ACQUIRING GOOD ETHICAL JUDGMENT 157 SCENARIO4 PTIONAL CLIENT SERVICE tely nd, ed

Question

ACQUIRING GOOD ETHICAL JUDGMENT 157 SCENARIO4 PTIONAL CLIENT SERVICE tely nd, ed, real one act in the best interests of one's client? The Situation enior accountant is working on the audit of a distribution company. The y is a big client of the office of the managing director of the firm, who has A senior accounta elp ins rs he or ructed his team to provide "the greatest level of service" to this client. str One day the audit manager approaches the senior accountant and asks him to prepare the company's Federal tax return. A significant part of the tax return is the valuation of inventory, using a LIFO/FIFO standard of valuation- the choice of the standard being contingent on the legal tax benefits that can accrue. Because the distribution company has thousands of products, the manager suggests that the senior accountant use a statistical sampling method of valuing the inventory for tax purposes. The senior accountant has not done anything like this before. Knowing this, the manager offers his assistance, saying, "When you get to that point of the tax return, let me know, and I'll show you how to do it." Later, when the senior accountant asks for this help, the manager shows him how to use the relevant software for statistical samples. He then adds: "I'Il set this up for you so that it runs 1000 samples. You can then pick the sample that is most advantageous to our client's tax position and use that for the tax return." The senior accountant at first shows some hesitation. Seeing this, the manager reminds him of what the managing director had requested, namely, that this client be given "exceptional client service." The manager suggests that to do 1000 samples, and not merely one, is to go through the trouble of finding the sample that best advances the interests of the client. This is the way to provide "exceptional client service. Question The senior accountant continues to have doubts about the suggested procedure. And yet this sort of tax return is new to him, and, as far as he knows, the procedure of searching through 1000 samples to find the best one for his client is not forbidden by the letter of the law. What should he do in such a circumstance? Which of the following is not permissible? And, of the permissible alternatives, which is the best course of action?

Explanation / Answer

It is not permissible to change the valuation technique for the tax return based on what is most beneficial for the tax payer. The senior accountant should consult some other person where in he can understand the correct method since it is not ethical to follow most beneficial method for tax payer.

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