On closer examination

In order to be awarded CPD units you must answer the following five random questions correctly. If you fail the test, please re-read the article before attempting the questions again.

Which of the following statements regarding the nature of due diligence is incorrect?

It is the same as due care which is a legal concept by itself meaning duty of care

The procedures involved can be viewed as a consulting service, with certain standards established by different accountancy bodies

It is one of the key portions of an acquisition process

It involves either the performance of an investigation of a business or person, or the performance of an act with a certain standard of care

Which of the following work is unrelated to tax due diligence?

Compliance with tax law

Reviewing tax planning opportunities

Identification of transfer pricing issues

Compliance with listing rules

Which of the following is not a common example of tax due diligence findings?

Complicated group structure and financing structures with incomplete statutory and management books and records

Inadequate market analysis

Aggressive tax planning with different degrees of tax avoidance and/or evasion

Complicated group structure and financing structures with incomplete statutory and management books and records

Which of the following is a major aspect of tax due diligence consideration?

Tax adjustments

Tax administration

All of these answers

Scope of tax charge

Which of the following provisions of the IRO covers holdover of tax in dispute under objection?

Section 70A

Section 71(2)

Section 80

Section 64(1)

Which of the following is not a way that tax in dispute by the Commissioner of the Inland Revenue Department can be held over?

By a holdover on condition that a bank guarantee for the tax in dispute plus any interest is issued

By an order that no holdover is allowed

By a holdover on condition that a Tax Reserve Certificate (TRC) is purchased for the amount of tax in dispute

By an unconditional holdover

Which of the following penalties is a possible consequence for the late filing of a profits tax return?

A maximum penalty of a fine plus three times the amount of undercharged tax

An additional tax at a maximum of treble the amount of undercharged tax, at the Commissioner’s discretion

All of these answers

A smaller sum at the Commissioner’s discretion

Which of the following characteristics of penalty tax is incorrect?

Additional assessment may be imposed

A fine may be imposed

It can be applied if the assessor believes that the late filing is done without reasonable excuse

The maximum amount of additional tax is treble the amount of undercharged tax

Which of the following business records-keeping requirements is incorrect?

Records must be kept for seven years after the completion of the transactions, acts or operations

Records include books of account, receipts and payments, income and expenditure together with vouchers, bank statements, invoices, receipts and other documents necessary to verify the entries in the accounts, records of assets and liabilities, goods purchased and sold, details of sellers and buyers, records of stocktaking, and records of services provided

Anyone carrying on a trade, profession or business in Hong Kong is required to keep sufficient records in English or Chinese of his income and expenditure to enable income to be assessed

The business records must be originals, not scanned computer copies

Which of the following statements is incorrect regarding additional assessment?

The Commissioner is empowered to raise any assessment within six years after the end of the year of assessment in which a transaction or event occurs

Additional assessment is different from additional tax assessment

Additional assessment can only be issued once

In the case of fraud or wilful evasion, the time limit is extended to 10 years

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