Tax agents: The essential ethics check-up

A 2021 study found 27% of professional accountants had felt pressured in the previous three years to act in an unethical way.

That’s why it’s so important to familiarise yourself with the five fundamental principles within the IFA Code of Ethics, says Tim Pinkney, the IFA’s Head of Practice Standards.

“We do feel that some accountants adopt a tick-box exercise in relation to compliance,” he says. “We advocate, as part of our training, that firms review their compliance culture regularly to engage more proactively, something that embeds ethical approaches.”

Pinkney says the principles are there for accountants to embrace, and can help them avoid not only awkward situations but ones that can result in severe consequences including disciplinary action, fines and even disbarment.

Here are five areas and behaviours tax agents can scrutinise to reinforce their ethical practices.

1 The truth and nothing but the truth

Accountants are in a position of trust, which brings a responsibility to deal fairly and truthfully with clients, businesses, governments and other organisations, and have the strength of character to act appropriately no matter how much pressure is applied, says Pinkney.

Lack of transparency in accounting decisions, misrepresenting expertise or overcharging fees are all examples of breaches of integrity.

Failing to apply a sceptical eye to information supplied by a client may also result in filing a report that bears little resemblance to the truth.

IFA public practice regulations require firms to be transparent regarding fees and how records are kept in letters of engagement.

These requirements are underpinned by the Code of Ethics.

2 Refusing to be compromised

All accountants are required to do their jobs without being compromised by bias, conflict of interest, or undue influence or reliance upon other people, organisations or other factors.

“This is one area where we see a regular challenge,” Pinkney says. “On a small scale, a practitioner may represent a couple who are both directors of their company. When they go their separate ways, the practitioner has a conflict of interest to resolve as they cannot provide advice to both.”

Providing services to both a vendor and a buyer, or consulting with a client who is looking to take over another client’s business, is also an ethical challenge.

So too is failing to declare that you are receiving commission, incentives or any other advantage from a third party in return for giving advice.

3 Keeping your knowledge up-to-date

We live in a fast-changing world and, to maintain ethical standards, it is necessary to change with it.

For that reason, the IFA provides updates and webinars that are easy to access by members on current subjects and issues, and members are required to submit an annual declaration that they have met requirements regarding continuing professional development.

“Keeping competencies up to date, especially with regards to tax compliance, is a matter of retaining public trust,” says Pinkney. “On our part, the IFA represents members at stakeholder groups and gets heavily involved in consultation around legislation and changes in taxation.”

As being digitally proficient becomes more and more important, this is also an area where accountants need to continually sharpen their skills.

“The transition to digital record keeping makes the ethical value of professional competency and due care even more important,” Pinkney says.

He advises accountants to consider all aspects of this issue, including access to clients’ files in the event of a disaster such as being incapacitated.

4 Acting professionally at all times

Besides complying with relevant laws and regulations, accountants are required to act in the public interest in all professional activities and avoid any conduct that might discredit the profession.

“A lot of it is common sense,” says Pinkney, who recalls a recent case where a member who was in court on speeding fines actively promoted his membership of the IFA as a sign of good character.

“Something like that can potentially bring our brand into disrepute.”

For tax accountants who find that, in serving the interests of clients, they are in conflict with a relevant revenue authority, it is nevertheless important to manage disagreements in a constructive manner.

5 Keeping secrets

Maintaining confidentiality of all client information and data is a core ethical principle.

This rule applies even after the association has ended, and also applies to personnel under an accountant’s control.

With many taxation records now kept on the cloud, Pinkney says up-to-date cybersecurity also protects such details.

“Should a client’s information be hacked, the matter could be a breach of data protected by legislation and face scrutiny from the Information Commissioner's Office,” he says.

The IFA Tax Series 2023 features expert industry speakers covering a range of tax scenarios and challenges. See recordings of Q1 and Q2 instalments and register for Q3 and Q4.