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• Question 5 Hugh, CPA, has developed an opinion for which tax
avoidance is a significant purpose that is marketed to potential
investors. According to Treasury Department Circular 230
• Question 6 Under the liability provisions of Section 11 of the
Securities Act of 1933, a CPA who certifies financial statements
included in a registration statement generally will not be liable to a
purchaser of the security
• Question 7 Which of the following circumstances is a defense to an
accountant’s liability under Section 11 of the Securities Act of 1933
for misstatements and omissions of material facts contained in a
registration statement?
• Question 8 A CPA partnership may, without being lawfully
subpoenaed or without the client’s consent, make client workpapers
available to
• Question 9 An accounting firm was hired by a company to perform
an audit. The company needed the audit report in order to obtain a
loan from a bank. The bank lent $500,000 to the company based on
the auditor’s report. Fifteen months later, the company declared
bankruptcy and was unable to repay the loan. The bank discovered
that the accounting firm failed to discover a material overstatement of
assets of the company. Which of the following statements is correct
regarding a suit by the bank against the accounting firm? The bank
• Question 10 In accordance with the AICPA Statements on
Standards for Tax Services, if after having provided tax advice to a
client there are legislative changes which affect the advice provided,
the CPA
• Question 11 Alex Stone, CPA, prepared Ray Pym’s 2012 federal
income tax return. Pym advised Stone that he had paid doctors’ bills
of $15,000 during 2012, when in fact Pym had paid only $3,000 of
bills. Based on Pym’s representations, Stone properly computed the
medical expense deduction, with consequent understatement of tax
liability of more than $5,000. Pym’s total tax liability shown on the
return was $40,000. Stone had no reason to doubt the accuracy of
Pym’s figures, although Stone did not request documentation for the
expenses claimed; but he was assured by Pym that sufficient