Preparing a Client's Tax Return Solely Based on What the Client

question 14

Multiple Choice

Preparing a client's tax return solely based on what the client has represented to you about his income and expenses generally is:

• A) Permissible
• B) Prohibited only by the AICPA's Statements of Standards onTax Practice
• C) Prohibited only by U.S. Treasury Circular 230
• D) Prohibited by both AICPA and IRS professional mandates

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Definitions:

Cash Flows

The inflows and outflows of cash and cash equivalents, indicating a company's liquidity and financial health over a period.

Transactions Identified

The process of recognizing and documenting specific financial events in the appropriate accounting period.

Accounts Used

Refers to specific accounts in the general ledger that are impacted by transactions and financial events of a business.

Recording Revenue

The process of documenting the income a company generates from its business activities, typically recognized when goods or services are delivered.