Reference no: EM131622300

Question: 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 One way 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 One way 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 One way 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. "One way 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.