2. In August 20X5, a new corporate client retained Paula Preparer as accountant and tax return preparer. In reviewing the prior returns of the client, Paula noticed that the client had claimed substantial deductions for travel and entertainment expenses. Paula asked if the corporation had ever been audited and learned that it had not. Paula knew that the corporation's president spent a great deal of time traveling and promoting the business and, so in setting up their procedures for the corporation, Paula stressed the importance of keeping adequate records for any travel and entertainment expenses. Paula also discussed the sort of recordkeeping procedures that should be followed by the bookkeeper of the corporation. The first fiscal year of the corporation for which Paula prepared its return was the fiscal year ending August 20X5. In reviewing the records, Paula noticed that expenses of $9,500 were claimed for travel and entertainment by the president. Because the sales of the corporation were approximately $750,000 for that year, Paula did not think that the $9,500 figure was out of line. Since Paula had spent so much time stressing the Code Sec. 274 recordkeeping requirements when the corporation initially retained her, she assumed that it had followed through on her insistence of keeping adequate records. Paula did not inquire into the adequacy of the T\&E records before she prepared the return. In 20X6, the IRS audited the corporation's return. The IRS discovered that of the $9,500, approximately $2,000 constituted personal expenditures of the president and approximately $5,500 constituted expenditures for which adequate substantiation did not exist. The IRS has disallowed $7,500 of the deduction to the corporation and is also proposing to assess a preparer penalty against Paula. Is the proposed penalty assessment justified