Which of the Following Is NOT Something the CPA Should

question 92

Multiple Choice

Which of the following is NOT something the CPA should do in tax planning?

• A) Uncritically accept the client's explanations for assumptions and representations
• B) Establish the relevant background facts
• C) Consider the reasonableness of the assumptions and representations
• D) Consider the business purpose and economic substance of the transaction, if relevant to the tax consequences of the transaction

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Definitions:

Return On Investment

A performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments.

Residual Income

The net income an investment or business venture generates above the minimum rate of return.

Minimum Required Rate

The lowest return rate that an investor or project manager would accept for an investment.

Residual Income

Income that remains after all costs and expenses, including minimum required return on investment, have been subtracted.