Question

Fernando, CPA, started his own public accounting practice in 2019 when the company he had worked for since 2010 went bankrupt and he lost his job. During all the years Fernando worked for the company, he was only involved in the preparation of simple personal tax returns. Since he started his practice, Fernando has not yet had the time to take tax courses or seminars in addition to the courses required to register his practice, and he has not purchased any tax-related manuals or subscribed to any tax reporting service.One of his new clients, Sharon, has consulted him on a complex corporate tax matter involving a foreign affiliate. Sharon requires an answer in two days’ time.

What are the major ethical issues Fernando should consider?

Answer 1

The major ethical issues Fernando should consider are related to transparency, professional competence and integrity.

1. Transparency : The professional accountant should have absolute transparency in dealing with the client. On ethical ground Fernando should be clear with Sharon that he has not dealt with complex corporate tax affairs before ,he has not undergone any training on advanced taxation and he has not subscribed to any tax reporting service. Therefore, the complex tax issue related to foreign affiliate is practically a new area for him and he should refer Sharon a CPA who is experienced in this area and can handle the things better.

2. Professional competence: Fernando has the issue of professional competence in such case. He has the experience of simple personal Tax filing and he has not updated himself with courses and training in advance corporate taxation matters and also not subscribed to tax manuals or tax services. He is therefore not well equipped to deal with complex corporate tax issues and must desis from accepting the assignment of complex tax matters.

3. Integrity : Fernando faces the issue of integrity which is linked to lack of professional experience and knowledge.

He should maintain his integrity in his business dealings and inform the clients about his area of current expertise and take assignments in that area only. He must in parallel get prepared for the other complex tax areas by taking advanced courses and trainings so that he can enter into the world of corporate tax matters and start handling corporate clients as well .