Page 415 - TaxAdviser_2022

TAX PRACTICE RESPONSIBILITIES
Editor:
Stephen P. Valenti, CPA
Authors:
Pamela Slatten, J.D.
Larry Marietta, CPA
Even small firms
should have a
conflict-of-interest
policy in place
because Circular
230 holds tax
leaders within a
firm responsible
for establishing
procedures
that ensure
firm members comply
with the rules.
32 August 2022
Conflicts of interest: A practical
approach for small firms
Tax practitioners are required by both examples provided in additional guid-
the AICPA Code of Professional Conduct ance. Circular 230, Section 10.29(a),
and Treasury Circular 230, Regulations states that a conflict of interest exists
Governing Practice Before the Internal if the representation of one client will
Revenue Service (31 C.F.R. Part 10), to be directly adverse to another client or
screen for and address conflicts of inter- there is a significant risk that the repre-
est related to professional services. It is sentation of one or more clients will be
prudent for even small firms to have a materially limited by the practitioner’s
policy in place to identify and deal with responsibilities to another client,
potential conflicts because Circular 230 to a former client, or to a third
holds tax leaders within a firm respon- person, or by a personal interest of the
sible for establishing procedures that practitioner.
The guidance in the AICPA stan-
ensure firm members comply with the dards, found here, falls under the
rules. While Circular 230 applies only
to practice before the IRS, the AICPA “Integrity and Objectivity Rule”
standards apply for all professional ser- (ET §1.100.001), which states that a
practitioner shall be free of conflicts of
vices. Additional local or jurisdictional
rules may apply. interest and maintain objectivity and
When conflicts are readily apparent, integrity. Since the standard does not fall
they have to be dealt with, but there are under the “Independence Rule”
also circumstances in which practitioners
(ET §1.200.001), which can never be
have an affirmative duty to seek to dis- waived, it is possible for some conflicts
cover potential or actual conflicts. This of interest to be waived and for the en-
means that even if the conflict is not
gagement to continue.
self-evident, the practitioner should take
steps to determine whether a conflict Categories of conflict
The AICPA divides conflicts into three
might exist presently or arise later. Such
situations are most likely to present general categories: adversarial conflicts,
themselves when the firm is onboarding transactional conflicts, and relation-
a new client; firms should take steps to al conflicts.
ensure that there is not a conflict with an Adversarial conflicts occur when
existing client or the staff or firm itself. two clients of the firm have directly
It can be difficult for practitioners to opposing interests in a matter. The firm
identify what circumstances rise to the cannot provide adequate representation PHOTO BY SVCAN/ISTOCK
level of a potential or immediate conflict regarding the matter to both clients
of interest. Specific circumstances might because the representation of one client
not be addressed in the standards or the will necessarily harm the other client.
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