Wiley CPA Examination Review Focus Notes E-Book

Kevin Stevens

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 105

Veröffentlichungsjahr: 2010

Beschreibung

This book uses acronyms and mnemonic devices to help candidates remember the accounting rules and checklists needed to pass the exam. It provides a thorough review of all basic skills and concepts need for the exam. The new computerized CPA exam includes one or two case study simulations in each section, approximately 20-40 minutes in length, that will require candidates to perform research activities, use common spreadsheet and word processing functions, and use a financial calculator or spreadsheet to perform financial calculations. In order to assist candidates in successfully performing these simulations, Wiley Focus Notes include references to authoritative literature, sample spreadsheets, and key concepts, tips and tools to facilitate research

Leseprobe

Table of Contents

Title Page

Copyright Page

Preface

About the Authors

Accountants’ Liability

Liability under Common Law

Liability under Federal Securities Regulations

Liability as a Tax Preparer

AICPA Code of Professional Conduct

Standards for Consulting Services

Standards for Tax Practice

Federal Securities Regulations

Securities Act of 1933 (33 Act)

Securities Exchange Act of 1934 (34 Act)

Sarbanes-Oxley Act of 2002

Partnership

Partnership Characteristics

Limited Liability Arrangements

Limited Liability Partnerships (LLPs)

Limited Liability Companies (LLCs)

Corporations

Characteristics of Corporations

Promoters

Directors & Officers

Shareholders

Business Combinations

Dissolution

Environmental Law

Federal Water Pollution Control Act (Clean Water Act)

Contracts

Formation of Contracts

Validity & Enforceability

Rights & Obligations

Breach of Contract

Sales

Offer, Acceptance, & Enforceability

Goods in Transit

Special Sales

Seller’s Warranties

Product Liability

Breach of Contract

Negotiable Instruments

Commercial Paper

Defenses against a Negotiable Instrument

Liability of Parties

Other Instruments

Secured Transactions

Attachment & Perfection

Priorities among Claims

Default by Debtor

Credit Card Debt

Bankruptcy

Voluntary Filing—Chapter 7

Involuntary Filing—Chapter 7

Powers of Bankruptcy Trustee

Distribution of Assets

Exceptions to Discharge

Denial of Discharge

Business Reorganizations – Chapter 11

Repayment Plans – Chapter 13

Alternatives to Bankruptcy

Suretyship

Sureties

Cosureties

Agency

Types of Agency

Liability

Authority of Agent

Terminating Agent’s Authority

Environmental Law

The Clean Air Act

The Noise Control Act

The Comprehensive Environmental Response, Compensation, and Liability Act ...

Employment

Health & Safety

Retirement & Security Income

Other Employment Laws

Unions & Collective Bargaining

Discrimination

Affirmative Action

Property

Personal Property

Real Property

Insurance

Insurable Interest Requirement

Coinsurance

Individual Income Tax

Accounting Method

Gross Income

Adjustments for AGI

Roth IRAs

Coverdell Education Savings Accounts (ESAs)

Additional for AGI Deductions

Deductions

Exemptions

Credits

Self-Employment Tax

Tax Payments

Filing Status

Tax Return Schedules

Filing Requirements

Statutes of Limitations

Depreciation

Depreciable Real Property

Depreciable Personal Property

Property Dispositions

Depreciation Recapture

Taxation of Gains & Losses

Related Party Sales

Special Transactions

Partnership Taxation

Formation of Partnerships

Taxation of Partnerships

Distributions

Sale of Partnership Interest

Termination

Corporate Income Tax

Corporate Formation

Computing Corporate Income Tax

Supplemental Tax Schedules

Distributions to Stockholders

Corporate Termination

Corporate Reorganizations

Parent-Subsidiary Transactions

Section 1244 Stock

S Corporations

Formation of S Corporations

Taxation of S Corporations

Termination of S Corporation Status

Taxation of Estates & Trusts

Estates

Trusts

Estate & Gift Tax

Tax Due

Property Received by Inheritance or Gift

Estates & Trusts

Trust Requirements

Types of Trusts

Obligations of Trustee

Trust Distributions

Distribution of Estates

Per Capita Distribution

Intestacy Rules

Income Tax Return Preparers

Procedures in Preparation

Tax Preparer Penalties

Copyright © 2011 by John Wiley & Sons, Inc. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey

Published simultaneously in Canada.

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ISBN: 978-0470-93572-9

10 987654321

Preface

This publication is a comprehensive, yet simplified study program. It provides a review of all the basic skills and concepts tested on the CPA exam, and teaches important strategies to take the exam faster and more accurately. This tool allows you to take control of the CPA exam.

This simplified and focused approach to studying for the CPA exam can be used:

• As a handy and convenient reference manual

• To solve exam questions

• To reinforce material being studied

Included is all of the information necessary to obtain a passing score on the CPA exam in a concise and easy-to-use format. Due to the wide variety of information covered on the exam, a number of techniques are included:

• Acronyms and mnemonics to help candidates learn and remember a variety of rules and checklists

• Formulas and equations that simplify complex calculations required on the exam

• Simplified outlines of key concepts without the details that encumber or distract from learning the essential elements

• Techniques that can be applied to problem solving or essay writing, such as preparing a multiple-step income statement, determining who will prevail in a legal conflict, or developing an audit program

• Pro forma statements, reports, and schedules that make it easy to prepare these items by simply filling in the blanks

• Proven techniques to help you become a smarter, sharper, and more accurate test taker

This publication may also be useful to university students enrolled in Intermediate, Advanced and Cost Accounting; Auditing, Business Law, and Federal Income Tax classes; Economics, and Finance classes.

Good Luck on the Exam, Kevin Stevens, DBA, CPA

About the Authors

Kevin Stevens, DBA, CPA, is the director of the School of Accountancy and Management Information Systems at DePaul University. He is full professor of accountancy and is a registered certified public accountant in Illinois. He has taught for many years in DePaul’s CPA review program and at both the graduate and undergraduate levels. He holds a doctoral degree in business administration (accountancy) from the University of Kentucky, a master’s in taxation from DePaul, a master’s in accounting from the University of Illinois at Urbana and a bachelor’s degree in Political Science from Loyola University, Chicago.

Accountants’ Liability

Liability under Common Law

An accountant may be liable under common law due to negligence or fraud.

Negligence

A loss due to negligence occurs when an accountant violates the duty to perform professional services in a competent manner. NEGligence may consist of

• Nondisclosure of information to a client

• Errors previously discovered not being corrected

• GAAP not being followed

Best defense to common law negligence is that appropriate professional standards were followed.

Simple negligence

• Careless mistakes

• Defense of lack of privity may be available

• But client and intended third beneficiaries have privity

• Foreseen third parties have privity in majority of states under tort law

• Foreseen third parties lack privity in states conforming to Ultramares case

Gross negligence

• Reckless disregard for the truth

• Lack of privity not valid as defense

Fraud

Fraud refers to conduct that involves all of the following:

• Material false representation of fact

• Justifiable reliance on the information

• Awareness of the false information by the accountant

• The falsity was made with the ultimate intent to deceive

• The party must have suffered damages

Scienter refers to the accountant’s knowledge of a false representation or material omission of fact with the intent to deceive.

Potential defenses against fraud include

• Lack of intent to deceive

• Immateriality

Lack of privity is not a valid defense

Liability under Federal Securities Regulations

Auditors are liable under both the Securities Act of 1933 (33 Act) and the Securities Exchange Act of 1934 (34 Act).

Liability under 33 Act

Accountants are liable under Section 11 of the 33 Act

• Liable if financial statements contain untrue statement or material omission

• Liable to anyone acquiring security without knowledge of error

To be successful, the plaintiff need not prove

• Privity

• Scienter

• Reliance

Defenses the accountant may use include

• Plaintiff’s knowledge of the error

• Due diligence in performance of services

Liability under 34 Act

Accountants are liable under Rule 10b-5 of the 34 Act

• Liable for oral or written misrepresentations of fact

• Liable for wrongful act committed through mail, interstate commerce, or a national securities exchange

To be successful, the plaintiff must prove

• Scienter

• Reliance

Defenses the accountant may use include

• Plaintiff’s knowledge of the error

• Lack of reliance by plaintiff

Summary of Auditor Liability

Elements in action taken against an accountant

1. There is a misstatement or omission of a material fact

2. Plaintiff has reasonably relied upon the information

3. Plaintiff suffered a loss

4. Accountant was in error

Auditor Common Law Liability

Auditor Liability under Federal Securities Laws

1933 ActSection 111934 ActRule 10b-5Who may bring actionAny purchaserAny purchaserAccountant’s error resulting in actionLack of due diligenceRecklessness or intentional misconduct (scienter)Plaintiff must proveElements 1 & 3 onlyAll 4 Elements

Private Securities Litigation Reform Act of 1995

Requires auditor of publicly held company to include specific substantive procedures designed to

• Identify illegal acts, including management fraud, having a direct and material effect on the financial statements

• Identify significant related-party transactions

• Determine if there is substantial doubt related to the entity’s ability to continue as a going concern

Illegal acts must be reported to management and board of directors must be notified

Board of directors must

• Notify the SEC within 1 business day

• Provide auditor with copy of report to SEC

If auditor not notified

• Resign from engagement

• Notify SEC within 1 business day of board’s failure to meet deadline

Liability as a Tax Preparer

Penalties

Actions by an accountant preparing a client’s tax return can result in penalties

• Not providing client with copy of return

• Failing to sign return as a preparer

• Endorsing & cashing client’s refund check

Liability to Client

Other actions may create a liability to a tax client

• Failing to file a return timely

• Not advising client of tax elections

• Neglecting evaluation of joint versus separate returns

AICPA Code of Professional Conduct

• To audit public companies, CPA’s must have both a state permit to practice and be registered with the PCAOB

• Violation of AICPA rule usually means violated state rule as well

• Code is applicable to all AICPA members

Independence, Integrity, & Objectivity

When performing certain services, CPA must be independent in fact and in appearance. Independence in fact means

• No direct financial interest in client

• No material indirect financial interest in client

Independence is impaired if a CPA takes on a decision-making role for an audit client.

Independence is not impaired if a CPA performs litigation support services for a client.

Independence impaired by

• Supervising client’s personnel

• Signing client’s checks

• Acting as client’s stock transfer agent

• Entering into lease with client

• Accepting gifts from client

• Obtaining material loan from client, even if fully collateralized (except by cash balances)

Unpaid audit fees may impair independence

• May not extend beyond one year

• Audit may be performed, but report may not be issued

Auditor Takes Employment with Audit Client

An auditor who is considering employment with an audit client must follow certain requirements

• They must inform the audit firm of any conversations with an audit client about possible employment.

• If they enter into negotiations on possible employment, they must be immediately removed from the engagement and all their work reviewed by the audit firm to ensure proper skepticism was exercised.

• Once the professional accepts employment with the audit client, the audit firm should consider the need to modify the audit plan or change members of the audit team to deal effectively with the new situation.

In any audit performed within a year of the professional joining the client, a member of the audit firm with no connection to the audit must review all work to ensure it takes into account independence difficulties caused by the firm member’s involvement as client.

Nonattest Services

Members performing attest services for client may perform certain nonattest services without impairing independence.