There’s been some debate on this blog about the duty of accountants to their clients. A commentator has said:
Tax is an expense and any accountant doing his job properly has an obligation to act in his clients’ best interests to use lawful means to mitigate the tax liability. The accountant cannot pick and choose which lines of expense he is prepared to mitigate.
Your first obligation as a professional is to your client, not your firm, your partners, or even your family. If your client is doing something illegal then it is to law enforcement. That may seem harsh, but it’s the code that’s supposed to insure that lawyers and accountants, for example don’t cut corners out of their own self-interest and to the detriment of their client’s interests.
As I wrote a while back I think both wrong (although the difference is fundamental with the commentator on my blog, one of emphasis I think with Francine). On reflection I think I’d refine what I said in that earlier blog. I’d say an accountant’s duty (whether auditor or tax practitioner) is to act ethically. There are, of course, always going to be varying perceptions of ethics. What is beyond dispute is that the onus in question does, as Francine notes from the US AICPA’s ethical guidance require that:
By accepting membership, a certified public accountant assumes an obligation of self-discipline above and beyond the requirements of laws and regulations.
The Principles call for an unswerving commitment to honorable behavior, even at the sacrifice of personal advantage.
A distinguishing mark of a profession is acceptance of its responsibility to the public. The accounting profession’s public consists of clients, credit grantors, governments, employers, investors, the business and financial community, and others who rely on the objectivity and integrity of certified public accountants to maintain the orderly functioning of commerce. This reliance imposes a public interest responsibility on certified public accountants…In return for the faith that the public reposes in them, members should seek continually to demonstrate their dedication to professional excellence.
Due care requires a member to discharge professional responsibilities with competence and diligence. It imposes the obligation to perform professional services to the best of a member’s ability with concern for the best interest of those for whom the services are performed and consistent with the profession’s responsibility to the public.
This fundamentally contradicts the argument of my commentator who argues that the accountant has a duty to do anything legal, a position also argued by John Cullinane of Deloittes. Quite clearly this is not true. This ethcial code makes that abundantly clear.
Ethically a qualified accountant can refuse to do something legal for any client they wish, at their own liberty. They may do so because:
1) They are not able to do the requested task. No one has to act beyond their own capacity. Indeed they have a duty not to do so.
2) They do not wish to do so. I can pick and choose who I wish to work for. There is no obligation on an accountant to work for anyone.
3) I do not approve of what the client wishes to do, even if it is legal. There are numerous reasons why I would wish to do this – and have done this.
4) I think what the client wishes to do is anti-social, unethical, fraudulent without breaking the law, in breach of the good faith the public should have in an accountant, likely to lead me into disrepute, or my firm into disrepute or my other clients into disrepute.
I am under no obligation in such circumstance than to simply decline to act. If the client has done nothing wrong I am under no obligation to report them for any misconduct to anyone. But to say I have a duty to tell them about behaviour I consider unacceptable is plain straightforwardly wrong. No one can make me do that. Indeed, professional ethics require that I do not do that. If more accountants had stood up for their principles we would be much better off.
But let’s also go a little further than this. I also completely refute that I am obliged to tell my clients in detail about all options available to them and then act on their instruction even if I do not approve of it. I would entirely accept that I must not hide facts from them. In other words, and to use the example as my commentator did of the non-domiciled person, I must not tell such a person of their option of claiming that status, and that this might under the law as currently constructed afford them tax advantages. But if they chose to make that claim there is nothing at all that requires me to pursue it for them or secure that advantage. I may always invite them to go elsewhere. I can even say why. I might lose a fee as a result: that is the price of ethics. All accountants should be willing to forego fees for this reason. If they have not there is something seriously wrong with their practice, I venture.
And as for the claim that I would be negligent if I did not set out all options that my client might pursue for them to chose which to undertake, and that this is my duty, I have fundamentally disagreed with this for most of my career, indeed probably since I was taught that this is what Peat Marwick required of me. My reasoning has always been simple. I think this completely unprofessional because it neglects the duty of a professional person.
A professional person has the duty to offer an opinion. It say that proper conduct is putting the client first by telling them of all the available options from which they then choose when offering tax advice means by definition that the adviser is not offering an opinion. They are being good technicians, but clients really do not want to pay top-notch money for accountants to copy and paste chucks out of tax text books or off the web, with a concluding paragraph which pretty much says ‘call us when you’ve made up your mind’. This really is low grade stuff and I have had it put to me by clients that they really do resent the ability of the Big 4 to copy and paste text into letters, and do little more. Such actions do, I suggest, bring the profession into disrepute. And it is unprofessional because no opinion is involved and it fails fundamentally to meet the client’s need. This therefore is not a case of putting the client first, but of failing them in the interests of covering the accountant’s supposed risk.
The professional accountants duty is quite different. It is to listen to and understand their client. If the client has an attitude for high tax risk then in my case I ask them to go elsewhere. That is my right. We are not suited to each other. If however I have a client who I understand and whose needs I think I have correctly understood, noted and agreed (and I stress the importance of documentation and client agreement in this) then I can use my judgement in offering the client advice not on all available options they could choose between but on the actions I think in their best interests and meets their need. And because I have pre-vetted my clients to eliminate the rogues, charlatans and tax abusers, what I will advise upon is what I also happen to feel comfortable with. So long as I have done my job properly it will also be what they are comfortable with. Assessing that is where my risk lies, but this is a professional risk, not a technical one (I assume a professional is technically competent, it is a pre-requisite, not an optional extra).
My clients know that my advice will allow them to sleep easy at night: which is exactly what they want from me. They want to know what they can do within the law, with minimal risk of investigation, with maximum chance that the tax they pay is acceptably low but beyond challenge, and that I have taken the risk of ensuring this is the case off their shoulders.
That I think is what meeting client need is. Those accountants who think it is asking the client to choose between tax abuse options 1, 2 or 3 are I think wholly unprofessional, simply because they are acting as technicians.
This is what accountants have done for far too long. They have sought, as Dennis Howlett has discussed elsewhere in the last day or so, to live by the rules. That’s not good enough. In fact it is a recipe for failure. And it is unprofessional. A professional has to live, as the AICPA says, “above and beyond the requirements of laws and regulations”. This requires the exercise of judgement and the expression of judgement. When doing that there is only one place where an accountant can safely operate: well within the rules. Anything else will eventually bring the profession into disrepute, as it has.
Until we are a profession, expressing judgement, working within the rules, and showing that we understand our duty to the client comes after that to ourselves, our profession, our firms and society at large we have no chance of reclaiming our status in society. And society is at risk from us. If we don’t act they will. I know the better option.