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the Side of Angels: Advice on Ethical Behavior
By Cara Patterson Posted on 8/7/08 NEW
YORK -- The CPA license doesn't come with a badge and a nightstick.
Expectations are even higher since the Enron accounting scandal: 60 percent of people surveyed post-Enron agreed with the statement: "Accountants are responsible for making sure companies stay honest," compared to only 35 percent who agreed pre-Enron, according to Dodsworth, who was one of the speakers at FAE's Ethics Conference on July 31 at the Helmsley Hotel. When it comes to whistleblowing, public expectation "is higher than our professional requirement right now," said Dodsworth. "The public…gets the difference between ethical and unethical behavior and they're very quick to punish." Yet certain ethical dilemmas are characterized by shades of gray, according to speaker and Past NYSSCPA President Marilyn Pendergast. "Individuals have their own ethical baseline, so to speak," she said, citing two different styles that emphasize laws and individuals, respectively. Add to these subjectivities a recent explosion of additional standards for accounting, the increased complexity of financial transactions and the shortage of CPAs in the workforce, and behaving ethically is particularly challenging today, according to Pendergast. As chair of the International Federation of Accountants (IFAC) Ethics Committee, Pendergast believes a single set of international guidelines are needed as more businesses go global. Given the complexities of the day, how can CPAs to make sure they're in the right? Pendergast, Dodsworth and others offered suggestions. Beginner Beware Don't take on an assignment you're not qualified to do, said Dodsworth. Lack of expertise is not a legal defense. "Taking on engagements that you don't have expertise for is unethical," he said. A CPA could be painted as a co-conspirator or as incompetent and have his or her license revoked. One audience member asked how it was possible to gain experience in a given practice area without starting as a beginner. Acknowledging the catch-22, Dodsworth suggested partnering with an experienced colleague and utilizing professional resources. Longtime Relationships Friendly relationships often develop with longtime clients, but take care: This can compromise independence, according to Pendergast. A long association "is always an issue," said Pendergast, and one must be honest with oneself regarding independence and objectivity, she said. Evaluate such threats to make sure you're in compliance with basic principles, Pendergast advised. For example, she wouldn't take an old college friend as a client because "I couldn't conceive that she did wrong," she said. "My ex-husband, on the other hand-no problem at all," said Pendergast, provoking laughter from the audience. Decline the assignment when you feel you might not be objective. "Sometimes you actually do just have to resign," she said. Audit, attest and certain tax services all require independence, said conference chair Jo Ann Golden. She suggested asking colleagues to step in when independence becomes compromised, but she cautioned, "There are some complicated rules about independence. If you're not independent, other people in the firm may not be as well. You need to be very careful." Advise, Warn and Document Protect yourself by advising your client on the risks of his behavior, and document it for your own records, Dodsworth advised. If things go wrong, it's every man for himself, Dodsworth said, adding he'd never seen a client volunteer to take the fall for a CPA, even when the CPA was pressured by the client to take a certain position. A more likely client reaction is, "'I expected you to draw the line,'" Dodsworth said. Warn your client about risks and keep the records for your own peace of mind, Dodsworth recommended. Taking Shortcuts CPAs are sometimes tempted to take shortcuts when performing "low bid" jobs, such as audits of government entities, non-profits, or audits performed under the Employee Retirement Income and Securities Act, according to Dodsworth. But getting paid a pittance is no excuse, Dodsworth cautioned; shortcutting the work compromises integrity. Speaker Mel Crystal also warned against taking shortcuts, and recommended following AICPA Ethics Ruling 202 by complying with standards in all areas of practice. Holding up a volume of the AICPA Professional Standards, Crystal advised audience members to invest in a copy. Whistleblowing Since Enron, CPAs face increased pressure to blow the whistle on fraud, according to Dodsworth, yet CPAs also want to maintain client confidentiality and avoid getting sued by a client they expose. But confidentiality only goes so far. "It's different than lawyer-client privilege," said Golden. "We have certain situations that can arise where we really don't have confidentiality. That needs to be clear to the client too." Juries usually find a way to punish the wrongdoers and reward those who behaved ethically even when laws are complex, according to Dodsworth. "If you're going to get sued, get sued by the right person, which is the wrong person [or the person ethically in the wrong]" he said. One audience member wanted to know if a checklist for whistle-blowing was available. There's no such thing, Dodsworth said, but he said CPAs should get advice from an attorney or insurance carrier before blowing the whistle. So did Pendergast. "Call a lawyer
if you reach a situation where you need to [blow the whistle],"
she said. "If you have client acceptance policies and procedures within a firm that could help" in avoiding such situations, she said. In today's economic climate, CPAs face mounting pressure from clients to produce financial statements that will help them survive tough times, according to Dodsworth. "In trying to please the client we forget about our own risk," he said. Ultimately, doing the right thing could as simple as asking yourself what your children or parents would think, according to Dodsworth. "Be on the side of the angels," he advised. Cara Patterson, Public Relations Associate, can be reached at cpatterson@nysscpa.org. |
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