Accountants' professional ethics: Squaring the circle

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Mark Lee
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An accountant's work isn't all about increasing profits and pleasing clients – there should also be an emphasis on professional integrity, argues Mark Lee.

Most people rightly assume that all accountants are bound by a code of professional ethics, and yet those same people may also believe that they can rely on their accountant to help them run rings around the taxman - not just to pay the legal minimum, but to find loopholes and advise on what one can get away with, as well as exploiting any weakness in HMRC's armour.

The media reinforces both of these perspectives. On the one hand they berate accountants who evidence anything less than high standards of professional behaviour. On the other hand, the papers are full of adverts and stories about how to cheat the taxman.

In 2006...

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13th Jul 2010 10:37

Avoidance is not cheating

Tax avoidance is not "cheating the taxman", end of story!

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13th Jul 2010 10:46


"Codes of ethics" are, at best, a guidline.  They cannot cover all circumstances.

That said, I believe that it is really down to the individuals personal ethics. For instance, what I would consider unethical in an arguement between two individuals, I might not consider unethical in a dispute between an individual and the might of "the state".

I recall a tax ins[pector berating me by saying that I had reduced a clients liability "by using a loophole" to which my response was quite simply that, given the size and resources of HMRC if they couldnt close a loophole then they had no one to blame but themselves and whilst it was legal it would be unethical for me not to use it for my clients benefit.

I've been asked many times - "how can you defend someone you know is guilty of an offence".  Of course the answer is you dnt "defend" them - it would be unethical for instance to say "my client is innocent" if he has already admitted his guilt to me. However, it is perfectly ethical to test the prosecutions case - and make them actually prove his guilt. If they can't then the client is entitled to go free regardless of any admission he has made to me as it is the duty of the prosecution to prove its case, not for the defence to prove innocence.  

Exactly the same principals apply to tax. Ultimately it is for HMRC to prove that a taxpayer owes tax, it is not for the taxpayer to prove that he doesn't - despite what HMRC might like to think.  

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14th Jul 2010 01:21

Ethical dilemmas

Much of this rings true.  In particular I began to realise many years ago that I was uncomfortable acting for clients who had tax reduction as a key condition of running their business or personal affairs, in that sooner or later it was bound to become borderline evasion or, at best, I'd suspect there were activities I was not being told about.

CD's tax loophole is a good example.  My accountant's head agrees with him, ie if HMRC were daft enough to leave an open door, why should we not exploit it, however, there are degrees and so my discomfort level starts kicking in and I'm not sure I want to be party to some loopholes.  A good example of this was a client who last year discovered the offshore employee benefit trust loan "scheme" whereby he could retain the majority of his Ltd company income by the generation of a never ending loan.

It's clear the scheme works however it is regarded by the government as a mis-use of legislation and it's only a matter of time until it's closed down.  I told the client that it was up to him whether he signed up or not but that I would not be able to act for him once he did.

CD is also spot on with his summary of how the legal world operates but I'm not sure it works the same way for accountants?  ie if my client tells me s/he's evaded tax I'm certainly not going to hang around waiting for HMRC to prove it, self assessment and AML regs don't work like that.

My ethical & moral guidelines are influenced not only by the ACCA but also who I am and these can reach much further than tax.  So there may be particular activities or industries with which I have strong personal avesions and for which I will not act or will withdraw if they appear.

I don't make any secret of these to clients and I can understand why it may seem "unprofessional" but I know that if I were to grit my teeth and agree to act I would always doubt whether I was acting in the client's best interests, ie good old fashioned conflict of interest.

The downside in all this is that my client base is now 2/3rds of what it was 5 years ago.  As Mark experienced, I can see myself withdrawing completely from this and, for me, the charitable/voluntary sector is where I think I'll end up.

I'm delighted to hear that core training now promotes the consideration of ethics & integrity however, I have always felt that these qualities are inbred, ie a person either has integrity or s/he doesn't and I can't imagine exams making much of a dent in that.  Similarly, another new core topic, described as fundamantal in today's business world, is the concept of sustainability but, again, from what I can tell of business and their advisors you either have it or you don't.

Hope I'm proved to be just a grumpy old man.

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14th Jul 2010 10:55


Accountants in practice exist to fulfull our clients needs. 

We must not break the law. However if the law allows us to serve our clients needs then so be it.

I have no interest in what HMRC ( i.e. civil servants) think of our approach. HMRC often seek to use the law to their advantage, even if was not intended to do so and often misrepresent the law to "con" innocent taxpayers (including their timid agents) into paying too much tax.

It seems to me that those who understand the realities of business and act as businessmen prosper in practice.

Those who do not and  are more interested the wider standing of accountants in the community or wish to spend their time pontificating on technical matters are better off not being in business but in academia, the press or other similar institution (provided of course I do not have to pay professional subscriptions to support them).

Wayne Pulman






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14th Jul 2010 14:20


Hi Wayne - I'm left a bit in the dark.  Are you saying that the law is the only parameter in your dealings with & for clients, ie that ethics & integrity are not a consideration or, if they are, they are insignificant?

You say we exist to fulfill our clients' needs, is that all? Surely that's what Spartacus would have said before he found his true calling? 

I have a business relationship with my clients which (as with most healthy relationships) needs to balance the needs of both sides, ie unless I look after myself and my staff we are not at our best to look after our clients.  Similary I don't work in a vacuum of me & client, ie I have an impact on others, as they do on me and so, whilst clients' needs are important, there are other considerations to being in business.



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14th Jul 2010 17:18

personal v professional ethics

There is a difference between the two aspects of your own moral code and a professional code.

Working in tax, I'll clearly spell out whether advice is black (not allowed), white (allowed) or grey (best caveat!) and allow the client to determine how aggressive they want to be on an issue assuming they do not wish to remain in the black category.

Happenstance, I find myself advising on something I would not personally do due to my own morals, but if it is defensible to the taxman where, for instance, I know the position is different to the Revenue's but I feel on a legal point it is possibly OK to interpret that way. I'll happily advise on the risks and take a position with the client and disclose as necessary to HMRC so they can enquire into if they wish and then have a debate with them or ultimately let the courts decide on a technical point if need be. Not that it rarely goes this far, as most clients don't actually like sticking their necks above the parapet and risk offending HMRC so they will usually fall in line with what HMRC want, but I feel that would be a professional working within professional ethics to point out the possibilities and consequences of their actions.


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15th Jul 2010 23:56

Can anyone else see the sheer stupidity of this situation ?

CD is also spot on with his summary of how the legal world operates but I'm not sure it works the same way for accountants?  ie if my client tells me s/he's evaded tax I'm certainly not going to hang around waiting for HMRC to prove it, self assessment and AML regs don't work like that.

Posted by Paul Scholes on Wed, 14/07/2010 - 01:21


Until relatively recently the situation was broadly the same in that whilst you couldnt state your client was innocent, you were under  no obigation to "turn them in".  In court that remains the case.  However, in the world of accountancy that has been changed in that we are now under an obligation to report suspicions under MLR etc.

Personally I have serious misgivings about being placed in such a situation as it seems to cut through the whole idea of client confidentiality.

So, if a clients comes to see me about his accounts and admits he has "been on the fiddle" I have a legal obligation to report this.  BUT - if my solicitor friend refers him to me with my legal hat on and he consults me "because he is worried about the possible legal consequences of his being on the fiddle" then not only do I not have a responsibility to report it, I am in fact specifically barred from doing so as it is covered by client confidentiality and I could be struck off if I did.

Can anyone else see the sheer stupidity of this situation ?


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