By MACPA Professional Ethics Task Force
Following is a question and answer transcript highlighting some of the frequent inquiries sent to the MACPA Professional Ethics Task Force. Responses to the inquiries have been tailored to specific questions presented and may not consider all of the unique circumstances that are part of an ethical inquiry. Attempt your own answers before reading the “unofficial” opinion of the Task Force.
| Interpretation 101-3
Resources As members continue to implement Interpretation 101-3 Performance of Nonattest Services, including the documentation requirements, a number of helpful resources are available on the AICPA web site. |
Q. I am the CPA for individuals A and B and for their partnership P. The partnership owns a building leased to A's company. The partners are contemplating the sale of the building and liquidation of the partnership. A's company is $6,000 delinquent in rent to P. All entities, A, B and P are clients. Since A is the tax matters person for P and I am precluded from discussing confidential information under Code of Conduct Rule 301 with anyone else, and treatment of the debt as an uncollectible is probably a violation of my integrity under Rule 102, how and what should I do to protect B from loss of the rental income?
A. There are two essential problems here, Conflicts of interest and Confidentiality.
You are correct that you cannot disclose confidential information under Rule 301 without the client's consent (must be in writing). But, if B is a full partner you may be able to disclose the information at a meeting with both partners or in a letter to the Partnership in connection with finalization of the activity by asking the question, "How shall I resolve….?"
You are also correct that any bias on your part in resolution of the issue could be construed as lack of independence and integrity under Rule 102.
This situation and dilemma points out the need to address this type of issue in a comprehensive engagement agreement. If either the engagement agreement or partnership agreement speak to this situation, that document could provide a way around the problem.
A course of action would be to withdraw from all three of the engagements. Upon inquiry from B as to the reason for your withdrawal, you could advise B that there are accounting differences that are not resolved and that they should be reviewed with A.