November 1999

Ethics in Action is a new feature of The Trusted Professional to help educate members on ethics issues and provide a greater understanding of the profession's self-disciplinary process. Authored by members of the NYSSCPA Professional Ethics Committee, columns summarize actual ethics case investigations, with the names and other details changed to protect the identity of the participants.

The "Harmless" Violation. Not to Worry! Says Who?

By Burton L. Shepard, CPA, JD

From time to time many of us take liberties, knowingly or not, with the rules of professional ethics when we believe we are merely expediting an engagement and causing no injury.

For example, any CPA can tell you that omitting--now and then--to prepare a required tax information form for a taxpayer (e.g., Form 1099) is really nothing to be concerned about. This is especially true where that same CPA prepares the recipient's income tax return and thus has first-hand knowledge that the income in question has been duly reported to the Internal Revenue Service. Not to worry, right?

Or take another common experience that would seem to be not worth a second thought: A CPA is dealing with a revenue agent in a protracted case, going on over many years with no end in sight. Both the CPA and his client are frustrated and out of patience.

The CPA jokingly says to the agent, "If this case isn't finished soon, I think the taxpayer may come over to your office with a stick of dynamite to bring it to a close." The revenue agent later reports this pleasantry to his supervisor. We all know that "a little humor" like this may help to let off some steam but certainly causes no harm to anyone. Right?

If you answered "Yes" to either of the above scenarios, you will be surprised to learn that the CPAs in both cases, following complaints and investigations, were held by the Professional Ethics Committee to have violated the Code of Professional Conduct.

Disciplinary actions by the NYSSCPA and the AICPA (working under a joint ethics enforcement program) for ethics violations by their members can range from admonishment to expulsion. Investigation by the State Education Department can lead to loss of license, and investigation by the U.S. Treasury Department may lead to criminal prosecution (as actually happened in the tax information case described above). In all events, however, the CPA's record at professional ethics enforcement organizations will show him or her as an ethics violator.

Rule 501 of the Society's Code of Professional Conduct provides, in full, that "a member shall not commit an act discreditable to the profession." Suffice it to say that conduct similar in fact patterns to the two described above could and did trigger complaints to the Society resulting in findings by the Professional Ethics Committee, with the concurrence of the AICPA, that the CPAs in question had violated Rule 501.

Moral: Be wary of committing a "minor" offense on the theory that it is too trivial to provoke a complaint by a concerned party or a finding against you. *

Burton L. Shepard is a member of the NYSSCPA Professional Ethics Committee and practices as a consultant in Harrison, N.Y.