If, for example, a plumbing company schedules a date and time to visit your home, the plumber would reasonably expect that you would pay for the plumbing services provided. One party’s actions lead the other party to reasonably believe that a contract exists. In this case, the conduct of a party creates a contract. The two parties make either written or oral promises to each other, and this process forms an actual contract. Here are three types of contracts on the REG test: Contract law takes into account what a reasonable person would think about a particular transaction or event, and the courts substitute quasi-contracts to prevent one party from taking advantage of another. A party may make a monetary payment, or make a promise to do something. When you think of contracts in the context of the REG exam, consider whether or not each party gave something up to enter them. Gleim CPA Review Course ◄◄ Most Practice Questions.Surgent CPA Prep Course ◄◄ Best Adaptive Technology.Becker CPA Review Course ◄◄ #1 Rated CPA Prep Course of 2024.Bob had implied authority to take down the fence. When the equipment is removed, Bob reattaches the chain link fence. When Bob takes down the 20-foot pine tree in the back yard of 200 Riverside Terrance, he unhooks a chain link fence and lays the fence on the ground, so that he can get his equipment to the tree. IMPLIED AUTHORITY: The agent can be reasonably expected to carry out certain duties as part of his or her actual authority. Susan reasonably believes that Bob has authority to select the specific trees to be removed. Steve meets with Susan, a client, and tells her that Bob’s crew will remove any trees that are close to power lines. If Steve tells Bob to take down a 20-foot pine tree in the back yard of 200 Riverside Terrance, Bob has actual authority.ĪPPARENT AUTHORITY: The principal’s words or actions would lead a third party to reasonably believe that the agent has authority to act. Bob’s authority to act as an agent for Steve can take several forms:ĪCTUAL AUTHORITY: The principal’s words or actions cause the agent to reasonably believe that he or she has the authority to act. HERE’S THE DEAL:Īssume, for example, that Bob manages a work crew for Steve’s tree service company. Additionally, the REG test has several questions on the authority and professional responsibilities of agents. The relationship between an agent and principal is a business law concept. Use these tips to study for the REG test’s multiple-choice questions and pass the CPA exam! IN A NUTSHELL: There are some general concepts, however, that can help you simplify much of the test detail. The REG section of the CPA exam is challenging because this test covers business law, federal taxation, and rules of professional conduct for CPAs.
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