ExpertMedium1 markMultiple Choice
CPA · Question 10 · Area 1: Ethics & Procedures
Regarding the Statements on Standards for Tax Services (SSTS), when may a tax preparer use a client's estimates to prepare a tax return?
Regarding the Statements on Standards for Tax Services (SSTS), when may a tax preparer use a client's estimates to prepare a tax return?
Answer options:
A.
Never; actual documentation is always required.
B.
When it is not practical to obtain exact data and the estimates appear reasonable based on the preparer's knowledge.
C.
Whenever the client provides them, as the preparer has no duty to verify.
D.
Only for expenses under .
How to approach this question
Know SSTS No. 4. Estimates are okay if: 1) Impractical to get real data, 2) Reasonable, 3) Not misleading.
Full Answer
B.When it is not practical to obtain exact data and the estimates appear reasonable based on the preparer's knowledge.✓ Correct
When it is not practical to obtain exact data and the estimates appear reasonable based on the preparer's knowledge.
SSTS No. 4 permits the use of estimates when obtaining exact data is not practical and the estimates are reasonable.
Common mistakes
Assuming estimates are never allowed or that they are allowed just because the client is lazy.
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