Wanda David, a licensed CPA, works for Gee, LLC, a professional accountancy corporation with offices in Wisconsin and Illinois, in the audit department and she also has some small business clients that she provides tax services to in her spare time-generally on weekends. Her employer does not know that she does this. Wanda never thought about a conflict of interests because the firm does no tax work.
One of Wanda's small business clients, Wiz Inc., was also an audit client of Gee and had fallen more than 90 days past due on paying bills. In her position with Gee, Wanda was assigned to the audit of Wiz and is responsible for preparing and estimating the Allowance for Doubtful Accounts. During the audit of Wiz's financial statements during the week ending March 1, 2013, her boss asks her for justification for not including Wiz Inc. in the 90+ day aging report. It seems there are some audit-related questions about the collectible of the Wiz account. Wanda came up with an explanation for not including the Wiz account in the estimated allowance and her boss was satisfied.
Within a week of this request, Wanda is given a nice promotion and raise, but she has to transfer to the office of Gee in Chicago for the new job. Wanda accepts the promotion, leaves immediately, and decides to quit doing accounting on the side. In moving, Wanda does not complete the corporate tax return for Wiz on Form 1120, which should be filed with the IRS by March 15. She also fails to inform Wiz of her relocation. In trying to locate Wanda given the impending tax filing deadline, Wiz contacts the managing partner at Gee and discloses Wanda's side business.
Questions
1. Do you think it is ethically appropriate for Wanda David to provide tax services to Wiz, an audit client of her employer, Gee, LLC, at the same time that she works for the audit firm and is part of the audit engagement team on the Wiz audit? Why or why not?
2. Has David violated any of her ethical responsibilities to Wiz? How about her ethical responsibilities to Gee, LLC? Be specific and reference the AICPA Code of Professional Conduct in answering the question.
3. Assume that you are David's new boss in Chicago and just found out about her dual role as the tax accountant for Wiz and auditor for the firm on the Wiz audit. What would you do at this point?