Biker’s Nightmare
- Should Biker employee quit his job over the failure of his employer to pay import duty taxes?”
In accordance to the mandate as passed by the SOX (Sarbanes-Oxley Act), SEC (US Securities and Exchange Commission) and IFAC (International Federation of Accountants), the first priority for professional accountants should be towards the larger public good. While, in view of public interest, the Biker employee should report the misrepresented facts to the concerning authorities, the fact is that there are several factors that affect this course of action.
Firstly, in most companies these days, there is a clause which speaks of the client-accountant/auditor non-disclosure. In such a scenario, the employee does not really have many options left. Nevertheless, in order to avoid exactly such situations, the IFAC has now stipulated that companies should also have a committee of sorts offering limited, confidential consultation, providing guidance to the employees in such ethical turmoil. As the code guides, the professional accountant must take “professional advice from relevant professional body or legal advisors, and thereby obtain guidance on ethical issues without breaching confidentiality.”
In this wake, while quitting her job is always an option, there are more strategic and alternate ways to clear her conscience and yet following the code of ethics aptly.
Tax Return Complications case
- Identify the ethical issues Bill Adams should address.
There are basically two ethical issues that need to be addressed by Bill here. The first one is to decide whether or not Bill and his company Hay & Hay would still consider preparing accounts for Dr. Rim. Since Bill already knows about the discrepancies in the accounts as submitted by Dr.Rim, and Dr.Rim’s rejection for making any amendments, it is now Bill Adama’s discretion to decide whether or not he would help Dr.Rim in order to keep Dan, the CEO of Zentor Inc.’s happy or to simply let go of Dr.Rim as a client in order to avoid getting involved in fraudulent accountancy.
The second issue he needs to address is whether or not he would back date the Notice of Objection for Zentor Inc in order to save his client $1,200,000.
- What would you do about these issues if you were Bill?
If I were Bill Adams here, I would undoubtedly have decided to let go of Dr.Rim as my client. Non-transparency in accounts and audit working is against the ethics, especially since Dr-Rim is purposefully avoiding paying his legitimate taxes. On the second issue, however, I would have taken a more lenient course of action. I would have agreed to submit the back dated, legitimate and fully signed Notice of Objection for Zentor Inc. The reason for such leniency here is that the penalty that Zentor Inc would have to pay otherwise in not justifiable and hence, is not in the larger good of the stakeholders involved. Since it is simply for reassessment, in any case, if the reassessment does reduce the taxes to be paid, it will be in a larger good of both the companies involved – the client and the accountant. Nevertheless, in case reassessment did not bring much change, Zentor Inc will pay its share full of taxes any ways.
- What potential AICPA Code of Professional Conduct violations is Bill facing?
Bill would be violating the Acts Discreditable Rule by misrepresenting the date by which the Notice of Objection was furnished to the concerning body. As the Code of Professional Conduct states that “A member who fails to comply with applicable federal, state, or local laws or regulations regarding (a) the timely filing of the member’s personal tax returns or tax returns for the member’s employer that the member has the authority to timely file or (b) the timely remittance of all payroll and other taxes collected on behalf of others may be considered to have committed an act discreditable to the profession, in violation of the “Acts Discreditable Rule”.
