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Sounds like a college course, doesn' t it?
Published on February 6, 2006 By Jythier In Misc
Welcome to tax season! I am an Accounting major, and I am graduating very soon. Looking for a job, too, but that's beside the point, unless you're looking for an accountant.

I recently learned that, under the rules of the American Institute of Public Accountant's Code of Conduct, if I find a mistake on someone's previous tax return, I am supposed to tell the client about the error and leave it at that.

Now, a mistake is unintentional. Nothing illegal about making a mistake on your tax return. However, when a mistake is found, and you fail to rectify it, isn't that tax fraud? Also, it probably was not even a mistake to begin with if this person will not fix it. If this person I tell about the mistake does not fix it, I am supposed to dissassociate myself from him. I cannot tell the government about it. I cannot report him to anybody. He has broken the law, and I can't do anything about it. To me, that is crazy!

Why shouldn't people ignoring their civic duty to pay taxes have consequences? Aren't accountants supposed to be the policemen of the financial world? That's what I thought when I got into accounting. I guess I was wrong.

Enron went down for a lot of reasons. The fraud that went on there is beyond the scope of this article. However, one of the reasons that it seemed to happen overnight was because of the auditors. They became consultants instead of auditors, working for the executives instead of making sure the reporting was accurate. I believe that as an auditor that is your job, making sure the financial reporting is fair in accordance with whatever standards are involved. When the client says "I want to avoid reporting a loss," the response can't be "Well, let's find a creative way to avoid reporting that." It should be, "Did a loss happen? Then you need to report it." End of story. Accounting should not offer loopholes around economics.

This is my first Joe User Article. I hope for there to be many more in the future, about the Accounting profession, games, parenting, marriage, everything. Thank you for building a great community for me to be a part of.

Comments
on Feb 06, 2006

If the cllient refuses to correct an error, then it can be fraud.  However, not all errors are in the government's favor.  Not being an accountant, I am not familiar with their code of ethics/  Do you have a 'lawyer-cllient' type of relationship?  If so, then you would be in the wrong to snitch on them.  If not, then give them fair warning.

And you are dead on with the Enron case.  That is why Price Waterhouse went down.  Being a consultant, we have potentials for conflicts of interest as well.  If we help a client design a system they need, then we are barred by ethics from bidding on doing the work (if the original scope said come in and do that is something different).  And while Ethics and 50 cents will get you a cup of coffee (i.e. you are not going to jail), the Client, upon finding out you are unethical, would be hesitant to do business with you again.

on Feb 07, 2006
Lawyers can't be called to testify in court because they have privilege, but accountants do not have that privilege. However, according to the Code of Conduct, I can't turn someone in. This is supposed to help the client trust me. However, I don't want to work for someone who needs to trust me with their dirty laundry. If they have dirty laundry, I have to not work with them anyway. I just can't turn them in. I don't understand it. Maybe it has something to do with confidentiality? I wouldn't go telling everyone, just the authorities.

I would rather be a Fraud Examiner than a Public Accountant, anyway, but I will probably end up with both certifications.