Davis, the founder, and CEO of Davis Inc., contacted a new firm run by a young man who has just received his CPA certificate and started his practice to conduct external accounting for his company and prepare end of year accounts and tax returns. The company has 190 employees, hence falling below the required statutory audit. Company staff often purchase goods manufactured by the company, but this is processed outside the accounting system. Davis uses the proceeds to fund internal parties and celebrations.
Individuals seeking to practice before the IRS must adhere to all regulations in the 230 Circular. Having practiced in a CPA firm for two years, I believe that I have the required experience to run my firm. I do not have a non-compete clause with my employer, which allows me to start a similar profession without facing legal challenges. As a certified public accountant with sufficient competency and reputation, I have the authority of representing clients before the IRS on issues like a representation of taxpayers, resolving violations and sanctions on confirmed violations, and describing standards of conduct under which individuals are planning to prepare tax returns must exercise. The only restriction that I face is that I have not registered my firm. Hence I must acquire the required certifications immediately to enable me to conduct my services legally.
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I will base my practice on the grounds of integrity; hence I will advise my client that omitting income generated from sales to staff is misleading and dishonest. Moreover, I consider objectivity, due care, confidentiality, professional behavior, and professional competence as crucial ethical practices that I must incorporate in my service. I will explain to my client the implications of his actions and recommend a change in their accounting system to disclose previous undisclosed income. In case he is unwilling to change the system to incorporate staff sales, I will stop involving myself with his company.
Response 1
The process of starting a business is complicated, especially with the dynamic legal requirements. Hence, CPAs must consistently comply and upgrade their academic qualifications to maintain their license. I think the idea presented depicts the authority of the CPA in engaging in the practice. Lack of a non-competence clause with the previous employer and proper registration of the business gives him the power to conduct his business legally. As a client, I believe that my CPA has the responsibility of doing his business ethically, advising, and protecting me as a client to maintain his firm's reputation. I find these sentiments as crucial ethical background on which to base his business. I am confident that he will maintain confidentiality and advise me on ensuring that my firm complies with government regulations.
Response 2
As a client, I believed that the CPA is competent based on his experience and academic qualifications. The CPA license grants him the right to represent clients on payment and collection issues, audits, and appeals. However, he must continue with his education to keep his license alive and maintain ethical requirements. I run a business of manufacturing and selling bread. However, I do not account for the sales I make to my employees. I wish to resolve this issue by incorporating the services of a tax accountant. I think that with you as my CPA, you will represent my issues and communicate with the IRS on my behalf. Having promised to work with due diligence and only present factual information in documentations, I am optimistic that you will help me resolve my tax evasion problem.
