Quiz 4: Ethical Responsibilities of Accountants
At a minimum, CPAs and other accounting professionals have a responsibility to caution their clients when they believe that the clients may be engaging or thinking about engaging in unethical or illegal acts. The client needs to be aware of the risks as well as any responsibility the accounting professional has in reporting the illegal/unethical act and/or cooperating with law enforcement in an investigation.
Although the 1984 Supreme Court opinion noted "the independent auditor assumes a public responsibility transcending any employment relationship with the client," there is also a client confidentiality rule in play that prevents an auditor from disclosing confidential client information to third parties. It ultimately becomes a judgment call. The accounting professional needs client confidentiality to obtain the information they need from their clients; however, it appears that the Supreme Court would support a violation of client confidentiality in certain circumstances.
If the accountant in the case were to become an "informant," the following parties would be affected. • Client : the accountant has a confidentiality privilege with the client, and moving to an informant status would likely compromise the integrity of his commitment to his client. • Family members : In this case, the decision to become an informant might have a significant impact on the family's lifestyle, finances and relationships. • Firm members : The decision to become an informant for the IRS might negatively impact his firm and its members, particularly if the information were to become public record. There might be embarrassment and/or a significant loss of clients. • Accounting professionals as a whole : Standards for professional behavior exist in part to protect the credibility of a profession as a whole. It is possible that the decision to become an IRS informant might create a negative bias towards the accounting profession.