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Sley Corporations’ payment of those expenses as dividends to the
shareholders.
Petitioner understood that Berger was not engaged to audit
the travel and entertainment expenses of the Sley Corporations.
In calculating income for purposes of preparing petitioner’s
and Betsy’s individual tax returns, Berger and those he
supervised used third-party information such as Forms W-2, 1099,
and K-1 that petitioner gave to Berger, schedules prepared by the
Sley Corporations’ bookkeeper, and information on transactions
that petitioner had with his law firm.
During the years in issue, petitioner and Betsy were cash-
basis taxpayers.
Brown worked for Grant Thornton as a tax specialist from
January 1985 to April 1987. Brown worked under Berger’s
supervision. Berger assigned her to prepare the 1984 tax returns
and the compilation financial statements for the Sley
Corporations. Pursuant to her assignment to the Sley
Corporations’ account, Brown was told to prepare trial balances,
corporate tax returns, and compilation financial statements, and
to make adjustments to the compilation financial statements for
accrued income and expenses; she was not told to audit the books
of the Sley Corporations. Brown used the books and records
prepared by Baybrook to prepare trial balances and then used the
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