During the Course of an Audit, a CPA Discovers an Error

question 60

Multiple Choice

During the course of an audit, a CPA discovers an error in a prior return. According to the Statements on Standards for Tax Services, the CPA should

• A) correct the error in the current year's tax return.
• B) ask the client for permission to disclose the error to the IRS.
• C) inform the IRS of the error, regardless of whether the client grants permission.
• D) withdraw from the engagement.

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Definitions:

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term financial health and operational efficiency of the business.

Company

An organization created by several persons for the purpose of running and operating a business activity.

Dividend Payout Ratio

A financial metric that measures the percentage of a company's earnings paid out to shareholders as dividends.

Dividends

Payments made by a corporation to its shareholder members, usually derived from the company's profits.