Which of the Following Statements About the Statements on Standards

question 2

Multiple Choice

Which of the following statements about the Statements on Standards for Tax Services is true?

• A) The CPA may in good faith rely on information provided by the taxpayer, without verifying the reliability of that information if reasonable inquiries are made where the information furnished appears to be incorrect.
• B) A CPA is never allowed to use a taxpayer's estimates when preparing a tax return.
• C) The CPA should not recommend that a taxpayer take a certain position if there is any doubt as to whether the position would be approved by the IRS upon audit.
• D) The CPA must tell the IRS upon becoming aware that an error has been made on a past tax return.

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Definitions:

Forward Contract

A tailor-made agreement between two entities to purchase or sell a valuable at an agreed price on a predetermined date in the future.

July Futures Contract

A standardized, legal agreement to buy or sell a commodity or financial asset at a predetermined price at a specified time in July.

Settle Price

The official price at the end of a trading session on a futures exchange, used for calculations of margin and account balances.

Option Premium

The price paid for the rights granted by an options contract, not considering the actual trading of the underlying asset.