Forensic Accounting

Tom Anderson is a CPA who is engaged to prepare the annual tax return for Mary Wench, the EO of a company to which Tom provides regular consulting services. Each year Mary brings Tom several brown bags full of documents relating to her income and expenses. This year, when Tom is sorting through the documents, he finds something he hadn’t seen in previous years: a deposit receipt from a foreign trust in the Cayman Islands. The receipt for $50,000 was written by a Cayman Islands attorney, with a notation that it was for deposit in a trust account for the benefit of Mary Wench. Tom asked Mary about the receipt. “What is this?” he asked.
“Forget about it,” she said. “I want you to act like you never saw this.”
Tom is concerned that Mary may be evading taxes by not reporting income from the trust, and he is also concerned about the need to disclose the existence of the foreign trust on her tax return.
Should Tom immediately withdraw from the engagement without discussing it further, try to convince Mary to report the foreign trust and any related income, report the incident to the IRS or other authorities, and continue to do consulting for the company?

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