Problem
Jenny is an accountant for an international energy corporation (not a public practice). She oversees the accounting for certain associated offshore entities. The amount of funds involved in the entitles is substantial. At the end of the year, she notices that the accounting information from the offshore entitles is not included in the consolidated financial statements of the corporation but is reported on the consolidated tax return. She inquiries about this and is told that the corporation does not report the financial information from the offshore entities since it would lower the earnings of the main corporation. Jenny is sure that this is not the proper accounting and tax treatment for the entities.
Answer the following questions and related them to circular 230 of tax research.
1) What would you recommend for jenny at this point?
2) What potential ethical and practice issues do you see in this situation?