Conflict of Client’s Interests. Jon Williams, CPA, is in the middle of the real-life soapopera, Taxing Days of Our Lives.The Cast of CharactersOneway Corporation is Williams’s audit and tax client. The three directors are the officersand the only three stockholders, each owning exactly one-third of the shares. President RaulJack founded the company and is now nearing retirement. As an individual, he is also Williams’s tax client. Vice President Jana Jill manages the day-to-day operations. She has beeninstrumental in increasing the business and its profits. Jill’s individual tax work is done byCPA Corin Phil. Treasurer Chris Bill has been a long-term, loyal employee and has beenresponsible for many innovative financial transactions and reports of great benefit to thebusiness. He is Williams’s close personal friend and an individual tax client.The ConflictPresident Jack discussed with CPA Williams the tax consequences to him as an individualof selling his one-third interest in Oneway Corporation to Vice President Jill. Later, meetingwith Bill to discuss his individual tax problems, Williams learns that Bill fears that Jack andJill will make a deal, put him in a minority position, and force him out of the company. Billsays, “Jon, we’ve been friends a long time. Please keep me informed about Jack’s plans, evenrumors. My interest in Oneway Corporation represents my life savings and my resources forthe kid’s college. Remember, you’re little Otto’s godfather.”Thinking back, Williams realized that Vice President Jill has always been rather hostile.Chances are that Phil would get the Oneway engagement if Jill acquires Jack’s shares andcontrols the corporation. Nevertheless, Bill will probably suffer a great deal if he cannotlearn about Jack’s plans, and Williams’s unwillingness to keep him informed will probablyruin their close friendship.Later, on a Dark and Stormy NightWilliams ponders the problem. “Oneway Corporation is my client, but a corporation is afiction—only a form. The stockholders personify the real entity, so they are collectively myclients, and I can transmit information among them as though they were one person. Right?On the other hand, Jack and Bill engage me for individual tax work, and information aboutone’s personal affairs is really no business of the other. What to do? What to do?”Required:Give Williams advice about alternative actions, considering the constraints of the AICPACode of Professional Conduct.
Conflict of Client’s Interests. Jon Williams, CPA, is in the middle of the real-life soap
opera, Taxing Days of Our Lives.
The Cast of Characters
Oneway Corporation is Williams’s audit and tax client. The three directors are the officers
and the only three stockholders, each owning exactly one-third of the shares. President Raul
Jack founded the company and is now nearing retirement. As an individual, he is also Williams’s tax client. Vice President Jana Jill manages the day-to-day operations. She has been
instrumental in increasing the business and its profits. Jill’s individual tax work is done by
CPA Corin Phil. Treasurer Chris Bill has been a long-term, loyal employee and has been
responsible for many innovative financial transactions and reports of great benefit to the
business. He is Williams’s close personal friend and an individual tax client.
The Conflict
President Jack discussed with CPA Williams the tax consequences to him as an individual
of selling his one-third interest in Oneway Corporation to Vice President Jill. Later, meeting
with Bill to discuss his individual tax problems, Williams learns that Bill fears that Jack and
Jill will make a deal, put him in a minority position, and force him out of the company. Bill
says, “Jon, we’ve been friends a long time. Please keep me informed about Jack’s plans, even
rumors. My interest in Oneway Corporation represents my life savings and my resources for
the kid’s college. Remember, you’re little Otto’s godfather.”
Thinking back, Williams realized that Vice President Jill has always been rather hostile.
Chances are that Phil would get the Oneway engagement if Jill acquires Jack’s shares and
controls the corporation. Nevertheless, Bill will probably suffer a great deal if he cannot
learn about Jack’s plans, and Williams’s unwillingness to keep him informed will probably
ruin their close friendship.
Later, on a Dark and Stormy Night
Williams ponders the problem. “Oneway Corporation is my client, but a corporation is a
fiction—only a 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, Jack and Bill engage me for individual tax work, and information about
one’s personal affairs is really no business of the other. What to do? What to do?”
Required:
Give Williams advice about alternative actions, considering the constraints of the AICPA
Code of Professional Conduct.
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