Suppose United Sates is a large open economy which can influence the world capital market. During the past decade, the US cut tax rates and increased defense spending, resulting in record budget deficits. Using diagrams state and explain what the effects were on: the levels of investment, the level of net capital outflow, the level of trade balance in and the real exchange rate in Japan assuming it is a small open economy.

Discuss how the facts in the potato industry case illustrate the lack of control over prices by individual potato producers in a competitive market. Also, discuss the response to high prices predicted by the model of perfect competition and the attempts by producers in a competitive market to gain control over price. Check recent business publications to find out how successful the United Potato Growers of America cooperative has been in recent times.

Is it necessary to have a set of International Auditing Standards? Would it be better if the International Accounting Standards were allowed to be set by or be based upon U.S. auditing standards? Or perhaps International Auditing Standards should be set by the United Nations? In your opinion, is it perhaps easier for the world to reach an agreement on International Auditing Standards than it is for the world to reach an agreement on International Accounting Standards? Why or why not for each of the above individual questions? Be specific.

Both the SSTS and Circular 230 have been posted on Blackboard for your use in answering the following questions.

Answer the following questions using the SSTS’s or Circular 230.   For each question cite the Standard or page number and section number of Circular 230 for which your answer is based upon. (Member means tax preparer.)

(Disregard the page number)

______ 21.    A member may omit answering a question on a tax return if reasonable grounds exist for omitting the answer to a question applicable to the taxpayer.

SSTS: ___________________________________________

______ 22. A member should not omit an answer to a question because it might prove disadvantageous to the taxpayer.

SSTS: ___________________________________________

______ 23.   If reasonable grounds do not exist for omission of an answer to an applicable question, a taxpayer is not required to provide on the return an explanation of the reason for the omission.

SSTS: ___________________________________________

______ 24. A member shall make a reasonable effort to obtain from the taxpayer that the taxpayers has maintained books and records or substantiating documentation to support reported deduction or tax treatments of items on a tax return.   SSTS: ___________________________________________

______ 25. A member can use estimates if fire, computer failure, or natural disaster has destroyed the taxpayer’s records.

SSTS: ___________________________________________

______ 26. A practitioner may endorse or otherwise negotiate any check issued to a client if the client has authorized the practitioner to do so.

230: ___________________________________________

______ 27. Tax advisors should provide clients with the highest quality representation concerning Federal tax issues by adhering to best practices in providing advice and in preparing or assisting in preparation of a submission to the Internal Revenue Service.

230: ___________________________________________

______ 28. An enrolled agent has the same ability to practice before the Internal Revenue Service as does an attorney or CPA.

       230: ___________________________________________

______ 29. Practice before the Internal Revenue Service include preparing documents, filing documents, corresponding and communicating with the Internal Revenue Service and representing a client at conferences, hearings, and meetings.

230: ___________________________________________

______ 30. Enrolled Agents, enrolled retirement plan agents, and registered tax return preparers must renew their status with the Internal Revenue Service to maintain eligibility to practice before the IRS.

230: ___________________________________________

______ 31. A CPA may be denied to practice before the IRS if he or she has not filed their own individual income tax returns.

230: ___________________________________________

______ 32. An employee of the Mississippi Department of Revenue may not practice before the Internal Revenue Service if such employment may disclose facts or information applicable to Federal tax matters.

230: ___________________________________________

______ 33. In order to practice before the Internal Revenue Service, an individual must be twenty-one years old.

230: ___________________________________________

______ 34. An individual must pass a written examination administered by the Internal Revenue Service in order to receive status as an enrolled agent.

230: ___________________________________________

______ 35. An enrolled agent must complete a minimum of 72 hours of continuing education credit during an enrollment cycle with a minimum of 16 during each enrollment year.

230: ___________________________________________

______ 36. An enrolled agent must complete two hours of ethics or professional credit each enrollment year.

230: ___________________________________________

______ 37. A practitioner who, having been retained by a client with respect to a matter administered by the Internal Revenue Service, knows that the client has not complied with the revenue laws of the United States or has made an error in or omission from any return, document, affidavit, or other paper which the client submitted or executed under the revenue laws of the United States, must advise the client promptly of such noncompliance, error, or omission.

230: ___________________________________________

______ 38. A practitioner should always exercise due diligence in determining the correctness or oral or written representations made by the practitioner to the Department of the Treasury.

230: ___________________________________________

______ 39. A practitioner should not publish the availability of a written schedule of fees and disseminate since it may be considered to be advertising.

230: ___________________________________________

______ 40. A practitioner should refrain from any type of advertising.

230: ___________________________________________

______ 47. A practitioner may not use or disclose any return information without the consent of the taxpayer in any situation.

230: ___________________________________________

______ 48. A practitioner may advise a client to submit a document, affidavit, or other paper to the IRS if it contains information that demonstrates an intentional disregard of a rule or regulation unless it, in conjunction with other documentation, in good faith, challenges the rule or regulation.

230: ___________________________________________

______ 49.   A practitioner must possess the necessary competence to engage in practice before the Internal Revenue Service.

230: ___________________________________________

______ 50.   A practitioner may not represent two separate clients if the representation of one will adversely affect the position of the other.

230: ___________________________________________

1. The vertical axis for an aggregate demand curve measures

   		real income.
   		nominal GDP per year.
   		the price level.
   		real GDP per year.

2.5 points   

QUESTION 5

1. A price level increase tends to reduce net exports, thereby reducing the amount of real goods and services purchased in the United States. Economists refer to this phenomenon as

   		the Gross Domestic Product (GDP) effect.
   		the barrier effect.
   		the open-economy effect.
   		the wealth effect.

2.5 points   

QUESTION 6

1. An aggregate demand curve

   		does not shift, unlike individual or market demand curves.
   		shifts to the right when population decreases and shifts to the left when population increases.
   		shifts to the right when the price level increases and to the left when the price level falls.
   		shifts to the right when any non-price-level change that increases aggregate spending occurs.

2.5 points   

QUESTION 7

1. The shape of the aggregate demand curve does not tell us anything about how the total dollar value of spending will ultimately be divided between output and prices. For this we need

   		information about the standard of living in the country.
   		to know how far from the origin the aggregate demand curve is.
   		an long-run aggregate supply curve.
   		information that only the Consumers' Price Index can provide.

2.5 points   

QUESTION 8

1. If aggregate demand is stable and there is economic growth, the economy will experience

   		secular degeneration.
   		secular decline.
   		secular deflation.
   		secular depreciation.

2.5 points   

QUESTION 9

1. If consumers' confidence in the economy rises,

   		aggregate demand will shift rightward and the price level will fall.
   		aggregate demand will shift rightward and the price level will rise.
   		aggregate demand will shift leftward and the price level will rise.
   		aggregate demand will shift leftward and the price level will fall.

2.5 points   

QUESTION 10

1. If the long-run aggregate supply declines

   		there will be no change in price level and real GDP.
   		there will be inflation.
   		there will be stable prices.
   		there will be deflation.

2.5 points   

QUESTION 11

1. One tenet of classical economics is that

   		the government should intervene whenever necessary to avoid any unemployment.
   		the role of the government should be limited, since the market will always be self-correcting.
   		wages and prices are "sticky downward."
   		the government should set a minimum wage slightly above the natural market equilibrium rate.

2.5 points   

QUESTION 12

1. According to classical theory, total employment and real Gross Domestic Product (GDP) are

   		unrelated.
   		negatively related.
   		positively related.
   		inversely related.

2.5 points   

QUESTION 13

1. Long-run unemployment in the classical model is considered to be impossible because

   		job placement and training programs are rampant in the United States.
   		flexible prices and wages keep workers fully employed.
   		the labor supply is horizontal.
   		the government will intervene to aid the unemployed.

2.5 points   

QUESTION 14

1. The classical model makes little distinction between the long-run and short-run because

   		the model has not been fully developed yet.
   		prices adjust so fast that the economy is quickly moving towards the long-run.
   		current changes influence the long run, so it is not possible to plan for the future.
   		the classical economists knew that we are always operating in the short run.

2.5 points   

QUESTION 15

1. What is the underlying assumption of the simplified Keynesian model?

   		The relevant range of the short-run aggregate supply curve (SRAS) is vertical.
   		The relevant range of the short-run aggregate supply curve (SRAS) is horizontal.
   		The relevant range of the aggregate supply curve (AS) is vertical.
   		The relevant range of the long-run aggregate supply curve (LRAS) is horizontal.

2.5 points   

QUESTION 16

1. A decrease in aggregate demand will cause

   		aggregate supply to fall according to Keynes, and unemployment to increase according to classical economists.
   		aggregate supply to fall according to classical economists, and prices to fall according to Keynes.
   		prices to fall according to classical economists, and unemployment to increase according to Keynes.
   		prices to fall and unemployment to increase according to both classical economists and Keynes.

2.5 points   

QUESTION 17

1. All items below will decrease the short-run aggregate supply curve EXCEPT

   		a decrease in labor supply.
   		a decrease in training and education.
   		a decrease in the marginal tax rates.
   		an increase in the prices of inputs.

Place the letter of the report type that best fits the language presented on the answer line. Each report type may be used more than once or not at all, but each item has only one best answer. If you think more than one answer may apply, choose the BEST answer.

a. Explanatory language

b. Unqualified opinion with qualification for GAAP departure

c. Qualified opinion

d. Qualified opinion because of a scope limitation

e. Qualified opinion because of an ICFR deficiency

f. Qualified opinion because of a GAAP departure

g. Qualified opinion because of a change in accounting standards

h. Qualified opinion because of lack of independence

i. Qualified opinion plus explanatory language

j. Qualified opinion for dual dating

k. Qualified opinion to reflect need to rely on another auditor

l. Disclaimer of opinion because of a scope limitation

m. Disclaimer of opinion because of lack of independence

n. Adverse opinion

o. Combined report with unqualified opinions on financial statements and ICFR

_____1. In our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of March 31, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)…

_____2. In addition, as discussed in Note 9 to the consolidated financial statements, effective January 1, 2007, the Company adopted Accounting for Uncertainty in Income Taxes, FASB ASC 740-10.

_____3. We are not independent with respect to XYZ Company, and the accompanying balance sheet as of December 31, 19X1, and the related statements of income, retained earnings, and cash flows for the year then ended. …

_____4. …because of the effects of the matters discussed in the preceding paragraphs, the financial statements referred to above do not present fairly. …

_____5. We have also audited in accordance with the standards of the Public Company Accounting Oversight Board (United States) the company’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 6, 2011 expressed an unqualified opinion thereon.

_____6. … except for the effects of such adjustments, if any, as might have been determined to be necessary…

_____7. The accompanying financial statements have been prepared assuming that ABC, Inc. will continue as a going concern. As more fully described in Note 1, the Company filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code on January 29, 2010, which raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to this matter are also described in Note 1.

_____8. The Company did not make a count of its physical inventory…The Company’s records do not permit the application of other auditing procedures. …the scope of our work was not sufficient to enable us to express. …

_____9. In our opinion, except for the omission of the information discussed in the preceding paragraph….

_____10. In our opinion, based on our audits and the report of other auditors, the financial statements referred to above present fairly, in all material respects…

_____11. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of W Company as of December 31, 2010 and 2009…. Also in our opinion, W Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010. …

_____12. We did not audit the financial statements of B Company, a wholly-owned subsidiary, which statements reflect total assets and revenues constituting 20 percent and 22 percent, respectively of the related consolidated totals. … In our opinion, based on our audit and the report of the other auditors, the consolidated financial statements referred to above present fairly. …

_____13. In our opinion…the financial statements present fairly… Dated February 16, 2010, except for Note 16, as to which the date is March 1, 2010.

_____14. Except as discussed in the following paragraph, we conducted our audits in accordance with auditing standards…. In our opinion, except for the effects…the financial statements present fairly. …

_____15. As discussed in Note X to the financial statements, the 20X2 financial statements have been restated to correct a misstatement.

Congress should retire, not reform, the Generalized System of Preferences BY MARC L. BUSCH, OPINION CONTRIBUTOR — THE HILL.com September 15, 2020 The United States’ Generalized System of Preferences (GSP) is set to expire at the end of the year. This trade program, which started up in 1976, grants developing countries zero-tariffs on eligible goods. U.S. Trade Representative Robert Lighthizer says he may want to reform GSP before renewing it. GSP can’t be reformed. Instead, Congress should start the process of retiring it. The U.S. extends one of 13 GSP programs in today’s global economy. All of them aim to help poor nations boost their exports through tariff preferences. U.S. GSP, in particular, comes with political conditionality and caps annual import growth. The U.S. “suspends” recipients that fall short on labor standards or intellectual property rights, for example, and has “competitive limitations” on a recipients’ year-on-year exports. These design features rub poor nations the wrong way, but the main problem with GSP is what it does inside developing countries. At first blush, GSP sounds like a free lunch because developing countries get tariff cuts without having to give them. But it’s not. One indication is that GSP is underused: The average utilization rate is a respectable 72 percent, but for some of the poorest nations, such as Ghana, Lesotho and Sierra Leone, it’s only 27 percent, 38 percent and 36 percent, respectively. The reason for this underuse is that GSP’s margin of preference, in relation to the most-favored nation (MFN) tariffs under the World Trade Organization (WTO), isn’t big. It’s certainly not big enough to take on the risk of being suspended or staying below competitive limitations. Things were different in the 1970s. Most recipients didn’t belong to the General Agreement on Tariffs and Trade (GATT), so GSP’s margin of preference was sizable. Today, far more recipients are members of the WTO, such that GSP’s preference margin over MFN averages a mere 2.4 percent. This underutilization of GSP isn’t the problem. The problem is that GSP does bad things to the domestic trade politics of recipients that belong to the WTO. The issue lies with the exporters. They get market access abroad regardless of whether their government liberalizes. That’s because GSP is nonreciprocal. But conditionality still looms large. That’s where the WTO comes in. Although not a WTO obligation, GSP is permitted by the WTO and has been the subject of litigation. The ruling says that conditionality has to be applied the same way across recipients in similar situations. The WTO, in other words, helps to insulate exporters from ad hoc conditionality, and thus reduces their incentive to lobby against tariffs at home. This leads the recipient to import less, hurting consumers and industries that make use of imported inputs. So, what is there to reform? GSP works exactly as intended. It’s just that GSP happens to distort trade politics in recipients that belong to the WTO. This wasn’t entirely unanticipated. In 1968, at a conference in New Delhi that brought the idea of GSP to life, developing countries asked how the program would work with the GATT’s multilateral rules. It didn’t fit back then, and it can’t be made to fit now. Proponents of GSP will push back. One line of argument is that developing countries are unable to go without GSP. This is a stretch. GSP covers only about 3 percent of U.S. imports. Even India, a relatively large user of GSP, reported little change in exports to the U.S. after being suspended in 2019. India also wants a free trade deal with the U.S. That’s the future, not GSP. Another line of argument is that GSP is a useful foreign policy tool for dealing with labor standards. This is also a stretch. Not one measure of labor standards, conditional on the margin of preference, predicts GSP utilization. This says recipients that are weak on labor standards are enticed by the same margins as those that are strong on labor standards, suggesting that they don’t see themselves as being at greater risk of suspension. GSP doesn’t need to be shut down overnight. But this December, Congress should begin to retire this antiquated program. Do you agree with the author that Congress should retire, not reform, the United States’ Generalized System of Preferences? Why or why not?