The case of the rotten core
Ethics
Charles Selcer, CPA, MBA | October/November 2023 Footnote
Editor's note: Updated September 26, 2023
Axel Grees, CPA received an offer he couldn’t refuse from his audit client, Apple Core Leone Co.’s President Ciara Leone, to come aboard as CFO at a salary far in excess of his current salary at Slyk Slyme and Grees CPAs (SSG). Axel took the offer and negotiated a sale of his practice to the firm before joining his new company. SSG plans to continue as Apple Core Leone’s auditors. Axel’s sale of his practice calls for semi‐annual payments of $80,000 for four years, decreased by a factor of 15% SSG’s pre‐tax income each year. The adjustment would be applied to the next year’s
first payment.
Q. Is SSG’s independence impaired?
A. Yes. Even if the payments are not material to SSG, the underlying formula used to calculate the payments must remain fixed during the payout period. The firm may adjust the payments for inflation and pay interest on amounts due.
See Code Section 1.279.020.02(a)
