During an interview conducted by the tax return preparer, the client stated that he had paid $1,500 for deductible travel expenses and $3,000 for charitable contributions. The preparer asked if documentation existed in support of the deductions and was assured by the client that adequate documentation did exist. When the client's return was later examined by the IRS, a tax deficiency resulted due to the client's lack of supporting documentation for the travel expenses. Which of the following statements best describes this situation?
A. The preparer is subject to a penalty under Sec. 6694 because she did not verify the existence of the documentation and a tax deficiency resulted from the examination.
B. The preparer is not subject to a penalty under Sec. 6694 because the understatement was not substantial.
C. The preparer is not subject to a penalty under Sec. 6694 because she is not required to examine or review the client's books and records in order to verify the client's information.
D. The preparer is subject to a penalty under Sec. 6694 because she did not verify that her client had supporting documentation.
Answer: C