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CPA Responsibility

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Molly, a CPA in public practice is on the board of directors of a local bank. One of Molly's clients has a $100,000 ninety day loan from the bank. Molly, while preparing the clients tax return finds that the client's revenues from their business is down significantly. Any further deterioration may very well result in the client's bankruptcy. At a meeting of the banks' directors Molly finds out that her client has requested that the bank renew their loan of $100,000 for another ninety days. From the comments of the other board members in discussing the client's request it is obvious that they are unaware of the client's current business conditions. Just before the vote is taken as to renew the loan the chairman who is aware of Molly's relationship to the client turns to her and asks her for her comments. What are Molly's responsibilities? What are the issues here? Advise Molly on what she should do and why. Remember you need to have solid research to defend your position.

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Solution Summary

The expert discusses duty and responsibility of CPA. Molly's relationship to the client turns to her and asks her for her comments are provided.

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As a CPA, it is the duty of Molly to ensure confidentiality of client's information. Hence, as a responsible CPA, he should divulge the confidential information of his client to the bank. He cannot divulge such information to bank without the prior consent of his client. Hence, from professional ethics and professional code of conduct perspective, he is not allowed to divulge the confidential financial information of his client.

Even though the failure to disclose the confidential financial information of the client is a breach of Molly's fiduciary ...

Solution provided by:
Sandeep Bardia, MBA
Education
  • BCom, SGTB Khalsa College, University of Delhi
  • MBA, Rochester Institute of Technology
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