Final answer:
A CPA should ensure that a tax position is in compliance with the principles of being equitable, simple, and efficient, as well as with all relevant laws and professional standards before concluding its appropriateness.
Step-by-step explanation:
Prior to concluding whether a tax position is appropriate, the CPA should ascertain that the position is in compliance with all relevant tax requirements and principles. Tax laws are designed to be equitable, meaning they are fair and just in the burden they place on taxpayers. They must also be simple, offering a straightforward approach for taxpayers to determine what they owe, and efficient, with systems in place to collect taxes without undue cost or delay. If these criteria are not met, the position may not hold up upon inspection by tax authorities. A CPA should rigorously evaluate the position against these standards, along with applicable laws and regulations, ethical guidelines, and professional standards before making a determination.
Precedent and court rulings: The CPA should examine any relevant court decisions that may have established a precedent for the tax position.
Professional judgment: The CPA should use their expertise and knowledge to assess the merits of the tax position and determine if it is reasonable and supportable.