Discussion board reply
Directions: Please submit two replies of at least 200-250 words each. Include two citations with each reply, and use APA formatting for all citations.
Scenario – Clara comes to an attorney’s office in need of assistance with her husband’s estate. Her husband, Phil, a factory worker, had been a saver all his life and owned approximately $1,500,000 in stocks and bonds. Clara is relatively unsophisticated in financial matters, so the attorney agrees to handle the estate for 17 percent of the value of the estate. The normal charge for such work is 3 to 5 percent of the estate. The widow agrees to the 17 percent arrangement. The attorney then hires CPA Charles for $10,000 to compute Phil’s estate tax on Form 706 and to prepare other appropriate documents.
Under Circular 230, does Charles have any responsibility to inform the widow that she is being significantly overcharged by the attorney? Be sure to cite research that supports your position. What potential ethics issues do you see in this situation? Which AICPA Code(s) of Professional Conduct rules apply in this situation (explain how and why they apply)? Cite the specific verse(s) for at least one Biblical principle that you feel is relevant to the situation (explain how and why it applies).
Charles has responsibility to inform the widow that she is being significantly overcharged by the attorney. Hebrews 13:16 (New Living Translation) says to not neglect to do good and share what you have, for such sacrifices are pleasing to God. Those sacrifices do not have to necessarily be material things. For example, Charles could share what he has by explaining to Clara the rules and regulations. There are many rules and regulations that cover the issue of contingent fees.
Under Circular 230 Section 10.27 is where a person can find whether or not the policy of being charged too much is being followed. Circular 230 Section 10.27 states that a practitioner “may not undertake contingent fee arrangements for any matter before the IRS. The primary rule is that a Circular 230 practitioner cannot charge unconscionable fees” (Jenkins, 2015, para. 2). According to the textbook the reason of Circular 230 is to give protection to the people that pay taxes and the IRS by making the tax preparers to be competent and adhere to ethical standards (Sawyers, R., Raabe, W., Whittenburg, G., Gill, S., 2015, p. 7).
One of the potential ethics issue I see in this situation is Charles and the attorney are fully aware of what a person usually is charged, three to five percent of the estate. It is ethically and morally wrong for the attorney and Charles to take advantage of Clara knowing she may be naive and unsophisticated. Philippians 2:4 states to let each person look not only to his own interests, but also to the interests of others. Charles and the attorney should put themselves in Clara’s shoes before choosing to perform the way they did. According to Schreiber (2014), ethical standards that have to be followed by CPAs in tax practice require the CPAs to know about ACIPA, other regulatory and statutory rules, and IRS rules of tax practice (para. 4).
Schreiber also states what the AICPA Rule 102 is, which is integrity and objectivity. This applies to the situation because Chalres and the attorney should not knowingly misrepresent facts to Clara. Schmutte and Duncan (2014) say that it is important for a professional to control their biases that could easily affect their decisions when helping a client. Another rule that applies to the situation is Rule 202. Charles and the attorney should be in compliance with the standards. An article by Desai and Roberts argues that the AICPAs always try to promote their private interests. It also states that it wants to raise concerns in regards to the public’s trust. Which if Clara was well-informed about the percentage ,then she would be apart of the public’s interest that is curious about the ACIPA rules. Rule 302 applies to this situation because the fee that the CPA is charging should not be more than what it normally would be.
Desai, R., Roberts, R. (2013). Deficiencies in the code of conduct: the aicpa rhetoric surround the tax return preparation outsourcing disclosure rules. Journal of Business Ethics. Vol: 114. Iss: 3, pp. 457-471. Retrieved from http://link.springer.com.ezproxy.liberty.edu:2048/article/10.1007%2Fs10551-012-1329-z
Jenkins, Edward R,Jr, C.P.A. (2015). The murky issue of contingent fees. Pennsylvania CPA Journal, 86(3), 6-7. Retrieved from http://ezproxy.liberty.edu:2048/login?url=http://search.proquest.com/docview/1715917999?accountid=12085
Sawyers, R., Raabe, W., Whittenburg, G., Gill, S. (2015). Federal tax research. (10th ed.). Stamford, CT: Cengage Learning.
Schmutte, J., & Duncan, J. R. (2014). Making independence decisions under the code of professional conduct. The CPA Journal, 84(10), 68-70. Retrieved from http://ezproxy.liberty.edu:2048/login?url=http://search.proquest.com/docview/1648075192?accountid=12085
Schreiber, G. H. (2014). An overview of aicpa and irs rules of practice. The Tax Adviser, 45(2), 132-136. Retrieved from http://ezproxy.liberty.edu:2048/login?url=http://search.proquest.com/docview/1498457266?accountid=12085
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