please make a reply of 200-250 words to this thread with two citations. When replying, try to address different aspects of the ethical argument. Often, these situations are not as black and white as they seem, particularly when responsibilities such as independence and confidentiality come into play.
Tax Discussion – Haddock
I would not sign this tax return. There is some type of flow of money going on between John and his son and whether it be legitimate or not, I do not think it is okay to sign the tax return without investigating. The potential ethics I see in this situation are not abiding by the standard that I am upheld to as a tax professional if I sign the tax return as well as my own personal morals. The reasoning that the IRS has never objected, and they have been doing it for several years is not a reason to continue doing it and be okay with it. The rules that would be in violation under the AICPA Code of Professional Conduct are Rule 102: Integrity and Objectivity, Rule 501: Acts Discreditable, and Rule 202: Compliance with Standards (AICPA, 2013). An accounting professional must always exercise integrity and objectivity, never commit a discreditable act to the profession and must always comply with the designated standards for the matters of accounting services. If I signed off on the tax return, I would not be exercising due professional care or compliance with standards because of my knowledge of the rent that is much higher than the rent in the area.
The Statements on Standards for Tax services that I think are most applicable to this situation is Statement 1 about tax return positions and Statement 6 about knowledge of error. As tax professionals, we cannot knowingly submit and sign off on a tax return that has an error, “The term ‘error’ includes any position, omission, or method of accounting that, at the time of the return is filed, fails to meet the standards set out in SSTS No. 1” (Sawyers et al., 2021)(AICPA, 2018). Overall, I would have to investigate the rent or withdraw from the engagement if I was not able to find a legitimate reason for the rent being so high. Unfortunately, I also must think about the error in past years tax return if they have been reporting the rent like that for years. Psalm 25:21 states “May integrity and uprightness protect me because my hope, Lord, is in you” (Patterson & Kelley, 2018). In this situation it relates to abiding by my integrity and professional due care and God can help provide me with peace from any resentment or anger I would receive from withdrawing from the engagement.