a Tax Court regular decision that opposes taxpayer’s position. What does the researc
> Find the Treasury Regulation that determines whether educational expenses can qualify as deductible business expenses. Give the citation for the general rule within that regulation.
> Compare the international treatment of segment reporting to the U.S. GAAP treatment.
> Does a tax treaty exist between the United States and Japan? If so, when was the most recent version signed?
> Locate the Valuation Services Standards, and explain the 2 types of valuation engagements to estimate a value.
> Herb Construction Company is building a hotel for speculative purposes. That is, the Company has not yet found a buyer for the hotel, but expects to do so within a few months. Herb, who expects to spend about another two years to complete construction
> What is the penalty provided under Code Section 6662 (b)(2)? Where in that Code section is that penalty defined? Explain the definition in your own words.
> Access the AICPA Professional Standards via Checkpoint, and click on By-laws. Under Section730, determine when can a member receive disciplinary action without a hearing?
> Locate the AICPA Professional Standards via Checkpoint, and click on Personal Financial Planning Services’ link. Locate Section 100 and provide four examples of PFP services
> Access the PCAOB website (www.pcaobus.org), and list two new or proposed auditing standards issued by the PCAOB
> Access the AICPA.org website and locate the ASB under auditing and attestation standards. Examine the approved highlights of the ASB. What were the last three auditing standards issued by the ASB?
> Under Treas. Reg. §1.6011-4, how is a reportable transaction described?
> Locate the Preparation, Compilation & Review Standards, and locate SSARS No. 21 to explain briefly the scope of this standard. Locate the Preparation, Compilation & Review Standards, and locate SSARS No. 21 to explain briefly the scope of this standard.
> After getting selected in Disney’s training program, Minsu became a rock star. His family paid $22,000 to get Minsu trained. How much of these expenses paid by his family are deductible? Reference the specific authority in the Code and regulations.
> Locate the Audit & Attest link and click on Clarified Statements on Auditing Standards, and determine the AU section number that discusses the forms of confirmations
> Access the International Federation of Accountants website (www.ifac.org/IAASB/), and briefly describe the following two International Auditing Standards: ISA 500 and ISA 505.
> On January 1, year 1, Melvin Corporation promises to “unconditionally” transfer a building that cost $100,000 (appraised recently at $300,000) to the Vivian Company on January 1, year 2 for a boat she bought for $250,000. As of December 31, year 2, Melv
> Joe Brock owns 10,000 of the 60,000 outstanding shares of Big Corporation; Leslie Ross own 20,000 shares; Mark Jones and his twin brother Sam each own 5,000 shares; and about 300 other shareholders own the remaining 20,000 shares—with no one other shareh
> Which of the following tax sources are considered primary authorities? a. Tax services b. Tax Court memorandum decisions c. Revenue Procedures d. IRS publications e. Temporary Treasury Regulations
> When is it appropriate to issue an adverse audit opinion? Cite the specific Professional Standard section used for your answer
> On January 1, year 1, the Allen Company issues 100,000 shares of its stock (which is valued at $10 per share) to acquire the Natie Company. The purchase agreement also states that Allen will pay $200,000 in year two if Natie has net income of at least $
> The Builtwell Construction Company is building a hospital for a third party. As such it borrows substantial funds from a foreign bank and repays the required interest costs as scheduled. Builtwell also incurs some foreign currency truncation gains and l
> Provide two examples of a business/due diligence investigation.
> Identify the basic steps of a fraud examination
> What are some risk factors associated with management fraud and employee fraud?
> Differentiate between management fraud and employee fraud.
> What is a risk factor or red flag?
> Bo Broker Company charges a fee for bringing together the Acme Construction Company and the First Bank Company. The parties agree that Bo earns her fee when Acme and First “agree” to the terms of the construction mortgage. However, Bo can receive four
> What are the three components of the fraud triangle? Of what concern are they to the fraud examiner?
> Define forensic accounting.
> Describe three computerized tools used by the fraud examiner/investigator.
> Describe four examples of fraud engagements.
> What are some of the complexities in international practice?
> How will you remain current on authoritative accounting standards?
> What is the purpose of a research memorandum?
> How might one determine accounting alternatives?
> What is the three-part approach used to identify the problem or precise issue?
> What skills are needed for professional practice and the CPA exam?
> On January 1, the Chin Company agreed to purchase all of Jack Jackson’s interest in the company for $30 per share. Jack, who owns 15%—and a controlling interest of Chin—previously threatened to engage in a hostile takeover attempt of Chin. For the last
> What is the focus of accounting, auditing, and tax research?
> What is the PCAOB? What standards does it issue?
> Discuss the difference in “must” and “should” in complying with ASB standards.
> Discuss the relationship between Statements on Auditing Standards (SAS) and auditing interpretations.
> What guidelines exist for the performance of accounting and review services?
> Differentiate between auditing standards and attestation standards.
> Identify three other attest services in addition to the normal financial statement audit.
> What authoritative body exists as to the development of international auditing standards?
> What guidelines are available for the accountant in serving the needs of the nonpublic client?
> What authoritative auditing literature that has general applicability in practice is considered primary authoritative support?
> Lowland Appliance Stores offers customers purchasing its appliances separately priced (extended) warranties. Lowland services these extended warranties. Its customers can receive no refunds for not using these warranties, and, of course, Lowland must ho
> Define professional skepticism, and explain its importance in an audit.
> How may accounting or auditing research aid the practitioner in complying with the Accounting Principles Rule of the Code of Professional Conduct?
> Explain the significance of the Accounting Principles Rule of the AICPA Code of Professional Conduct.
> Explain the importance of the Code of Professional Conduct in the performance of an audit.
> List the primary auditing guidelines for public sector auditing.
> State the objective of the Single Audit Act. When is this act applicable?
> Explain the 3 categories of professional responsibilities that the PCAOB requires for an auditor of a public company.
> What is an assurance service engagement?
> Identify the sources that are published in the IRB.
> What does it mean when the IRS announces a nonacquiescence?
> A new client for your firm is Sam Jones who is preparing personal financial statements for a bank loan. Mr. Jones is attempting to list his social security benefits to be received based on his future life expectancy as an asset on his financial statemen
> Clarify the meaning of the term precedent for tax research.
> Find the NAICS code for the property and casualty insurance business.
> Compare or contrast the work completed for tax compliance and tax litigation.
> Discuss typical challenges in tax research.
> Discuss how professional tax work is changing.
> Go to your library’s website. Find the library’s location of one AICPA’s reference books. If your library does not have it, suggest where you should go to view this important research tool and explain the book’s location within the library.
> Diagram the court hierarchy, identifying the three courts of original jurisdiction on the bottom, the two different courts in the middle, and the ultimate court on top.
> Compare and contrast regular Tax Court decisions with Tax Court memorandum decisions.
> Explain when a tax adviser would encourage a client to go to federal district court, rather than Tax Court.
> Identify and explain the five basic steps of the tax research process.
