Safeparts
Corporation is Jon Johnson’s audit and tax client. The short story:
The Cast of Characters
Safeparts
Corporation’s three directors are the officers and only stockholders of the
company. Each holds 1/3 of the shares. President Raul Rambo founded the company
and is now retired. As an individual, he is also Johnson’s tax client. Vice
President Jana Smith manages the day-to-day operations. She has been
instrumental in increasing the business and its profits. Smith’s individual tax
work is done by CPA Corin Ware. Treasurer Chris Fletch has been a long-term,
loyal employee responsible for many innovative financial transactions of great
benefit to the business. He is Johnson’s close, personal friend and an
individual tax client.
The Conflict
President
Rambo discussed with CPA Johnson the tax consequences to him as an individual
of selling his one-third interest in the Safeparts Corporation to Vice
President Smith. Later, meeting with Fletch to discuss his individual tax
problems, Johnson learns that Fletch fears that Rambo and Smith will make a
deal, put him in a minority position, and force him out of the company. Fletch
says, “Jon, we’ve been friends a long time. Please keep me informed about
Rambo’s plans, even rumors. My interest in Safeparts Corporation represents my
life savings and my resources for the kid’s college. Remember, you’re little
Otto’s godfather.” Thinking back, Johnson realized that Vice President Smith
has always been rather hostile. Chances are that Johnson will lose the Safeparts
engagement (to CPA Ware) if Smith acquires Rambo’s shares and controls the
corporation. Nevertheless, Fletch will probably suffer a great deal if he
cannot learn about Rambo’s plan, and Johnson’s unwillingness to keep him
informed will probably permanently ruin their friendship.
Later, Johnson’s Dilemma
Johnson
ponders the problem. “Safeparts Corporation is my client, but a corporation is
a fiction-only form. The stockholders personify the real entity, so they are
collectively my clients, and I can transmit information among them as though
they were one person. Right? On the other hand, Rambo and Fletch engage me for
individual tax work, and information about one’s personal affairs is really no
business of the other. What to do? I could be sued and lose my CPA license if I
get this wrong, so whatever should I do?
Required:
Prepare a paper discussion on the advice you would give to Johnson about
his professional ethics issue(s) with complete details.
Include the appropriate
constraints that you believe are governing factors that Johnson must consider
per the AICPA Code of Professional Conduct as highlighted in Module B.
Your paper should include a letter to each stockholder informing them about your decision concerning your ongoing ability to provide services as a CPA to the Safeparts Corporation and to each of them individually.
Use proper business terms and refer to the AICPA Code of Professional Ethics as required.
Please see the PDF Textbook – Module B.
If you are using outside source, please ensure its easly acesss (.gov, or .com)
Please do not use AI as it can be easly detected.
