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informed consent regarding the conflict. while everything is going well and they surrounding conflicts of interest should
For such an informed decision to be are profiting, but when problems arise, evaluate their current policies and their
made, the client has to know the nature the conflict may become a matter of current engagements. They should take
of the conflict and how that conflict will great importance to them. This may lead affirmative steps to implement changes
be handled, including what safeguards to professional liability claims, which are that are consistent with best practices
will be implemented to maintain integ- best refuted by contemporaneous writ- for handling conflicts of interest. Firms
rity and objectivity. The firm members ten documentation. should also evaluate existing client
should be cautious to avoid disclos- Firms should also have written relationships to identify potential issues
ing confidential information during policies for identifying and processing and determine the appropriate course of
these discussions. conflicts of interest, including verifica- action moving forward. It is important
Circular 230 is in the process of tion of signed informed consent before to address any identified conflict imme-
being revised, with updates expected in accepting or continuing engagements. diately, before an issue emerges, whether
the near future, but it currently requires These policies should be revisited at through obtaining waivers, altering the
written consent to waive a conflict of least annually for updates, ideally after a engagement, or terminating the cli-
interest on federal tax matters. While continuing education class attended by a ent relationship.
the AICPA guidelines still allow for senior member of the firm, or whenever
verbal consent, the best practice in such a situation occurs to warrant a policy up- Summary of best practices
matters is to have all waivers in writing date. This policy should be available to Here is a summary of best practices
and signed by all involved parties. The all staff with regular reminders to watch related to conflicts of interest:
AICPA has sample waivers included for, identify, and escalate conflicts within ■ Draft an engagement letter defining
in the guidelines released in 2015 here. the firm. The AICPA is in the process the client and the work involved and
Practitioners should consult with legal of updating the Guidelines for Conflicts of disclosing general conflicts.
counsel to determine what wording is Interest in the Performance of Tax Services ■ Have written policies to identify and
appropriate for specific uses. and is expected to release them in 2022; resolve potential conflicts, and revisit
If the client is unwilling to give these guidelines are a valuable resource the policies frequently.
consent to waive the conflict of inter- and should be shared with all staff mem- ■ Provide continuing education and
est, the firm should either change the bers. In addition, the firm’s professional training for the entire firm.
circumstances surrounding the conflict liability insurance provider may be a ■ Require contemporaneous documen-
in order to obtain consent or consider good resource for templates of written tation of any conflicts, safeguards,
terminating the client or the engage- policies and waivers, as written policies and communications regarding these
ment. Possible changes that could make and informed consent are best practices matters with the clients.
the client comfortable giving informed for reducing professional liability. ■ Obtain written, informed consent
consent would be to alter the safeguards, Another cornerstone safeguard from clients to waive any conflicts of
apply additional safeguards, terminate a against professional liability claims interest. ■
portion of the relationship, or dispose of related to conflicts of interest is clear
the relevant interest. If consent still can- identification of the client and the work
not be obtained, the practitioner should to be provided. Clients, especially those
consider terminating the relationship or of smaller firms, may develop a mental- Contributors
the engagement subject to the conflict. ity of “you’re my tax guy,” believing that
the firm or the practitioner can and will Pamela Slatten, J.D., MBA, is an attorney
Firm policies regarding handle everything that arises without and senior tax strategist with Marietta
conflicts consideration of the possibility of con- CPAs in Indianapolis. Larry Marietta,
In addition to obtaining the written flicts. Specific engagements naming the CPA, is the owner of Marietta CPAs in
waiver, firms and practitioners should client (such as which LLC member the Indianapolis. Stephen P. Valenti, CPA,
document all discussions members of firm represents) and the work agreed is professor emeritus of accounting at
the firm have with clients regarding the upon (such as preparation of tax returns New York University. Mr. Marietta and Mr.
potential conflicts, the safeguards being but not identification of tax planning Valenti are members of the AICPA Tax
implemented within the firm, and the strategies) will help define where con- Practice Responsibilities Committee. For
information relayed to the clients in flicts may arise. more information on this column, contact
the efforts to obtain informed consent. Practitioners who have ignored or thetaxadviser@aicpa.org.
Clients may minimize potential conflicts who have been unaware of the issues

www.thetaxadviser.com August 2022 35