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Forensic Accounting

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Final Examination According to IRS 25.1.1.2 “tax fraud is often defined as an intentional wrongdoing on the part of a taxpayer, with the specific purpose of evading a tax known or believed to be owing” (Hopwood, pg 320). By this definition, if Tom Anderson ignores the receipt to the foreign trust, he is enabling Mary Wench in tax fraud. Mr. Anderson should encourage Ms. Wench in reporting the foreign trust deposit and other related income that she might be hiding. If Ms. Wench resists, Mr. Anderson should discuss what could happen if she chooses to continue to hide the possible income and inform her that he could no longer represent her in filing her annual taxes. Mr. Anderson should also let the IRS know of his findings so that they can red flag her account. If she chooses another accountant and does not disclose the same information to them, then they will be in the middle of the legal case when they come after Ms. Wench for tax fraud.
Mr. Anderson should also disengage himself from doing any other type of work, like consulting, from Ms. Wench’s company. As the CEO of her company, Ms. Wench is responsible for overseeing and supplying accounting information to her company. Who is to say she would not hide income, expenses, losses, or assets to make her company look good. If she is willing to do it in her personal life, she is capable of doing it in her professional role as CEO.
Mr. Anderson is bound by ethics like every other profession. He must encourage his clients to make the right choices and if they chose not to, then he cannot continue the professional relationship with them. If he chooses to continue the engagements knowing they are not forthcoming with all pertinent information then he becomes just as responsible as they are when it comes to tax fraud. With that, he will have penalties, fines and possible jail time as would they.

References:
Hopwood, W., Leiner, J., & Young, G. (2008). Forensic accounting. New York: McGraw-Hill Irwin.

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