That’s the question posed on the news magazine and hidden camera television show of the same name.
Broadcast on ABC News since 2008 as part of the Primetime series, and hosted by newsman John Quiñones, it features cast members acting out scenes of conflict or illegal activity in public settings while hidden cameras videotape the scene, and the focus is on whether or not bystanders intervene, and how. It airs on a number of cable and satellite channels, including ABC News, OWN, HLN and ID Network.
But if the ethical challenges on the television show are hypothetical, the ones that can affect tax and accounting professionals are very real. The penalties for unethical conduct are likewise very real – ranging from loss of reputation and formal censure to fines and prison terms.
Ethical conduct should be simple -- obey the laws and regulations, deal fairly with clients and peers, and foster a climate of ethical conduct within your own firm. It is not that simple, for four reasons:
- Our concept of what is “ethical” changes over time. Not so very long ago, it was considered unethical to advertise accounting services in the media. Today, with few constraints, advertising is permissible and even encouraged.
- Laws and regulations change constantly. To the extent that “ethical conduct” is based on obeying the law, it becomes more complicated each time the law itself is changed – which occurs almost constantly.
- The law is not ever final. Months or even years after a regulation or law is implemented, it can be overturned by a court ruling or superseded by a new law or regulation. Tax and accounting firms of every size identify this uncertainty as a priority issue for practice management.
- New technologies and services create new challenges. Consider that in the past decade alone, social media has raised a number of ethical considerations that include protection of client data and secure communications. Even mobile computing can raise these considerations, and we have yet to identify all of them, much less come to agreement on how to deal with them.
Foundations of Ethical Conduct
There is no shortage of guidance for tax and accounting professionals with respect to ethics – virtually every national, state and local society has its own set of ethical standards. Legal interpretations and articles abound. Virtually every conference or continuing education program includes offerings in ethics. Having so many choices, however, may make it harder rather than easier to figure out the best means to comply.
To make the process more manageable, begin by cutting through the clutter so that you are dealing with the four most important foundations of ethical conduct – Title 26 of the Internal Revenue Code; IRS Circular 230; the Code of Professional Conduct of the American Institute of CPAs; and your firm’s culture and policies related to ethics.
It is beyond the scope of this blog post to try to cover the details of each of these four – and in any event, one or more will have changed by the time you read this. Instead, this post will identify what each of the four do, how they apply, where to find the most current provisions of each, and any important notes or observations.
- Internal Revenue Code, Title 26 of the code of federal regulations (http://www.law.cornell.edu/uscode/text/26). Preparer penalties may be assessed against an individual or firm meeting the definition of a tax preparer in I.R.C. §7701(a) (36) and treas. Reg. §301.7701-15. Preparer penalties that may be assessed under appropriate circumstances include, but are not limited to, those set forth in I.R.C. §§ 6694, 6695, 6701, and 6713, which explain the required procedures, the rules for collecting revenues, and the penalties for such issues like understating tax liability.
- Circular 230 (http://www.irs.gov/pub/irs-pdf/pcir230.pdf). The second foundation is administered by the Office of Professional Responsibility (OPR), which is concerned with protecting the public in matters concerned with the Treasury Department. The OPR receives its authority from Circular 230, Title 31, §10. The OPR is concerned not with collecting taxes or the understatement of tax liability, but rather, with protecting the public and with a pattern of behavior on the part of the preparer. This differentiation between the IRS and the OPR is important, because if violations do not ultimately result in the under-reporting of tax, the IRC does not provide any sanctions. Alternatively, if there is no willful or reckless intent or gross negligence, then sanctions cannot be imposed under OPR. If, however, a practitioner is deemed to have been reckless and to have under-reported tax liability, then the practitioner can be found in violation of both sets of rules and subject to sanctions, fines, and imprisonment.
- AICPA Code of Professional Conduct (http://www.aicpa.org/research/standards/codeofconduct/pages/default.aspx). Currently updated through June of 2014, the AICPA Code has already been superseded by a new version that will be effective on December 15 of this year. The Code, binding on CPAs who are members, covers principles of professional conduct; rules, applicability and definitions; general standards, responsibilities to clients; responsibility to colleagues; and other responsibilities and practices.
- The firm’s culture and policies. Ultimately, none of the guidance from these and other organizations will be effective without a strong culture of ethical behavior within the firm, supported by management and codified in the personnel policies that apply to all employees of the firm.
Professional ethics and rules of conduct for tax and accounting professionals ought to be a simple and straightforward proposition of knowing the law, obeying the law, and being mindful of an ever-changing business environment. The fact that it is not simple makes the topic more challenging, but at the same time gives the most ethical professionals a means to differentiate themselves in terms of client service, practice management and cost efficiencies.