Sarah Smart, CPA, is a member of the AICPA and has been in practice for over 10 years. She recently acquired a new tax compliance client, NewCo, Inc. NewCo’s in-house accountant (not a CPA) had previously prepared its returns. In reviewing NewCo’s prior returns, Sarah discovers some significant error, resulting in underpayment of tax, that will impact the current year return. Sarah meets with the client representative and informs him of the errors and possible corrective action. Initially the client indicates that it will not correct the prior returns but instead allow the IRS to find the mistakes on audit. In the course of the conversation, the client also suggests that it could make a counterbalancing entry to the current return that would result in an increase in tax sufficient to offset the prior underpayments of tax. Based on Circular 230, the SSTSs, and the AICPA Code of Professional Conduct, how should Sarah proceed?