Question

An accountant recommends a local computer company to a client that is trying to upgrade its computerized sales records. The client purchases $25,000 worth of equipment and sends a check to the accountant for 5 percent of the total sales. This is an example of a:

a. Fee-splitting arrangement
b. Contingent fee arrangement
c. Business referral arrangement
d. Unethical practice arrangement

Answer 1

The scenario described is an example of a business referral arrangement, where an accountant receives payment for referring a new client to a computer company.

Step-by-step explanation:

An accountant recommends a local computer company to a client that is trying to upgrade its computerized sales records. The client purchases $25,000 worth of equipment and sends a check to the accountant for 5 percent of the total sales. This is an example of a business referral arrangement.

In the context of business, a business referral arrangement is an agreement where an individual or company receives a benefit for referring a new client to another business. This practice is generally considered lawful and ethical provided that it is transparent and does not conflict with the interests of either party or the ethical standards of the profession.