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CPA Ethics Questions and Correct
Answers/ Latest Update / Already Graded
Communicating fee information
Ans: Copies must be retained by the practitioner for a period of
at least 36 months from the date of the last transmission or use
Conflict of interest
Ans: o Each affect client waives the conflict of interest in
writing within 30 days after so waiving
Best Practice for Tax Advisors (VERY IMPORTANT, Memorize)
Ans: Tax advisors should provide clients the highest-quality
representation by adhering to "best practices" in providing tax
prep advice or assistance in a submission to the IRS
♣ Communicating with the client regarding the terms of
engagement to determine the client's purpose and use for the
advice
♣ Establishing the facts and arriving at a conclusion supported
by the law and the facts
All rights reserved © 2025/ 2026 |
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♣ Advising the client about the importance of the conclusions
reached (for example, whether the client will be able to avoid
penalties)
♣ Acting fairly and with integrity in practice before the IRS
♣ Taking reasonable steps to ensure that all members,
associates, and employees of the firm follow procedures that
are consistent with the above
Best Practices Include:
Ans: ♣ Communicating with the client regarding the terms of
engagement to determine the client's purpose and use for the
advice
♣ Establishing the facts and arriving at a conclusion supported
by the law and the facts
♣ Advising the client about the importance of the conclusions
reached (for example, whether the client will be able to avoid
penalties)
♣ Acting fairly and with integrity in practice before the IRS
♣ Taking reasonable steps to ensure that all members,
associates, and employees of the firm follow procedures that
are consistent with the above
Definition of Federal Tax Matter
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Ans: Is any matter concerning the application or interpretation
of:
♣ A revenue provision of the IRC
♣ Any provision of law impacting a person's obligations under
the internal revenue laws and regulations, including but not
limited to the person's liability to pay tax or obligation to file
returns; or
♣ Any other law or regulation administered by the IRS (internal
revenue service)
Sanctions by the IRS for the violations of the regulations
Ans: A practitioner may be sanctioned by the IRS if the
practitioner does any of the following
♣ Willfully violates any part of Circular 230 (EXCEPT the section
on "Best practices for Tax Advisors"
♣ Recklessly or through gross incompetence violates sections
10.34 ("Standards with respect to tax returns and documents,
affidavits, and other papers") 10.35 ("Competence"), 10.36
("Procedures to ensure compliance"), or 10.37 ("Requirements
for other written advice")
♣ Possible sanctions include censure and suspension or
disbarment from practice before the IRS.
All rights reserved © 2025/ 2026 |
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*** The IRS may also impose monetary penalties, not
exceeding the gross income derived (or to be derived) from the
conduct giving rise to the penalty.
Tax Return Preparer defined
Ans: - Means any person who prepares for "compensation" or
who employs one or more persons to prepare for compensation,
any tax return required under the IRC, or any claim for refund of
tax imposed by IRC
- Any tax professional with an IRS Preparer Tax Identification
Number is authorized to prepare federal tax returns.
These individuals are often categorized as Tax Preparers:
Ans: o Enrolled agents
o CPA
o Attorneys
o Annual filing season program participants
o PTIN holders
Unlimited representation rights
Ans: o Enrolled agents
o CPAs
All rights reserved © 2025/ 2026 |
CPA Ethics Questions and Correct
Answers/ Latest Update / Already Graded
Communicating fee information
Ans: Copies must be retained by the practitioner for a period of
at least 36 months from the date of the last transmission or use
Conflict of interest
Ans: o Each affect client waives the conflict of interest in
writing within 30 days after so waiving
Best Practice for Tax Advisors (VERY IMPORTANT, Memorize)
Ans: Tax advisors should provide clients the highest-quality
representation by adhering to "best practices" in providing tax
prep advice or assistance in a submission to the IRS
♣ Communicating with the client regarding the terms of
engagement to determine the client's purpose and use for the
advice
♣ Establishing the facts and arriving at a conclusion supported
by the law and the facts
All rights reserved © 2025/ 2026 |
, Page |2
♣ Advising the client about the importance of the conclusions
reached (for example, whether the client will be able to avoid
penalties)
♣ Acting fairly and with integrity in practice before the IRS
♣ Taking reasonable steps to ensure that all members,
associates, and employees of the firm follow procedures that
are consistent with the above
Best Practices Include:
Ans: ♣ Communicating with the client regarding the terms of
engagement to determine the client's purpose and use for the
advice
♣ Establishing the facts and arriving at a conclusion supported
by the law and the facts
♣ Advising the client about the importance of the conclusions
reached (for example, whether the client will be able to avoid
penalties)
♣ Acting fairly and with integrity in practice before the IRS
♣ Taking reasonable steps to ensure that all members,
associates, and employees of the firm follow procedures that
are consistent with the above
Definition of Federal Tax Matter
All rights reserved © 2025/ 2026 |
, Page |3
Ans: Is any matter concerning the application or interpretation
of:
♣ A revenue provision of the IRC
♣ Any provision of law impacting a person's obligations under
the internal revenue laws and regulations, including but not
limited to the person's liability to pay tax or obligation to file
returns; or
♣ Any other law or regulation administered by the IRS (internal
revenue service)
Sanctions by the IRS for the violations of the regulations
Ans: A practitioner may be sanctioned by the IRS if the
practitioner does any of the following
♣ Willfully violates any part of Circular 230 (EXCEPT the section
on "Best practices for Tax Advisors"
♣ Recklessly or through gross incompetence violates sections
10.34 ("Standards with respect to tax returns and documents,
affidavits, and other papers") 10.35 ("Competence"), 10.36
("Procedures to ensure compliance"), or 10.37 ("Requirements
for other written advice")
♣ Possible sanctions include censure and suspension or
disbarment from practice before the IRS.
All rights reserved © 2025/ 2026 |
, Page |4
*** The IRS may also impose monetary penalties, not
exceeding the gross income derived (or to be derived) from the
conduct giving rise to the penalty.
Tax Return Preparer defined
Ans: - Means any person who prepares for "compensation" or
who employs one or more persons to prepare for compensation,
any tax return required under the IRC, or any claim for refund of
tax imposed by IRC
- Any tax professional with an IRS Preparer Tax Identification
Number is authorized to prepare federal tax returns.
These individuals are often categorized as Tax Preparers:
Ans: o Enrolled agents
o CPA
o Attorneys
o Annual filing season program participants
o PTIN holders
Unlimited representation rights
Ans: o Enrolled agents
o CPAs
All rights reserved © 2025/ 2026 |
