Question

Our accounting firm has won the engagement to be the new federal income tax consultant for a fortune 500 company. In the course of preparing the federal income tax returns for its tax year ending December 31, 2017, we reviewed the company's federal income tax returns for recent years. Our review discovered a large error in the company's computation of its domestic production activities deduction. The error is the result of misunderstanding the law, and was repeated on all of the recent returns. We have discussed the matter briefly and informally with the client, who has indicated that they would rather not file amended returns correcting the error. The client has also indicated that it would like a written analysis of the issue, including the chances of the issue being found by the IRS on audit and of the client prevailing on the matter if it winds up in court. To prepare for the next meeting with the client on this matter, we need to determine:

• Under the IRS rules applicable to tax practitioners, what are our ethical obligations to the client and to the IRS with regard to these mistakes, the analysis requested by the client and our advice to the client?
• Under the AICPA's standards, what are our ethical obligations to the client and to the IRS with regard to these mistakes, the analysis requested by the client and our advice to the client?

Answer 1

Answer :

1)Under the IRS rules applicable to tax practitioners, what are our ethical obligations to the client and to the IRS with regard to these mistakes, the analysis requested by the client and our advice to the client?

According to IRS an expense advisor or a professional who has the learning about a blunder or oversight in any arrival, record or sworn statement which has been submitted under the income laws of USA has the commitment to exhort the customer speedily with respect to such mistake or exclusion. For this situation the customer has chosen not to record revised returns and according to IRS it is the obligation of the duty expert to guidance the customer the results of such rebelliousness with law which requires documenting of changed returns if there should be an occurrence of any blunders or oversights. According to the guidelines of IRS's round 230 #10.21 an expense proficient isn't in charge of fixing the rebelliousness by the customer once he has unmistakably informed the customer about the issue and furthermore about the subsequent outcomes.

2)Under the AICPA's standards, what are our ethical obligations to the client and to the IRS with regard to these mistakes, the analysis requested by the client and our advice to the client?

According to AICPA's SSTS no.6 an assessment expert or a professional, being an individual from AICPA, has the obligation to advise the customer regarding the blunders and oversights in past returns. The assessment advisor additionally has an obligation to illuminate his customer about the results just as the prescribed restorative move that can be made. Above all, according to AICPA, the assessment specialist isn't permitted to educate the expense expert about any mistakes or oversights without the express authorization of the customer. On the off chance that the customer does not document revised returns, at that point the assessment expert has the alternative of pulling back from prompting the customer