Free CPA Taxation and Regulation (REG) Flashcards

Circular 230 Section 10.22 requires a practitioner to exercise due diligence in determining the correctness of representations made to the IRS. The CPA cannot simply accept a client-supplied schedule at face value once a red flag exists; the CPA must make reasonable inquiries when information appears incomplete, incorrect, or inconsistent with other facts known to the practitioner. Signing the return without resolving the discrepancy risks a Section 6694 preparer penalty if the return understates tax as a result. Due diligence does not require auditing every client statement, but it does require following up on a specific reason to doubt it.