Ethics of Tax Accounting

By: Achmad Faizal Azmi (361160)

The AICPAs Statements on Standards for Tax Services (SSTS) along with the
Treasury Department Circular 230, Internal Revenue Code Section 6694, and the PCAOB
Release No. 2008 - 003, as well as the various Internal Revenue Code Sections (i.e. 6700,
7408, etc.) dealing with abusive tax shelters, all delineate enforceable standards by which the
tax preparer must abide. The tax accountant has several responsibilities to the public, through
the government. First, the tax accountant has an obligation not to lie or be party to a lie on a
tax return. Second, the signature on a tax return is a declaration under penalties of perjury that
to the best of the preparers knowledge, the return and accompanying schedules and
statements are true, correct, and complete.
Tax accountants have a duty not only to their clients but also to the system. The
clients duty is to pay the taxes they legally owe, no more, no less. The taxpayer has the final
responsibility for the representation of the facts and for the positions taken on the return, but
the accountant has the responsibility to point out to the client what is legally owed and not
owed, and the responsibility not to go along with a client who wants to take advantage of the
tax system. Some might object that such a position is naive, since certain taxes are unfair.
However, fairness is a notoriously ambiguous concept and in applying it to the evaluation of
tax burdens the most prudent course is probably that of adhering to what the society,
following its due process of passing determining legislation, decides is fair. If everyone
decided not to pay what is owed there would be chaos in the government. Hence, there should
be general agreement to comply with current tax laws, and if one thinks such laws are unfair,
to work through the proper procedures to change them.
There are seven standards presented in the Statements on Standards for Tax Services.
As found in the explanation sections, the following summarize the central themes of each
standard:
(1) A member should not recommend a tax return position unless it has a realistic possibility
of being sustained on its merits.
(2) A member should make a reasonable effort to obtain from the taxpayer the information
necessary to answer all questions on tax returns.
(3) A member may rely on information furnished by the taxpayer or third parties without
verifi cation. However a member should not ignore the implications of information furnished
and should make reasonable inquiries if the information appears to be incorrect, incomplete
or inconsistent either on its face or on the basis of other facts known to a member. Further, a
member should refer to the taxpayers returns for one or more prior years whenever feasible.
(4) Unless prohibited by statute or by rule, a member may use the taxpayers estimates in the
preparation of a tax return if it is not practical to obtain exact data and the member
determines that the estimates are reasonable based on the facts and circumstances known to
the member.
(5) A member may recommend a tax return position or prepare or sign a return that departs
from the treatment of an item as concluded in an administrative proceeding or court decision
with respect to a prior return of a taxpayer. However, the member should consider whether
the standards in SSTS No. 1 are met.

(6) A member should inform the taxpayer promptly upon becoming aware of an error in a
previously fi led return or upon becoming aware of a taxpayers failure to fi le a required
return. A member should recommend corrective measures to be taken.
(7) A member should use professional judgment to ensure that tax advice provided to a
taxpayer refl ects competency and appropriately serves the taxpayers needs.
References:
1. Duska, R., Duska, B.S., and Ragatz (2011). Accounting Ethics. Second
Edition. Wiley-Blackwell