Federal Tax Research 10th Edition by Roby Sawyers,William Raabe,Gerald Whittenburg,Steven Gill

Exercise 97

Big CPA Firm has many partners in one of its local offices. Two of these partners are Tom, a tax partner, and Alice, an audit partner. Because of the size of the office, Tom and Alice do not know each other very well.
Tom has a tax client, Anchovy Corporation, that is in severe financial trouble and may have to file for bankruptcy. Anchovy is a customer of Sardine Corporation, one of Alice's audit clients. Accounts receivable on Sardine's books from Anchovy are significant. If Anchovy goes bankrupt, it could cause serious problems for Sardine. Alice is unaware of the bad financial condition of Anchovy.
a. Can Tom disclose to Alice the problems at Anchovy
b. What if Anchovy goes under and takes Sardine with it
c. What potential ethics issues do you see in this situation