CASE 4.1
CREVE COUER PIZZA, INC.
Synopsis
In the early 1990s, the accounting profession was shocked when the news media revealed that for
several years a Missouri CPA had funneled confidential financial information regarding a client to
the IRS. The CPA had been recruited as a “controlled informant” by the IRS when he was under
investigation by that federal agency for failing to file a federal tax return for several years. After the
CPA began spying on his client, the IRS dropped its case against him—suggesting a classic quid pro
quo scenario.
When a federal indictment was filed against the CPA’s client by the IRS, the client subpoenaed
the information the IRS had used to build its case against him. At this point, the individual
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Creve Couer Pizza, Inc.—Key Facts
1. The IRS has operated a controlled informant program since 1939.
3. James Checksfield was recruited to become a controlled informant by the IRS when he was
under investigation by that agency for allegedly failing to file federal tax returns.
4. At the same time the IRS was recruiting Checksfield, one of his clients, the owner of Creve
6. While Checksfield was providing incriminating evidence regarding his client to the IRS, the
federal agency dropped its case against him.
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Instructional Objectives
1. To illustrate the importance of CPAs maintaining the confidentiality of client financial data.
Suggestions for Use
This case is ideally suited to be integrated with coverage of the confidentiality rule of the AICPA
Code of Professional Conduct. Like many of the ethical cases included in this section of the
casebook, the Creve Couer case can also be used at practically any point in an auditing course to
provide students a “break” from coverage of technical auditing issues.
Suggested Solutions to Case Questions
1. Most of us have heard anecdotes related by business owners or other taxpayers regarding how
their accountants allegedly helped them, or actually encouraged them, to underreport their taxable
income. These anecdotes always disturb me. (Granted, these anecdotes may be fabricated or at least
2. Here’s another example of an ethics-related question that tends to generate considerable debate, if
not controversy, among students. The client confidentiality rule expressly prohibits auditors from
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3. Listed next are examples of parties that would be affected by Jess’s decision and the related
obligation he has to each.
a. Members of the firm: Jess has a responsibility to consider how the individuals in his
firm would be affected by his decision to serve as an informant for the IRS. If his
involvement with the IRS is revealed publicly, his colleagues may suffer
embarrassment and are likely to suffer financially due to a loss of clients.