[win2bet]

Say you have a client that has a dental office with about 300k in revenue, 100k of his expenses are routed to scottrade & apmex bullion dealer, all other expenses don’t seem questionable & net income about 30k.

The client says the expenses are for precious metals that are used in dental procedures. Seems a bit high? This is simply a CPA thats doing book keeping & prepares returns, no auditing. Is is even the CPAs job to further investigate these unusual charges or take clients word for it (which is in writing)

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REG 68,87
BEC 85
FAR 75
AUD 64,64, 86!

[JeanPaul9]

A CPA is under no obligation to further inquire about the legitimacy and or justification of the ordinary and necessary use of the client's business expenses. Although, its up to the CPA to let the client know that all tax return information must be supported by the receipts whatnot and expenses should be ordinary and necessary for business purpose to generate revenue. For due diligence purpose, I would document the client's response and probably ask for the invoice to support the expense entry.

[WeWillSee]

Does he have inventory or COGS to support the amount of expenses? If so, the Apmex bullion dealer seems legit – The Scottrade seems little more sketch – maybe not malicious though. Is it something like 15% to Scottrade? If so, could be investment expenses for transactions he is making to hedge against dealing in precious metals, although the money actually going towards investments should be on the balance sheet not on the P&L, (unless gain/loss). May be worth while to ask for a 1099 for the Scottrade account. Maybe this is the case and he isn't aware of how to report those transactions appropriately. If he is hesitant to give you any support then it might be a little worrisome.

I have never personally worked on dental practices – so I'm not an expert but I guess those would be my initial questions.

[Author]

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