Arthur Young & Co., a firm of certified public accoun-
tants, was the independent auditor for Amerada Hess Corpo-
ration. During its review of Amerada’s financial statements
as required by Federal securities laws, Young confirmed
Amerada’s statement of its contingent tax liabilities and pre-
pared tax accrual work papers. These work papers, which
pertained to Young’s evaluation of Amerada’s reserves for
contingent tax liabilities, included discussions of questionable
positions Amerada might have taken on its tax returns. The
Internal Revenue Service (IRS) initiated a criminal investiga-
tion of Amerada’s tax returns when, during a routine audit,
it discovered questionable payments made by Amerada from
a “special disbursement account.” The IRS summoned Young
to make available all its information relating to Amerada,
including the tax accrual work papers. Amerada instructed
Young not to obey the summons. The IRS then brought an
action against Young to enforce the administrative summons.
a. What are the arguments that Young must turn over the
work papers?
b. What are the arguments that the work papers are
protected from government summons?
c. Who should prevail? Explain.
