Daryl, who had significant itemized deductions for 2017 and therefore was eligible to use Schedule A, purchased a new vehicle in 2017 for $40,000 with a state sales tax of 10%. The allocated deduction amount for other purchases made by Daryl throughout the year, using the IRS state and local sales tax tables, would be $750. Daryl also paid state income taxes of $4,500 for 2017. Daryl’s best option to legally maximize his tax savings in 2017 would be to: a. Deduct the amount of state sales tax for the vehicle purchase on Schedule A. b. Take the standard deduction. c. Take the deduction for the state income taxes paid on Schedule A. d. Deduct his total amount of allowable state sales tax deduction on Schedule A.
> What are the costs and benefits of establishing one set of accounting standards (i.e., IFRS) around the world? How do cultural factors, legal systems, and ethics influence your answer? Apply a utilitarian approach in making the analysis.
> How do Gray’s accounting values establish a basis for financial reporting in countries with different cultural systems?
> Business ethics is about managing ethics in an organizational context and involves applying principles and standards that guide behavior in business conduct. According to IFAC, “The decisions and behaviors of accountants should reinforce good governance
> Consider the following statement and explain the relationship between legal compliance on a global level and ethical responsibilities of accountants and auditors: “Ethical values and legal principles are usually closely related, but ethical obligations t
> In a 2014 segment of Shark Tank, Trevor Hiltbrand, the founder of nootropic supplement maker Cerebral Success, sought funding from the "Sharks" to introduce a line of nootropic shots to be sold on college campuses in Five Hour Energy-style containers, bu
> Has the accounting profession created a situation in which the auditors’ ethical behavior is impaired by their professional obligations? How does the profession’s view of such obligations relate to how courts tend to view the legal liability of auditors?
> Assume a U.S. company operates overseas and is approached by foreign government officials with a request to provide family members with student internships with the company. The company does business in that country with foreign customers and is negotiat
> Some auditors claim that increased exposure under Section 404 of the SOX creates a litigation environment that is unfairly risky for auditors. Do you think that the inability of auditors to detect a financial statement misstatement due gross deficiencies
> The following pertains to auditor legal liability standards under the PSLRA: a. The Reform Act requires that, in any private securities fraud action in which the plaintiff is alleging a misleading statement or omission on the part of the defendant, “the
> Nixon and Co., CPAs, issued an unmodified opinion on the 2015 financial statements of Madison Corp. These financial statements were included in Madison’s annual report and Form 10-K filed with the SEC. Nixon did not detect material misstatements in the f
> As discussed in the opening reflection, MF Global filed a complaint charging PwC with professional malpractice, breach of contract, and unjust enrichment in connection with its advice concerning, and approval of, the company’s off-balance-sheet accountin
> Rationalization for fraud can fall under two categories: “no harm” and “no responsibility.” Assume an employee is directed by management to reduce recorded expenses at year-end by insignificant amounts individually, but which are material in total. How m
> The following statement expresses the conclusion of XYZ auditors with respect to the company’s investment in ABC. Assume that all amounts are material. What kind of audit opinion should be rendered given this statement? Explain the reasoning behind your
> Give one example each of when an auditor might render an unmodified opinion and include an emphasis-of-matter paragraph and other-matter paragraph. What is the value of such paragraphs in the audit report?
> Explain the content of each section of the audit report. Evaluate the importance of each section with respect to the users of financial reports.
> Do you think it is ethical for an employer to use social media information as a factor when considering whether to hire an employee? What about monitoring social networking activities of employees while on the job? Be sure to use ethical reasoning in ans
> All companies are vulnerable to fraud, but small businesses are particularly vulnerable. Why do you think this may be the case? What signs of possible fraud may be more pronounced in small businesses when compared to larger ones?
> What is the ethical value of applying the fraud triangle to assess the risk of material misstatements in the financial statements?
> AU-C 240 points to three conditions that enable fraud to occur. Briefly describe each condition. How does one’s propensity to act ethically as described by Rest’s model of morality influence each of the three elements of the Fraud Triangle?
> Dennis just got hired after not working for two years following his reporting of financial statement fraud by his previous employer. Dennis was treated as an outcast and ultimately fired after the company “trumped up” some unsubstantiated claims of poor
> Audit morality includes moral sensitivity, moral judgment, moral motivation, and moral character. Explain how audit morality plays a key role in determining best audit practices that influence audit performance.
> Do you agree that a professional accountant providing professional services to a client that is not an audit client of the firm or a network firm, who is unable to escalate a matter pertaining to an illegal act within the client, should be required to di
> The International Auditing and Assurance Standards Board has issued a new standard effective December 15, 2016, requiring that engagement partners physically sign the audit report with their names instead of the name of the firms, as is done in the Unite
> In its report prepared for audit committees and other stakeholders in December 2014, “Our Commitment to Audit Quality,” EY acknowledges that recent PCAOB findings indicate the need for improving audits of internal control over financial reporting (ICFR),
> Discuss the cultural factors that create barriers for the Chinese units of Big Four firms to receiving support from the Chinese authorities to share audit information with the PCAOB to aid its inspection process.
> Distinguish between an auditor’s responsibilities to detect and report errors, illegal acts, and fraud. What role does materiality have in determining the proper reporting and disclosure of such events?
> Is there a difference between cheating on a math test, lying about your age to purchase a cheaper ticket at a movie theater, and using someone else’s ID to get a drink at a bar?
> Explain how PCAOB inspections can lead to improvements in audit engagement quality.
> Evaluate the costs and benefits of having a two-year “cooling off period for engagement partners.
> What are the auditor’s responsibilities to communicate information to the audit committee under AICPA and PCAOB standards? If the auditor discovers that the audit committee routinely ignores such communications especially when they are critical of manage
> Discuss the link between skeptical judgment and skeptical action and Rest’s Four-Component Model of Ethical Decision Making.
> Auditing standards require that a “brainstorming” session should be held at the beginning of each audit to help identify steps to assess the possibility that material misstatements/fraud in the financial statements exist. Discuss how brainstorming sessio
> Mr. Arty works for Smile Accounting Firm as a senior accountant. Currently he is doing a review of rental property compliance testing of rental receipts and expenses of the property owned by the client. He determines that the staff accountants tested onl
> According to GAAS, the auditor must evaluate the control deficiencies that he has become aware of to determine whether those deficiencies, individually or in combination, are significant deficiencies or material weaknesses. What is the purpose of the aud
> Do you think the concept of materiality is incompatible with ethical behavior? Consider in your answer how materiality judgments affect risk assessment in the audit of financial statements.
> Some criticize the accounting profession for using expressions in the audit report that seem to build in deniability should the client commit a fraudulent act. What expressions enable the CPA to build a defense should the audit wind up in the courtroom?
> What do you think is meant by the term ethical auditing with respect to the principles and rules of professional conduct in the AICPA Code?
> 1. What is the relationship between the ethical obligation of honesty and truth telling? 2. Is it ever proper to not tell someone something that he or she has an expectation of knowing? If so, describe under what circumstances this might be the case. How
> A common ethical dilemma used to distinguish between philosophical reasoning methods is the following. Imagine that you are standing on a footbridge spanning some trolley tracks. You see that a runaway trolley is threatening to kill five people. Standing
> Raquel, who works in medical sales, drives her own vehicle to various locations for client sales meetings. Her employer reimburses her $400 each month for various business expenses and does not expect Raquel to provide proof of her expenses. Her employ
> Which expense, incurred and paid in 2017, can be claimed as a miscellaneous itemized deduction subject to the 2% of AGI floor? a. Self-employed health insurance. b. Unreimbursed moving expenses. c. Employee’s unreimbursed business car expense. d. Self-e
> In 2017, the Rinaldis’ vacation cottage was severely damaged by an earthquake. They had AGI of $110,000 in 2017. Following is information related to the cottage: Cost basis………………………………………..$95,000 FMV before casualty…………………………135,000 FMV after casualty
> In 2017, the president of the United States declared a federal disaster due to brush fires in the Southwest. Lisa lives in that area and lost her home in the fires. What choice does she have regarding when she can claim the loss on her tax return? a.
> Which of the following statements is not true regarding documentation requirements for charitable contributions? a. If the total deduction for all noncash contributions for the year is more than $500, Section A of Form 8283, Noncash Charitable Contribut
> Which of the following organizations qualifies for deductible charitable contributions? a. A nonprofit educational institution. b. The Salvation Army. c. Churches. d. All of the above.
> For 2017, Thomas, a single parent, reported the following amounts relating to his investments: Net investment income………………..……………………………………………………………..$7,000 Interest expense on a loan to purchase stocks…………………………………………….…..2,000 Interest expense on funds
> For 2017, the deduction by a taxpayer for investment interest expense is: a. Not limited. b. Limited to the taxpayer’s net investment income for 2017. c. Limited to the investment interest paid in 2017. d. Limited to the taxpayer’s gross investment inc
> What is the maximum amount of personal residence acquisition debt on which interest is fully deductible on Schedule A? a. $1,000,000. b. $500,000. c. $250,000. d. $0.
> During 201 Noriko paid the following taxes related to her home: Real Estate property taxes on residence (paid from escrow account)……………..$1,800 State personal property tax on her automobile (based on value)…………………………600 Property taxes on land held for l
> For 2017, the amount of the sales tax deduction is calculated by: a. Determining the actual sales tax paid during the year. b. Using the IRS sales tax deduction calculator. c. Using the sales worksheet and tax tables provided by the IRS in the Schedule
> For 2017, Perla, who is single and 55 years of age, had AGI of $60,000. During the year, she incurred and paid the following medical costs: Doctor and dentist fees…………………………………………..$3,350 Prescription medicines………………………………………………..625 Medical care insura
> Prescription drugs obtained from sources outside the United States, such as Canada, are: a. Always deductible no matter how they were obtained. b. Deductible only for citizens of Canada living in the United States. c. Deductible if prescribed by a physi
> During 2017, Raul incurred and paid the following expenses: Prescription drugs…………………………………………………………$ 470 Vitamins and over-the-counter cold remedies…………………..130 Doctors and dentist visits…………………………………………………700 Health club fee………………………………………………………………...
> The threshold amount for the deductibility of allowable medical expenses is: a. 7.5% of AGI. b. 10% of AGI. c. 10% of taxable income. d. 15% of taxable income.
> Generally, a taxpayer may deduct the cost of medical expenses for which of the following? a. Marriage counseling. b. Health club dues. c. Doctor-prescribed birth control pills. d. Trips for general health improvement.
> The majority of itemized deductions are: a. Business expenses. b. Tax credits. c. Personal living expenses. d. None of the above.
> The amount of savings bond interest exempt from tax is limited when an individual is single and his or her AGI reaches a. $117,250. b. $77,550. c. $78,150. d. $76,000.
> An individual with an OID instrument must annually report a portion of the OID as a. Dividend income. b. Pension income. c. Capital gain income. d. Interest income.
> Original issue discount (OID) is deemed to be zero if it is less than ________ of the maturity value, multiplied by the number of complete years to maturity. a. 0.25%. b. 5%. c. 25%. d. 15%.
> Determine the amount of tax liability in the following situations. In all cases, the taxpayer is using the filing status of married filing jointly. a. Taxable income of $62,449 that includes a qualified dividend of $56. b. Taxable income of $12,932 tha
> Daniel and Alexis, both 28, are interested in saving for the college education of their twin daughters Alie and Amber. They decide to purchase some Series EE U.S. savings bonds because they know that the interest on the bonds is tax-free in certain circ
> In 2017, Joseph and Patricia Jefferson redeemed $8,000 of Series EE U.S. savings bonds (principal of $5,500 and interest of $2,500), the proceeds from which were used to pay for qualified higher education expenses of their dependent daughter who is atten
> Define original issue discount (OID). Under what circumstances are the OID rules applied?
> Briefly explain the application of the imputed interest rules.
> Define imputed interest.
> Explain the rules governing the exemption of interest on U.S. savings bonds from taxation if it is used for educational purposes.
> A person is selling some property and wishes to obtain payment partially in cash with the remainder in the form of a carryback note receivable. a. Why might the seller wish to increase the sales price and reduce the interest rate on the carryback note?
> Mimi is 22 years old and is a full-time student at Ocean County Community College. She lives with her parents, who provide all of her support. During the summer, she put her Web design skills to work and earned $4,150. Can Mimi’s parents claim her as
> What is a multiple support agreement, and what is its purpose?
> What qualifications are necessary to file as head of household?
> What is a for AGI deduction? Give three examples.
> Prepare a table of the possible IRS penalties listed in the text and give a brief summary of the purpose of each penalty.
> Paul has the following information: AGI for 2017 = $155,000 Withholding for 2017 = $ 24,000 Total tax for 2016= $ 29,000 Total tax for 2017= $ 33,470 a. How much must Paul pay in estimated taxes to avoid a penalty? b. If Paul paid $1,000 per quarter, wo
> Victoria’s 2017 tax return was due on April 15, 2018, but she did not file it until June 12, 2018. Victoria did not file an extension. The tax due on the tax return when filed was $8,500. In 2017, Victoria paid in $12,000 through withholding. Her 2016
> Using the appropriate tax tables or tax rate schedules, determine the tax liability for tax year 2017 in each of the following instances. In each case, assume the taxpayer can take only the standard deduction. A single taxpayer with AGI of $23,493 and
> Determine the average tax rate and the marginal tax rate for each instance in question 40. Data from question 40: Using the appropriate tax tables or tax rate schedules, determine the amount of tax liability in each of the following instances. A marri
> Using the appropriate tax tables or tax rate schedules, determine the amount of tax liability in each of the following instances. a. A married couple filing jointly with taxable income of $32,991. b. A married couple filing jointly with taxable income o
> Determine the amount of the standard deduction for each of the following taxpayers for tax year 2017: Christina, who is single. Adrian and Carol, who are filing a joint return. Their son is blind. Peter and Elizabeth, who are married and file separate
> Raphael and Martina are engaged and are planning to travel to Las Vegas during the 2017 Christmas season and get married around the end of the year. In 2017, Raphael expects to earn $45,000 and Martina expects to earn $15,000. Their employers have dedu
> Shandra is a U.S. citizen and is the 68-year-old widowed mother of Janet. After retirement, Shandra decided to fulfill a lifelong dream and move to Paris. Shandra receives $1,000 of interest income, but all of her other living expenses (including rent on
> Roberta is widowed and lives in an apartment complex. She receives $8,000 of social security income that she uses to pay for rent and other household expenses. The remainder of her living expenses is paid by relatives and neighbors. The total amount o
> In which of the following cases may the taxpayer claim head of household filing status? a. The taxpayer is single and maintains a household that is the principal place of abode of her infant son. b. The taxpayer is single, maintains a household for hers
> List the five types of filing status and briefly explain the requirements for the use of each one.
> The benefits of many deductions, credits, or other benefits are limited to taxpayers with Adjusted Gross Income below certain limits. Explain how the limitation (phaseout) process works. Give two examples of deductions, credits, or other benefits that
> Charles and Joan Thompson file a joint return. In 2016, they had taxable income of $92,370 and paid tax of $14,636. Charles is an advertising executive and Joan is a college professor. During the fall 2017 semester, Joan is planning to take a leave of ab
> Donald is a 21-year-old full-time college student. During 2017, he earned $2,550 from a part-time job and $1,150 in interest income. If Donald is a dependent of his parents, what is his standard deduction amount? If Donald supports himself and is not
> How many personal exemptions can a taxpayer claim on his or her tax return? Explain your answer.
> What is a Treasury Regulation? What are the four types of regulations and how do they differ?
> When would a taxpayer want to sue the government in a district court versus the Tax Court?
> What are the advantages in petitioning the Tax Court versus other trial courts?
> Where are Revenue Rulings and Revenue Procedures found? When might a Revenue Ruling be useful to a taxpayer? When might a Revenue Procedure be useful to a taxpayer?
> Differentiate between a General Regulation and a Legislative Regulation. Which one is the stronger tax authority?
> What is meant by a Proposed Regulation? Can a taxpayer rely on a Proposed Regulation as authority on how to treat a certain tax item?
> What is the purpose of the Joint Conference Committee? Its reports are considered more important or are more authoritative. Why?
> What are committee reports, and how can they help the taxpayer or tax preparer?
> Discuss the concept of statutory tax authority. Why is there a need for additional types of authority when statutory authority is the law?
> What is the difference between a Revenue Ruling and a Revenue Procedure? How does the level of authority of a ruling or procedure compare with regulations and statutory authority?
> Why might a district court’s opinion regarding a tax decision be more likely to be reversed on appeal?
> After the Court of Appeals, does the taxpayer have any additional avenue for appeals? If so, what are the taxpayer’s probabilities of receiving an appeal after the Court of Appeals? Why?
> If a taxpayer loses a case against the IRS in one of the three trial courts, does the taxpayer have any avenue for appeals?
