The Hindu Business Line : Aren't our ethics more benign?

THEY counted, measured and reported, and everybody believed them, till somebody noticed that the emperor had no clothes. So, the people who spoke about disclosure found themselves exposed. That is the sad story of accounting debacle in two sentences, if you like.

Well, then came an avalanche of attacks on the profession, and also repair job began to plug all the holes in the dyke wall.

Number crunchers found it necessary to dust their old books on ethics and read them, because everybody else was checking their conduct against the benchmark set by code of conduct and other statutory requirements.

`Meeting expectations in challenging times' sums up what is needed for auditors and accountants, and that is also the subtitle of a new book by Dan M. Guy and his team, Ethics for CPAs, published by Wiley (www.wiley.com).

"All parties agree that accounting firms must change their priorities and attitudes to put more emphasis on ethics, quality of audits, and on investor and public interests," reads the blurb.

The problem, however, is that the requirements are scattered in too many places. For the CPA in the US, sources of knowledge are in the guidance from the AICPA, SEC, Department of Labour, GAO, State societies/boards and IFAC.

Ditto is the problem for the Indian CA too. The book, therefore, "helps accounting professionals navigate this minefield, providing a reader-friendly, timely resource on the latest ethical pronouncements and considerations."

The format adopted by the book is `information-mapping', separating information into "small units based on purpose or function for the reader, rather than by topic," explains the back cover.

Since the field is dynamic, a companion Web site promises to post interpretations of new pronouncements "within thirty days of issuance." Wish we had something like that.

If you are hungry for new abbreviations, PEEC is the Professional Ethics Executive Committee of the AICPA, and it promulgates professional ethics requirements; and JEEP is Joint Ethics Enforcement Program — in which the AICPA and almost all the state societies of CPAs have joined so as to permit joint enforcement of their code of conduct.

There is the concept of `automatic discipline' according to which CPAs can be automatically suspended from membership without hearing if they are convicted for — a crime punishable by imprisonment for more than one year; wilful failure to file any income-tax return that the member as an individual taxpayer is required to file by law; filing a false or fraudulent income-tax return on a client's behalf or for the member's own benefit; wilfully aiding in the preparation and presentation of a false and fraudulent income-tax return of a client. In comparison, the Indian position is `benign'.

Likewise, the long definition of `covered member' by the AICPA includes an individual on the attest engagement team, and is independent of whether the individual is a member of the AICPA or not. An analogous definition by the SEC is of `covered person'.

On `gifts and privileges' the book is categorical. "A member should not purchase client products or services at discounts that are not available to the general public." What if the recipient CPA discloses the gift received to his firm? This cannot mitigate the appearance of a lack of independence.

"Therefore, CPA firms should have a policy that prohibits acceptance of gifts greater than a defined token amount (e.g. $ 100)."

The authors discuss interesting situations. A sampler: Suppose, in a divorce assignment, spouse B requests the member who had prepared the tax returns for information from prior returns, and spouse A directs the member not to comply with the above request. Advice: "Consult a lawyer".

BooksOfAccount@thehindu.co.in

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