Academic journal article Journal of Accountancy

Conflicts of Interest and Client Consent

Academic journal article Journal of Accountancy

Conflicts of Interest and Client Consent

Article excerpt

Section 10.29 of Treasury Circular 230, Regulations Governing Practice Before the Internal Revenue Service (31 C.ER. Part 10), generally prohibits a practitioner from representing a client before the IRS if the representation involves a conflict of interest.

Under Section 10.29(a), a conflict of interest exists if:

(1) The representation of one client will be directly adverse to another client; or

(2) There is a significant risk that the representation of one or more clients will be materially limited by the practitioner's responsibilities to another client, a former client or a third person, or by a personal interest of the practitioner.

However, in cases where there is a conflict of interest, a practitioner can nevertheless represent a client if the practitioner reasonably believes he or she can provide "competent and diligent representation" to each client, the representation is not prohibited by law, and each affected client waives the conflict and gives informed consent to the representation when the practitioner realizes the existence of the conflict. The informed consent must be confirmed by a signed written consent from each affected client. This written consent must be obtained within a reasonable period after the informed consent, but not later than 30 days after the conflict is known by the practitioner.

The preamble to the final regulations that last amended the conflict-of-interest rule (T.D. 9359) allows the form of the written consent to vary. For example, the practitioner can prepare a letter that describes the conflict and the possible implications of the conflict and send the letter to the client for the client to countersign.

The preamble also says that Treasury and the IRS do not intend to sanction "minor technical violations" of Section 10. …

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