Tax practice responsibilities: establishing an ethical culture in a tax practice.

• Author: Fuller, Diane D.

THE UNITED STATES IS CONFLICTED ABOUT ethical behavior. Americans want people to be grounded in right behavior, but they collectively celebrate and admire people who skate close to the edge, or cross the line, on ethical behavior.

This attitude within society can and does affect individual behavior. But the thinking that something is all right because everybody does it needs to go away. More than this, individuals must have ethical values that match their actions.

Often, asking the following two questions is a good place to start in analyzing an ethical issue:

* Does the decision feel like the right thing to do?

* Can the decision be defended with confidence publicly?

The CPA profession is filled with individuals who know right from wrong. It is time to develop a business culture that is ethically strong. Every organization, including professional firms, operates within an organizational culture. Inherent in that culture is a code of conduct that influences the behavior of individuals within the organization.

This column offers practical suggestions for ways a professional firm can communicate, reinforce, and monitor its code of conduct in tax practice. Ultimately, it is the firm's responsibility to ensure that its employees act consistently with these principles.

Sources of a Code of Conduct in Tax Practice

Underlying all of the specific rules, laws, and regulations governing a CPA's provision of tax services is a basic code of conduct that defines what it means to act as a professional. A professional firm can look to a number of sources for key principles of ethical conduct to emphasize in its practice. A good place to start is the AICPA Code of Professional Conduct (AICPA Code). AICPA members are obligated to follow the principles in the AICPA Code (AICPA principles), which express the profession's recognition of its responsibilities to the public, clients, and colleagues (ET Section Si, "Preamble").

The AICPA principles guide members in performing their professional responsibilities and express the basic tenets of ethical and professional conduct. The AICPA principles call for an unswerving commitment to honorable behavior, even at the sacrifice of personal advantage. In particular, the AICPA principles require members to act with integrity, objectivity, due professional care, and a genuine interest in serving the public (ET Section 53, "Article II: The Public Interest").

Integrity is measured in terms of what is right and just. In the absence of specific rules, standards, or guidance, or in the face of conflicting opinions, a member should test decisions and deeds by asking, "Am I doing what a person of integrity would do? Have I retained my integrity?" Integrity requires a member to observe both the form and the spirit of technical and ethical standards; circumvention of those standards constitutes subordination of judgment (ET Section 54, "Article Integrity").

The principle of objectivity imposes the obligation to be impartial, intellectually honest, and free of conflicts of interest (ET Section 55, "Article IV: Objectivity and Independence"). Normally, the issue of objectivity arises in the context of an attest engagement, but it can arise in tax practice as well. For...