Reference no: EM133118433

Question - Adam Hill started his own practice 10 years ago. He is a Nevada CPA and member of the AICPA. The firm grew quickly although Adam is still the only CPA and shareholder. Much of the growth was because of the assistance of his former employer Marcy Johnson of Tahoe Water Company.

Johnson liked the way Adam performed all the payroll functions and filed tax returns and that Adam maintained all payroll and tax records for Tahoe Water Company. Johnson trusted Adam to make all necessary tax payments using e-filing for employee and employer taxes.

Johnson lauded Adam's services to all her acquaintances in social and professional organizations. The two discussed Adam paying a referral fee to Johnson for any future business, which they agreed to do. Shamrock Beverages was the latest referral to Adam by Johnson. Adam sent Johnson the agreed-on fee.

During the last two years Johnson's health began to fail, and Adam was often communicating with Johnson's husband, Arlen. Arlen would send any correspondence from tax agencies directly to Adam with a blank check to cover the taxes and Adam's fees.

Recently, Arlen has also had some health issues and his son Lane is handling all financial matters for his parents. In the stack of bills, Lane finds three past due notices from the IRS. When discussing the correspondence with his father, Arlen says to send all that to Adam because Adam handles all the tax records and filing. Lane shows his father how the IRS claims that taxes have not been filed for the last six years.

Arlen says, "No, no, that cannot be right. Adam always handles that. He is such a nice young man. He files our taxes and maintains our records. He has done it for the last 10 years. We send him the correspondence with a check to cover the taxes and his fees. Adam takes good care of us and this can't be right."

In the meantime, the Workers' Compensation Insurance agency is auditing Shamrock Beverages. The request for payroll records and filings is sent by Shamrock to Adam to make copies of all documents. Shamrock is quite dismayed when Adam tells them that he has no payroll records or filings for Shamrock. Even though he promised Shamrock to maintain these records, he did not. He deleted them from the computer by mistake. Shamrock was appalled to learn of this and contacted the Nevada State Board of Accountancy, claiming an ethics violation by Adam.

Adam ignored three requests (emails, phone calls, and registered letters) from the state board to respond with documents and an interview about Shamrock Beverages. In the meantime, the state board received notice from the IRS that Adam was banned from practicing before the IRS as a result of the six years of delinquent tax filings on behalf of Johnson and the Tahoe Water Company.

In your initial post, address the following questions:

Did Adam violate any ethics rules either of the Nevada State Board of Accountancy or the AICPA? Explain.

What disciplinary action should be taken against Adam by the Nevada State Board and the AICPA? Explain.