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Supplementary Study Guide/Syllabus to Accompany theQuarterly CPE Exam on

Topics Addressed in the Journal of Accountancy

Second Quarter (April – June), 2020

Instructions: Before you start a section of the CPE Final Exam, complete the corresponding section of this

Supplementary Study Guide. Do NOT submit answers to the Review Questions.

Purpose: To provide an interactive learning experience by listing

Learning Objectives and Review Questions with Suggested Answers and Explanations.

OUTLINE: The section numbers of the Study Guide correspond to section numbers of the Final Exam. The page numbers below refer to the first page of each article in the printed version of the JofA.

Note: For Special Digital Editions, please refer to the pdf available on the AICPA website.

Sections I - II Relate to the Journal of Accountancy - Special Digital Edition April 24, 2020:

Section I. The Indirect Impacts of COVID-19 on CPA Firms (2)

Section II. How Auditors Can Test Inventory Without a Site Visit (Page 36)

Sections III - V Relate to the Journal of Accountancy - Special Digital Edition May 15, 2020:

Section III. Auditing During COVID-19: 6 Areas to Focus On (Page 14)

Section IV. Ethics Quiz: Pressure to Break the Rules (Page 25)

Section V. Deducting Home Office Expenses (Page 36)

Sections VI - VIII Relate to the Journal of Accountancy of June 2020:

Section VI. Forensic Accountants Team Up to Fight Elder Abuse (Page 35)

Section VII. When Business Owners Defraud Their Partners (Page 42)

Section VIII. Look Before You Leap into a 529 Plan (Page 46)

The Learning Objectives are stated in each of the following sections.

Section I. The Indirect Impacts of COVID-19 on CPA Firms (Page 12)

Section I Assignment:1. Study the articles (reference text) in the Journal of Accountancy, paying particular attention to our

Learning Objectives stated below. 2. Answer our Review Questions that have been designed to provide an interactive learning experience.3. Study the Solutions and Suggested Responses to the Review Questions.4. Answer Final Exam questions 1 through 5.

Section I Learning Objectives:1. Learn how the effects of COVID-19 may impact CPA services, primarily audit and attest.2. Consider how the potential impact may affect your firm's approach to and delivery of various

services.3. Consider how certain non-COVID-19 events could be similarly disruptive and how your firm

might adapt.

Section I Review Questions: 1. The authors state that at the onset of the COVID-19 pandemic, existing engagements in

_____________ could be affected.a. Audit and attest services.b. Tax planning and preparation services.c. Consulting services.d. None of the above.e. All of the above.

2. With regard to existing (still open) audit and attest service engagements, as a result of COVID-19,the authors recommend:a. Completing as planned. Engagements already in progress need not be re-evaluated.b. Considering withdrawing from the engagements to limit potential liability.c. Meeting with clients to have them sign a “hold harmless” release to protect the firm. d. Reassessing the planned approach considering modification.e. Considering changing the engagements from an audit to a compilation.

3. For upcoming audits, some planning questions to resolve would include:a. If on-site visits are not safe, how to observe physical inventory counts?b. If the audit is performed remotely, how to gather and test evidence.c. If engagement plans need modifications, assure compliance with professional standards.d. Consider how the above issues could affect the audit fee.e. All of the above.

4. In addition to reconsidering planned audit procedures, what document may need to be revised before the engagement. a. The financial statements.b. The auditor's report.c. The engagement letter.d. The client representation letter.e. Accounts receivable confirmation letters.

5. As the stability of the economy becomes less certain, lenders may:a. Be willing to relax certain loan covenants.b. Allow businesses to suspend loan payments and interest accruals.c. Partner with CPAs to help with non-performing loan workouts.d. Become more aggressive in requiring CPAs confirmation of certain client information.e. Be more willing to lend to struggling businesses.

Section I Solutions and Suggested Responses to Review Questions appear on the next page.Section I Solutions and Suggested Responses to Review Questions:

Review Question 1. (Please see page 12 of the April 24 online JofA.) a. Incorrect. This is part of, but not the most complete answer.b. Incorrect. This is part of, but not the most complete answer.c. Incorrect. This is part of, but not the most complete answer.d. Incorrect. This is part of, but not the most complete answer.e. Correct. All of the listed services could be affected.

Review Question 2. (Please see page 12 of the April 24 online JofA.) a. Incorrect. Reassessing the planned approach considering modification.b. Incorrect. Reassessing the planned approach considering modification.c. Incorrect. Reassessing the planned approach considering modification.d. Correct. Reassessing the planned approach considering modification.e. Incorrect. Reassessing the planned approach considering modification.

Review Question 3: (Please see page 12 of the April 24 online JofA.) a. Incorrect. This is part of, but not the most complete answer.b. Incorrect. This is part of, but not the most complete answer.c. Incorrect. This is part of, but not the most complete answer.d. Incorrect. This is part of, but not the most complete answer.e. Correct. All of the listed planning questions will need to be addressed.

Review Question 4. (Please see page 13 of the April 24 online JofA.) a. Incorrect. The engagement letter may need revision.b. Incorrect. The engagement letter may need revision.c. Correct. The engagement letter may need revision.d. Incorrect. The engagement letter may need revision.e. Incorrect. The engagement letter may need revision.

Review Question 5. (Please see page 13 of the April 24 online JofA.) a. Incorrect. Lenders may become more aggressive in requiring CPAs confirmation of certain client

information.b. Incorrect. Lenders may become more aggressive in requiring CPAs confirmation of certain client

information.c. Incorrect. Lenders may become more aggressive in requiring CPAs confirmation of certain client

information.d. Correct. Lenders may become more aggressive in requiring CPAs confirmation of certain client

information.e. Incorrect. Lenders may become more aggressive in requiring CPAs confirmation of certain client

information.

=========================================End of Section I.

Section II. How Auditors Can Test Inventory Without a Site Visit (Page 36)

Section II Assignment:1. Study the article (reference text) in the Journal of Accountancy, paying particular attention to our

Learning Objectives stated below.2. Answer our Review Questions that have been designed to provide an interactive learning experience.3. Study the Solutions and Suggested Responses to the Review Questions.4. Answer Final Exam questions 6 through 10.

Section II Learning Objectives:1. Learn how effects of the COVID-19 pandemic may effect inventory observations. 2. Learn some alternative inventory audit procedures that satisfy auditing standards.

Section II Review Questions:1. Historically, to test the existence of inventory, auditors employed:

a. Analytical reviews.b. Third-party confirmation.c. Physical observation.d. Statistical sampling of vendor invoices.e. Client interviews.

2. Standards addressing the physical observation of inventory are found in:a. AU-C Section 015.b. AU-C Section 051.c. AU-C Section 105.d. AU-C Section 501.e. AU-C Section 510.

3. In cases where auditors can't be on site to observe inventory counts one alternative is:a. Analytical reviews.b. Third-party confirmation.c. Roll back and roll forward.d. Apply to the AICPA for an audit “waiver.”e. Comparative reviews.

4. In cases where auditors are unable to be on site to observe inventory counts, the author believes anacceptable alternative procedure would be:

a. Third party confirmations.b. Use of company personnel to observe and record test counts and other data.c. Analytical reviews.d. Video observation.e. Client interviews.

5. For video observations, the author recommends a company employee with inventory responsibility should be used to hold the live feed video camera.a. True. It makes sense that those responsible for inventory would be most helpful.b. False. The auditor should use someone independent and not involved with inventory

functions.

Section II Solutions and Suggested Responses to Review Questions appear on the next page.Section II Solutions and Suggested Responses to Review Questions:

Review Question 1. (Please see page 37 of the April 24 online JofA.) a. Incorrect. Physical observation.b. Incorrect. Physical observation.c. Correct. Physical observation.d. Incorrect. Physical observation.e. Incorrect. Physical observation.

Review Question 2. (Please see page 37 of the April 24 online JofA.) a. Incorrect. AU-C Section 501.b. Incorrect. AU-C Section 501.c. Incorrect. AU-C Section 501.d. Correct. AU-C Section 501.e. Incorrect. AU-C Section 501.

Review Question 3. (Please see page 38 of the April 24 online JofA.) a. Incorrect. Roll back and roll forward.d. Incorrect. Roll back and roll forward.c. Correct. Roll back and roll forward.d. Incorrect. Roll back and roll forward.e. Incorrect. Roll back and roll forward.

Review Question 4. (Please see page 38 of the April 24 online JofA.) a. Incorrect. Video observation.b. Incorrect. Video observation.c. Incorrect. Video observation.d. Correct. Video observation.e. Incorrect. Video observation.

Review Question 5. (Please see page 41 of the April 24 online JofA.) a. Incorrect. The auditors should use someone not involved in inventory.b. Correct. The auditors should use someone not involved in inventory.

=========================================End of Section II.

Section III. Auditing During COVID-19: 6 Areas to Focus On (Page 14)

Section III Assignment:1. Study the articles (reference text) in the Journal of Accountancy, paying particular attention to our

Learning Objectives stated below.2. Answer our Review Questions that have been designed to provide an interactive learning experience.3. Study the Solutions and Suggested Responses to the Review Questions.4. Answer Final Exam questions 11 through 15.

Section III Learning Objectives:1. Learn about issues of client access that may result from the COVID-19 pandemic.2. Consider the economic effects of COVID-19 on the client's business and how certain audit

considerations will be affected (eg: going concern).

Section III Review Questions:

1. For may auditors, conducting “field work” from a home office or other remote location:a. Is the normal business model.b. Violates professional standards.c. Is a novel concept.d. Helps keep the audit fee competitive.e. Compromises independence and objectivity.

2. Professional standards address what evidence the auditor needs to obtain and how to meet those requirements.a. True. The standards describe in great detail the evidence required and prescribes the

methods to be employed.b. False. While standards address the evidence needed, they generally don't prescribe the

specific procedures.

3. Due to the effects of the COVID-19 pandemic, many entities in certain industries or regions are struggling. The auditor will need to:a. Consider fee discounts.b. Consider getting advance payments for fees.c. Consider scaling back procedures as the client has reduced staff due to furloughs and layoffs.d. Consider going concern issues.e. Consider withdrawing from the engagement rather than work in these challenging

conditions.

4. When “substantial doubt” exists regarding going concern of the entity:a. The auditor must withdraw from the engagement.b. The auditor does not disclose in the financial statements as this would constitute a forecast.c. Disclosure in the financial statement notes is required.d. Disclosure in the financial statement notes is optional.e. An adverse opinion is required.

5. One possibility auditors could encounter while working through a pandemic could be:a. Time limitations – audits will be rushed.b. Fee pressures.c. Management resistant to acknowledging pandemic-related challenges to business.d. Scope limitations.e. Disclosure limitations.

Section III Solutions and Suggested Responses to Review Questions appear on the next page.Section III Solutions and Suggested Responses to Review Questions:

Review Question 1. (Please see page 15 of the May 15 digital edition JofA.) a. Incorrect. A novel concept.b. Incorrect. A novel concept.c. Correct. A novel concept.d. Incorrect. A novel concept.e. Incorrect. A novel concept.

Review Question 2. (Please see page 15 of the May 15 digital edition JofA.)a. Incorrect. While standards address the evidence needed, they generally don't prescribe the

specific procedures.b. Correct. While standards address the evidence needed, they generally don't prescribe the

specific procedures.

Review Question 3: (Please see page 17 of the May 15 digital edition JofA.)a. Incorrect. Consider going concern issues.b. Incorrect. Consider going concern issues.c. Incorrect. Consider going concern issues.d. Correct. Consider going concern issues.e. Incorrect. Consider going concern issues.

Review Question 4. (Please see page 17 of the May 15 digital edition JofA.) a. Incorrect. Disclosure in the financial statement notes is required.b. Incorrect. Disclosure in the financial statement notes is required.c. Correct. Disclosure in the financial statement notes is required.d. Incorrect. Disclosure in the financial statement notes is required.e. Incorrect. Disclosure in the financial statement notes is required.

Review Question 5. (Please see page 17 of the May 15 digital edition JofA.)a. Incorrect. Scope limitations.b. Incorrect. Scope limitations.c. Incorrect. Scope limitations.d. Correct. Scope limitations.e. Incorrect. Scope limitations.

----------------------------------------------------End of Section III.

Section IV. Ethics Quiz: Pressure to Break the Rules (Page 25)

Section IV Assignment:1. Study the article (reference text) in the Journal of Accountancy, paying particular attention to our

Learning Objectives stated below. 2. Answer our Review Questions that have been designed to provide an interactive learning

experience.3. Study the Solutions and Suggested Responses to the Review Questions.4. Answer Final Exam questions 16 through 20.

Section IV Learning Objectives:1. Learn about some of the different types and sources of pressure a CPA may receive. 2. Learn certain pressures or requests could result in an ethics violation.3. Consider how the examples could occur in your practice or business and how you would

respond.

Section IV Review Questions:

1. Pressure to break rules can come from:a. Within the organization.b. Outside parties.c. State governing boards.d. a and b.e. a, b and c.

2. For CPAs, “breaking the rules” is a phrase the authors use to refer to a violation of:a. The Uniform Commercial Code.b. Footnote disclosure requirements, as a result of oversight.c. The AICPA Code of Professional Conduct. d. The by-laws governing the state association of CPA's.e. None of the above.

3. The rule that prohibits a CPA from subordinating his or her judgment when performing professional services for a client is:a. The “Independence and Objectivity Rule.”b. The “Integrity and Objectivity Rule.”c. The “Integrity and Independence Rule.”d. The “Integrity and Confidentiality.”e. The “Independence and Confidentiality Rule.”

4. The AICPA rules of “Integrity and Objectivity” apply to:a. CPAs in public practice, but not in industry.b. Only CPAs performing audits and other attest engagements.c. Only CPAs in the practice of accounting, auditing or tax, but not consulting.d. Only CPAs in management or supervisory positions, regardless of industry.e. All CPAs whether in public practice or industry.

5. While “integrity and objectivity” must be practiced, ethics rules would never suggest a CPA should resign from a job.a. True.b. False.

Section IV Solutions and Suggested Responses to Review Questions follow on the next page.Section IV Solutions and Suggested Responses to Review Questions:

Review Question 1. (Please see page 25 of the May 15 digital edition JofA.) a. Incorrect. This is part of, but not the most complete answer.b. Incorrect. This is part of, but not the most complete answer.c. Incorrect. a and b are correct.d. Correct. a and b are correct.e. Incorrect. a and b are correct, but not c.

Review Question 2. (Please see page 25 of the May 15 digital edition JofA.)a. Incorrect. The AICPA Code of Professional Conduct.b. Incorrect. The AICPA Code of Professional Conduct.c. Correct. The AICPA Code of Professional Conduct.d. Incorrect. The AICPA Code of Professional Conduct.e. Incorrect. The AICPA Code of Professional Conduct.

Review Question 3. (Please see page 25 of the May 15 digital edition JofA.)a. Incorrect. The “Integrity and Objectivity Rule.”b. Correct. The “Integrity and Objectivity Rule.”c. Incorrect. The “Integrity and Objectivity Rule.”d. Incorrect. The “Integrity and Objectivity Rule.”e. Incorrect. The “Integrity and Objectivity Rule.”

Review Question 4. (Please see pages 25 & 29 of the May 15 digital edition JofA.)a. Incorrect. All CPAs whether in public practice or industry.b. Incorrect. All CPAs whether in public practice or industry.c. Incorrect. All CPAs whether in public practice or industry.d. Incorrect. All CPAs whether in public practice or industry.e. Correct. All CPAs whether in public practice or industry.

Review Question 5. (Please see page 29 of the May 15 digital edition JofA.) a. Incorrect. If pressures or events in the current position would prevent the CPA from following

ethics rules, the CPA could consider resigning.b. Correct. If pressures or events in the current position would prevent the CPA from following

ethics rules, the CPA could consider resigning.

===================================== End of Section IV.

Section V. Deducting Home Office Expenses (Page 36)

Section V Assignment:1. Study the article (reference text) in the Journal of Accountancy, paying particular attention to our



Section V Learning Objectives:

1. Learn the basic requirements to be eligible to claim home office expenses.2. Learn the different calculation methods and limitations.3. Learn how the deduction was affected by the Tax Cuts and Jobs Act (TCJA).4. Consider whether the home office deduction could apply to clients or your personal

circumstances.

Section V Review Questions:

1. In order to deduct home office expenses, the office must be the only place of business.a. True. b. False.

2. IRS rules for business use of a home can be found in:a. Publication 387.b. Publication 487.c. Publication 587.d. Publication 687.e. Publication 787.

3. To be eligible to deduct home office expenses, the workspace must be an entirely separate roomor similar “isolated workspace.”a. True.b. False.

4. A separate room used only as an office will always qualify for the home office deduction.a. True.b. False.

5. For your home office to be considered the “principal place of business:”a. It must be in a structure separate from the home.b. The majority of hours worked must occur in that space.c. You must use the space to meet with clients, customers, etc.d. You can't have any other office or work location. e. None of the above – there is no single test or criteria.

6. How would a taxpayer determine whether their home office qualifies as the “principal place of business?”a. Using “facts and circumstances,” evaluating the relative importance of activities performed

at each location.b. The principal place of business is always where the taxpayer spends the most time.c. The principal place of business is always where the revenue-earning activities occur.d. The principal place of business is determined by the mailing address used for tax reporting.e. The taxpayer is allowed to select any location that has been used for business for a year or

more.

7. You have a principal place of business in an office building. Can you also claim a deduction foryour home office?a. No. The home office must be the only place of business.b. No. The home office must be a separate structure.c. Yes, if you use it to meet with clients regularly and it is “substantial and integral” to the

business.d. Yes, as long as you use it to meet with clients. The “regular and exclusive” test does not

apply.e. No. You can have multiple business locations, but only one office.

8. The deduction of home office expenses is calculated on:a. Schedule A, “Itemized Deductions.”b. Schedule C, “Profit or Loss From Business.”c. Form 8829, “Expenses for Business Use of Your Home.”d. Form 8929, “Home Office Expenses.”e. Form 1040, “US Individual Income Tax Return.”

9. The first step in calculating the home office deduction is to categorize expenses as:a. Direct vs. indirect.b. Inventory vs. cost-of-sales.c. Employee vs. independent contractor.d. Variable vs. fixed.e. Recurring vs. nonrecurring.

10. Rather than track actual expenses to calculate the home office expense deduction, Rev. Proc. 2013-13 provides a safe harbor that allows the taxpayer to use a Simplified Method, which is: a. A flat amount of $500.b. 1% of revenues with a maximum deduction of $5,000.c. $5 per square foot, with a maximum of 500 square feet (maximum deduction of $2,500).d. $5 per square foot, with a maximum of 300 square feet (maximum deduction of $1,500).e. 10% of the home value, depreciated over 27.5 years.

Section V Solutions and Suggested Responses to Review Questions appear on the next page.Section V Solutions and Suggested Responses to Review Questions:

Review Question 1. (Please see pages 37, 39 of the May 15 Online JofA.) a. Incorrect. There can be more than one business location, including principle places of business.b. Correct. There can be more than one business location, including principle places of business.

Review Question 2. (Please see page 37 of the May 15 Online JofA.) a. Incorrect. Publication 387.b. Incorrect. Publication 487.c. Correct. Publication 587.d. Incorrect. Publication 687.e. Incorrect. Publication 787.

Review Question 3. (Please see page 37 of the May 15 Online JofA.)a. Incorrect. The office does not have to be a separate room or “isolated” space, but can be a

“separately identifiable” space.b. Correct. The office does not have to be a separate room or “isolated” space, but can be a

“separately identifiable” space.

Review Question 4: (Please see page 37 of the May 15 Online JofA.)a. Incorrect. The room must also be used regularly. Occasional or incidental use does not qualify.b. Correct. The room must also be used regularly. Occasional or incidental use does not qualify.

Review Question 5: (Please see page 37 of the May 15 Online JofA.)a. Incorrect. The office does not have to be a separate structure.b. Incorrect. The office does not have to be the location of the majority of hours worked.c. Incorrect. The office could be where all administrative work occurs, rather than a meeting place for

clients and customers.d. Incorrect. The principal place of business does not have to be where you meet clients or customers.e. Correct. There is not a single test or criteria.

Review Question 6: (Please see pages 37 & 39 of the May 15 Online JofA.) a. Correct. The taxpayer considers the “facts and circumstances,” evaluating the relative importance

of activities performed at each location.b. Incorrect. The taxpayer could spend the majority of time away and still claim the home office.c. Incorrect. Revenue could be earned away from the office, while administrative duties occur in the

home office.d. Incorrect. The mailing address alone would not establish the principal place of business.e. Incorrect. Principal place of business is established using the “facts and circumstances, not by filing

an election with the IRS.

Review Question 7. (Please see page 39 of the May 15 Online JofA.) a. Incorrect. Yes, if you use the office regularly to meet with clients and it is integral to the business.b. Incorrect. Yes, if you use the office regularly to meet with clients and it is integral to the business.c. Correct. Yes, if you use the office regularly to meet with clients and it is integral to the business.d. Incorrect. Yes, if you use the office regularly to meet with clients and it is integral to the business.e. Incorrect. Yes, if you use the office regularly to meet with clients and it is integral to the business.

Review Question 8. (Please see page 39 of the May 15 Online JofA.) a. Incorrect. Form 8829, “Expenses for Business Use of Your Home.”b. Incorrect. Form 8829, “Expenses for Business Use of Your Home.”c. Correct. Form 8829, “Expenses for Business Use of Your Home.”d. Incorrect. Form 8829, “Expenses for Business Use of Your Home.”e. Incorrect. Form 8829, “Expenses for Business Use of Your Home.”

Review Question 9. (Please see page 39 of the May 15 Online JofA.) a. Correct. Direct vs. indirect.b. Incorrect. Direct vs. indirect.c. Incorrect. Direct vs. indirect.d. Incorrect. Direct vs. indirect.e. Incorrect. Direct vs. indirect.

Review Question 10. (Please see page 40 of the May 15 Online JofA.) a. Incorrect. $5 per square foot, with a maximum of 300 square feet (maximum deduction of $1,500).b. Incorrect. $5 per square foot, with a maximum of 300 square feet (maximum deduction of $1,500).c. Incorrect. $5 per square foot, with a maximum of 300 square feet (maximum deduction of $1,500).d. Correct. $5 per square foot, with a maximum of 300 square feet (maximum deduction of $1,500).e. Incorrect. $5 per square foot, with a maximum of 300 square feet (maximum deduction of $1,500).

===================================== End of Section V.

Section VI. Forensic Accountants Team Up to Fight Elder Abuse (Page 42)

Section VI Assignment:1. Study the article (reference text) in the Journal of Accountancy, paying particular attention to our



Section VI Learning Objectives:1. Learn about the nature and prevalence of elder abuse.2. Learn the “red flags” that could signal potential elder abuse.3. Learn about one state program that pools resources to help investigate elder abuse.

Section VI Review Questions:

1. The article opens with a case of suspected elder abuse involving embezzlement. The investigator, upon reviewing bank records, thought there was a crime, but could not make enough sense of the records to present it to a jury. A key to getting the proof was:a. Use of a forensic accountant.b. Use of a plea bargain to get a confession.c. Testimony from the elderly victim.d. Use of a special fraud attorney.e. Use of a tax accountants.

2. The district attorney in the Martin case recommended using the Ontario County (NY) E-MDT, which stands for:a. Enhanced Multi-Directional Tracking.b. Enhanced Medical Document Team.c. Enhanced Medical Directive Track.d. Electronic Microsoft Deployment Toolkit.e. Enhanced Multidisciplinary Team.

3. The majority of elder financial abuse is committed by:a. Neighbors.b. Internet scam artists.c. Family members.d. A friend made on a dating website.e. Service providers or various types.

4. Elder financial exploitation is growing and is:a. Severely underreported.b. Usually always detected by banks or other financial institutions.c. Easy to detect and resolve.d. Rarely related to dementia.e. Usually insignificant to the victim's net worth.

5. Often, victims of financial elder abuse:a. Are physically and mentally healthy.b. Live alone.c. Show signs of cognitive impairment.d. Have a low net worth.e. Have no immediate family.

Section VI Solutions and Suggested Responses to Review Questions appear on the next page.Section VI Solutions and Suggested Responses to Review Questions:

Review Question 1: (Please see page 35 of June JofA.) a. Correct. Use of a forensic accountant.b. Incorrect. Use of a forensic accountant.c. Incorrect. Use of a forensic accountant.d. Incorrect. Use of a forensic accountant.e. Incorrect. Use of a forensic accountant.

Review Question 2. (Please see page 35 of June JofA.) a. Incorrect. Enhanced Multidisciplinary Team.b. Incorrect. Enhanced Multidisciplinary Team.c. Incorrect. Enhanced Multidisciplinary Team.d. Incorrect. Enhanced Multidisciplinary Team.e. Correct. Enhanced Multidisciplinary Team. Review Question 3. (Please see page 36 of June JofA.) a. Incorrect. Family members.b. Incorrect. Family members.c. Correct. Family members.d. Incorrect. Family members.e. Incorrect. Family members.

Review Question 4. (Please see page 37 of June JofA.) a. Correct. Severely underreported.b. Incorrect. Severely underreported.c. Incorrect. Severely underreported.d. Incorrect. Severely underreported.e. Incorrect. Severely underreported.

Review Question 5. (Please see page 37 of June JofA.) a. Incorrect. Show signs of cognitive impairment.b. Incorrect. Show signs of cognitive impairment.c. Correct. Show signs of cognitive impairment.d. Incorrect. Show signs of cognitive impairment.e. Incorrect. Show signs of cognitive impairment.

======== End of Section VI

Section VII. When Business Owners Defraud Their Partners (Page 42)

Section VII Assignment:1. Study the article (reference text) in the Journal of Accountancy, paying particular attention to our



Section VII Learning Objectives:1. Learn what types of businesses can be vulnerable to fraud committed by partners.2. Learn some of the “red flags” that could indicate a business could be vulnerable to fraud.3. Learn measures that can help counter certain vulnerabilities.

Section VII Review Questions:

1. According to the author, medical practitioners can be vulnerable to fraud where ________embezzle funds.a. Friends.b. Relatives.c. Business partners.d. Online scammers.e. Medical billing companies.

2. In one example, the author's firm uncovered ________ of damages incurred in only five years.a. $100,000.b. $200,000.c. $500,000.d. $1,000,000.e. $2,000,000.

3. In the same example, the embezzlement was committed by:a. A third-party billing company.b. An independent bookkeeping service.c. A college friend who provided IT services.d. The co-owner's uncle (who was an owner) and aunt.e. A sibling.

4. Regarding responsibility for bookkeepers, the author recommends:a. Avoiding use of independent providers.b. Using a bookkeeper unrelated to partners or an outside service with no prior relationship

with any of the partners.c. Using a trusted individual, such as a spouse or other family member of a partner.d. Having one of the partners handle all of the finances.e. Partners focus on the business (eg: delivery of medical service) rather than spending time

looking over the finances.

5. In another example, the practice was short on funds (due to embezzlement by the managing partner) to the point that:a. Several dentists had unpaid wages.b. The managing partner asked fellow partners to lend money to the practice.c. The managing partner lent money to the practice.d. a and b.e. a, b and c.

Section VII Solutions and Suggested Responses to Review Questions appear on the next page.Section VII Solutions and Suggested Responses to Review Questions:

Review Question 1: (Please see page 43 of June JofA.) a. Incorrect. Business partners.b. Incorrect. Business partners.c. Correct. Business partners.d. Incorrect. Business partners.e. Incorrect. Business partners.

Review Question 2. (Please see page 43 of June JofA.) a. Incorrect. $2,000,000.b. Incorrect. $2,000,000.c. Incorrect. $2,000,000.d. Incorrect. $2,000,000.e. Correct. $2,000,000.

Review Question 3. (Please see page 43 of June JofA.) a. Incorrect. The co-owner's uncle (who was an owner) and aunt.b. Incorrect. The co-owner's uncle (who was an owner) and aunt.c. Incorrect. The co-owner's uncle (who was an owner) and aunt.d. Correct. The co-owner's uncle (who was an owner) and aunt.e. Incorrect. The co-owner's uncle (who was an owner) and aunt.

Review Question 4. (Please see page 44 of June JofA.)a. Incorrect. Using a bookkeeper unrelated to partners or an outside service with no prior relationship

with any of the partners.b. Correct. Using a bookkeeper unrelated to partners or an outside service with no prior relationship

with any of the partners.c. Incorrect. Using a bookkeeper unrelated to partners or an outside service with no prior relationship

with any of the partners.d. Incorrect. Using a bookkeeper unrelated to partners or an outside service with no prior relationship

with any of the partners.e. Incorrect. Using a bookkeeper unrelated to partners or an outside service with no prior relationship

with any of the partners.

Review Question 5. (Please see page 44 of June JofA.)a. Incorrect. This is part of, but not the most complete answer.b. Incorrect. This is part of, but not the most complete answer.c. Incorrect. Both a and b are correct, but not c.d. Correct. Both a and b are correct, but not c.e. Incorrect. Both a and b are correct, but not c.

====================================== End of Section VII

Section VIII. Look Before You Leap into a 529 Plan (Page 46)

Section VIII Assignment:1. Study the article (reference text) in the Journal of Accountancy, paying particular attention to our



Section VIII Learning Objectives:1. Learn the various aspects of Sec. 529 plans.2. Learn the basic aspects of Roth IRA's.3. Learn the scenarios where a Roth IRA could be a more tax-efficient tool to save and pay for college.

Section VIII Review Questions:

1. Section 529 plans provide a tax-favored way to:a. Purchase a first home.b. Save for retirement.c. Pay for healthcare expenses with pretax dollarsd. Save for higher education expenses.e. Purchase medical insurance.

2. Other than relative simplicity, a primary benefit of Section 529 plans is:a. Contributions can yield a tax credit of up to $2,500 per beneficiary. b. Contributions are tax-deductible up to $2,500 per beneficiary.c. Withdrawals are generally not taxed if used to pay for “qualified” education expenses.d. Unused Section 529 plan funds can be transferred to an Individual Retirement Account

(IRA) with no tax effects.e. Unused Section 529 plan funds can be transferred to a Health Saving Account (HSA) with no

tax effects.

3. A couple opens a Section 529 account for their child (beneficiary). Who is eligible to contribute to the account? a. The parents only.b. Parents and grandparents only.c. Family members only.d. Anyone can contribute.

4. Years later, the couple above is moving their child to college and wonder: “How exactly do we access the Section 529 funds to pay for college?”a. Part of the enrollment process connects the school and the Sec. 529 account so tuition and

fees (only) are automatically drafted by the school.b. The account generally provides a debit card or checks that the parent uses to pay college

bills.c. The account owner (usually a parent), must request a withdrawal and indicates whether it is

“qualified” or “non-qualified.”d. The parent must submit receipts or other proof of college expenses to the Section 529

account (usually an investment company), who will determine which amounts qualify for withdrawal.

e. Only the student can request withdrawals.

5. Withdrawals from Section 529 plans could be partly taxable. How would the IRS know to expect taxpayer reporting of Section 529 plan withdrawals?a. The college sends a Form 1099-Q to the IRS to report the amount of education expenses paid

with Section 529 plan funds.b. The college sends a Form 1098-T to both the IRS and the recipient (usually the parent)

reporting the total education expenses paid with Section 529 plan funds.c. The account owner (usually the parent) must complete Form 8863 to report to the IRS the

amount of Section 529 plan withdrawals for the tax year.d. The beneficiary (usually the child), must report the Section 529 plan withdrawals to the IRS

on Form 8863.e. The plan administrator (usually an investment company), sends a Form 1099-Q to the IRS

and recipient to report the withdrawals for the tax year and the amount of earnings vs. return of investment (contributions).

6. A Section 529 plan account can be used to pay for any “qualified education expenses,” tax-free. Which IRS publication provides guidance as to which education expenses qualify?a. Publication 770.b. Publication 790.c. Publication 870.d. Publication 970.e. Publication 990.

7. After explaining some of the potentially negative features of Section 529 plans, the authors recommend _________ as a complement or replacement. a. Coverdell Education Savings accounts.b. Regular IRAs.c. Roth IRAs.d. U.S. Savings bonds..e. 401(k) accounts.

8. Contributions to Roth IRA's, subject to modified adjusted gross income (MAGI) limits, are limited to __________ in 2020.a. $5,000, $6,000 if over 50 years old.b. $5,000, $7,000 if over 50 years old.c. $6,000, $7,000 if over 50 years old.d. $7,000, $7,000 if over 50 years old.e. $7,000, $8,000 if over 50 years old.

9. Unused Section 529 plan funds would be subject to some income tax or penalty when withdrawn. Unused Roth IRA funds can be withdrawn free of income tax and penalty if the account holder waits until age 59 and one-half, and the account is at least 5 years old.a. True.b. False.

10. Parents will need to understand the effects of Section 529 plans and Roth IRA's on FAFSA, which stands for:a. Federal Application For Student Aidb. First Application for Federal Scholarship Assistance.c. Free Application for Federal Student Aid.d. Federal Application For Scholarship Aid.

Section VIII Solutions and Suggested Responses to Review Questions appear on the next page.Section VIII Solutions and Suggested Responses to Review Questions:

Review Question 1: (Please see page 47 of June JofA.) a. Incorrect. To save for higher education expenses.b. Incorrect. To save for higher education expenses.c. Incorrect. To save for higher education expenses.d. Correct. To save for higher education expenses.e. Incorrect. To save for higher education expenses.

Review Question 2. (Please see page 47 of June JofA.) a. Incorrect. The tax credit is calculated using tuition and fees paid, not Section 529 contributions.b. Incorrect. Section 529 contributions are not deductible for federal income tax purposes.c. Correct. Withdrawals are generally not taxed if used to pay for “qualified education expenses.”d. Incorrect. Unused Section 529 plan funds cannot be transferred to an IRA without tax

consequences.e. Incorrect. Unused Section 529 plan funds cannot be transferred to an HSA without tax

consequences.

Review Question 3. (Please see page 47 of June JofA.) a. Incorrect. Anyone can contribute.b. Incorrect. Anyone can contribute.c. Incorrect. Anyone can contribute.d. Correct. Anyone can contribute.

Review Question 4. (Please see page 47 of June JofA.)a. Incorrect. The account owner must request a withdrawal, indicating whether “qualified” or not.b. Incorrect. The account owner must request a withdrawal, indicating whether “qualified” or not.c. Correct. The account owner must request a withdrawal, indicating whether “qualified” or not.d. Incorrect. The account owner must request a withdrawal, indicating whether “qualified” or not.e. Incorrect. The account owner must request a withdrawal, indicating whether “qualified” or not.

Review Question 5. (Please see page 47 of March JofA.)a. Incorrect. The plan administrator sends a Form 1099-Q to the IRS and recipient to report the

withdrawals for the tax year and the amount of earnings vs. return of investment (contributions).

b. Incorrect. The plan administrator sends a Form 1099-Q to the IRS and recipient to report the withdrawals for the tax year and the amount of earnings vs. return of investment (contributions).

c. Incorrect. The plan administrator sends a Form 1099-Q to the IRS and recipient to report the withdrawals for the tax year and the amount of earnings vs. return of investment (contributions).

d. Incorrect. The plan administrator sends a Form 1099-Q to the IRS and recipient to report the withdrawals for the tax year and the amount of earnings vs. return of investment (contributions).

e. Correct. The plan administrator sends a Form 1099-Q to the IRS and recipient to report the withdrawals for the tax year and the amount of earnings vs. return of investment (contributions).

Review Question 6: (Please see page 47 of June JofA.) a. Incorrect. Publication 970.b. Incorrect. Publication 970.c. Incorrect. Publication 970.d. Correct. Publication 970.e. Incorrect. Publication 970.

Review Question 7. (Please see page 50 of June JofA.) a. Incorrect. Roth IRAs.b. Incorrect. Roth IRAs.c. Correct. Roth IRAs.d. Incorrect. Roth IRAs.e. Incorrect. Roth IRAs. Review Question 8. (Please see page 50 of June JofA.)a. Incorrect. $6,000, $7,000 if over 50 years old.b. Incorrect. $6,000, $7,000 if over 50 years old.c. Correct. $6,000, $7,000 if over 50 years old.d. Incorrect. $6,000, $7,000 if over 50 years old.e. Incorrect. $6,000, $7,000 if over 50 years old.

Review Question 9. (Please see pages 50 & 51 of June JofA.) a. Correct. Unused Section 529 plan funds would be subject to some income tax or penalty when

withdrawn. Unused Roth IRA funds can be withdrawn free of income tax and penalty if the account holder waits until age 59 and one-half, and the account is at least 5 years old.

b. Incorrect. Unused Section 529 plan funds would be subject to some income tax or penalty when withdrawn. Unused Roth IRA funds can be withdrawn free of income tax and penalty if the account holder waits until age 59 and one-half, and the account is at least 5 years old.

Review Question 10. (Please see page 57 of March JofA.)a. Incorrect. Free Application for Federal Student Aid.b. Incorrect. Free Application for Federal Student Aid.c. Correct. Free Application for Federal Student Aid.d. Incorrect. Free Application for Federal Student Aid.

====================================== End of Section VIII

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