A CPA's audit client is a small charity which funds development projects in a small foreign country. Most of its donations come in the form of cash, with tax receipts issued to the donors. Included in the cash receipts are weekly donations by one person, Mr. X, whose last name is easily identifiable as coming from that foreign country. Some of these cash donations exceed $10,000. The CPA once asked about Mr. X and accepted as an answer that Mr. X was a wealthy entrepreneur but the CPA has done no other work. Which of the following statements is TRUE?
A) Assuming the CPA does no further investigation of this matter, the CPA may be
considered willfully blind and complicit in an illegal act.
B) The CPA may be associated with misleading information and should withdraw
from the audit.
C) The CPA should try to count the cash as it comes in order to avoid issuing a scope
limitation report.
D) Assuming the CPA has performed all other necessary and appropriate procedures,
he may provide a clean opinion.
A) Assuming the CPA does no further investigation of this matter, the CPA may be
considered willfully blind and complicit in an illegal act.
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On January 1, 2015, Danville Corporation acquired a machine at a cost of $60,000. The machine's service life was estimated to be ten years and its residual value to be $6,000. The straight-line method was used for depreciation. On January 1, 2020, the machine was no longer useful and was sold for $3,000. For 2020, in regard to this machine, how much of a loss should Danville record?
A) $27,000 B) $30,000 C) $3,000 D) $60,000
Justin's posts on Facebook provide information that establishes his intent and what he knew at a particular time, indicating potential liability. For this and other reasons, social media posts are often
a. included in discovery in litigation. b. used by law enforcement to detect and prosecute criminals. c. used by federal regulators in investigations into illegal activities. d. all of the choices.
Matthew had a $4,000 gain from the sale of his car. He
A) need not report the gain since it arose from the sale of a personal asset. B) must report the gain as a capital gain. C) must report only half the gain since capital gains enjoy favorable tax treatment. D) can defer paying taxes on the gain by buying another customized car of equal or greater value.
Equipment with a residual value of $50,000 at the end of 10 years was acquired at the beginning of 2019 for $500,000. Assuming the use of the straight-line depreciation method, the journal entry to record depreciation expense for 2021 will have a debit to
A. Depreciation Expense and a credit to Accumulated Depreciation for $50,000. B. Accumulated Depreciation and a credit to Equipment for $50,000. C. Depreciation Expense and a credit to Equipment for $45,000. D. Depreciation Expense and a credit to Accumulated Depreciation for $45,000.