Don’t Get Caught in the Cross-Fire Among Principals

Source: Pennsylvania CPA Journal

In this article the author points out the inherent conflict of interest in every closely held business and advises CPAs how to avoid being caught in the cross-fire.

The CPA can become a lightning rod for hostile principals. Once the CPA has knowledge about differences among principals, he may have to face the reality that one of them was responsible for engaging him. Simple professional actions, like allocating expenses in a K-1, can engender an atmosphere of blame. The CPA may be independent and impartial, yet a principal may view him as an enemy.

What should the CPA do in such a circumstance? First, disclose the relationship the CPA may have with one of the parties. Tell everyone you can. Inform them of the work you are doing, and advise all parties to look for someone who is independent to advise them on personal issues that might arise from a dispute among owners. If you are in possession of confidential information that creates a conflict between you and one of the parties, you may have to decline certain work or resign from the account.

To read the article, click here and select “Avoid Sitting in Two Boats at Once.”

From Pennsylvania CPA Journal, Winter 2009, www.picpa.org.