Jon Williams, CPA, is in the middle of a quandary related to his audit and tax client Oneway Corporation. The three directors of Oneway are the officers and the only three stockholders, each owning exactly one-third of the shares.
At his annual tax planning meeting with Williams, Raul Jack discussed the tax consequences of selling his one-third interest in Oneway Corporation to Sandra Smith. Raul believes that Sandra's business development efforts have contributed significantly to the growth of the business, so he would like to reward her with a majority ownership upon his retirement. He realizes this may be a challenge with Chris Barnes, so he wants to think more about possible incentives for Chris if this plan occurs.
Around the same timeframe, over an afternoon golf game with Chris Barnes, Barnes confides in Williams that he fears that Raul Jack and Sandra Smith will make a deal, put him in a minority position, and try to force him out of the company. Barnes says, "Jon, we've been friends a long time. Please keep me informed about Raul's plans. My interest in Oneway Corporation represents my life savings and I have a lot invested personally and professionally in the company."
Jon was clearly unsure of what to do given his roles in both relationships. He acknowledged to himself that he does not have a strong relationship with Sandra at this time, and she uses another CPA for her tax return. As such, he may lose the Oneway engagement if Sandra acquires Raul's shares and controls the corporation. On the other hand, Chris will probably suffer a great deal financially from the ownership change transaction if he does not know about Raul's plans, and Jon's unwillingness/inability to keep him informed will probably ruin their close friendship.
Jon ponders the problem.
Required:
Give Williams advice about alternative actions, considering the constraints of the AICPA Code of Professional Conduct.
Following are the answer:-
"If Ja and Ji gang up on B, Jo may lose the work that was going to P. This situation brought a typical 'Who is the client?' situation. Unluckily, the appropriate relationships are individual engagements of Jo with Ja and B, because if 0 Corporation were not a client, Jo would have confronted essentially a similar circumstance. In this circumstance Jo is in an impossible to win condition. On the off chance that he educates B, he might save the engagement of 0 and friendship of B, but he will undergo the responsibility of being engaged in industrial espionage and might face an ethics trap of confidentiality of accountants. In case, Jo does not tell him, he may lose the commitment and a generous offer of his own salary incidentally. On the off chance that, Jo thinks about guidelines as the most noteworthy part of moral conduct, he will dismiss the demand of B with a thoughtful and influential clarification of the expert reason. A happy conclusion for this approach depends upon B's understanding of typical condition he made for Jo. In case, Jo believes in considering the 'great and fiendishness worries of decisions identified with morals, he will require to choose which ultimate result is generally required".....
Jon Williams, CPA, is in the middle of a quandary related to his audit and tax...
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