What does substantial authority mean on the CPA exam?
Substantial authority. The standard between reasonable basis and more likely than not: roughly a 40 percent chance, judged on the weight of published authorities rather than on the preparer's confidence.
Defined against Treas. Reg. 1.6662-4(d).
Which CPA exam sections use substantial authority?
Substantial authority appears in the REG section of the CPA exam.
Related terms
- reasonable basis: The lowest standard at which a return position may be taken without penalty if it is disclosed.
- more likely than not: A greater than 50 percent chance of being sustained on its merits.
- valuation allowance: The contra account reducing a deferred tax asset to the portion more likely than not to be realized, meaning a likelihood above 50%.
- level of assurance: How much confidence the practitioner expresses.
- qualified business income: The net income from a domestic pass-through trade or business, excluding investment income and reasonable compensation.
- audit sampling: Selecting and evaluating less than 100% of a population of audit relevance so the sample is expected to be representative, giving a reasonable basis for conclusions about the whole population.