All AICPA members are subject to the AICPA Code of Professional Conduct, including all general and technical standards. There are several provisions that should be of interest to tax practitioners, including: Integrity and Objectivity (1.100 and 2.100), Conflicts of Interest (1.110 and 2.110), Independence (1.200), Nonattest Services (1.295), Contingent Fees (1.510) and the related interpretation, Tax Matters (1.510.010), and Confidential Client Information (1.700).
The AICPA’s Statements on Standards for Tax Services (SSTSs) are enforceable tax practice standards for members of the AICPA. The SSTSs apply to all members regardless of the jurisdictions in which they practice and the types of taxes with respect to which they are providing services. The SSTSs and interpretations delineate members' responsibilities to taxpayers, the public, the government and the profession. They are intended to be part of an ongoing process of articulating standards of tax practice for members.
In addition to the SSTSs, enforceable standards exist that may apply to members in tax practice, depending on the services being offering, including:
- AICPA Statement on Standards for Valuation Services
- AICPA Statement on Standards in Personal Financial Planning Services
Tax practitioners must also comply with Circular 230, which govern a CPA’s practice before the Internal Revenue Service.
Advocacy vs. Independence in Tax Practice
When considering relevant ethical requirements, there is an important distinction for tax practitioners regarding “independence.” Although independence of judgment is always an essential part of being a CPA, a tax practitioner is frequently called upon to be an advocate for clients. So, the independence requirement for an accounting and auditing practice is replaced with an advocacy requirement for a tax practice.
Internal Revenue Code Provisions
Members need to be alert to and comply with all other standards and ethics rules contained in the Internal Revenue Code contains. Examples of such standards and rules include (but are not limited to):
- Preparer penalty rules - IRC §6694 - Understatement of taxpayer’s liability by tax return preparer
- Confidentiality criminal penalty - IRC §7216 - Disclosure or use of information by preparers of returns
- Confidentiality civil penalty - IRC §6713 - Disclosure or use of information by preparers of returns
- Privilege rules - IRC §7525 - Confidentiality privileges relating to taxpayer communications
- Tax shelter rules - IRC §6111 - Disclosure of reportable transactions and IRC §6112 - Material advisors of reportable transactions must keep lists of advisees, etc.
New Competency Requirement
In June, 2014, a new Section 10.35 was added to Circular 230 to address practitioner competence.
Under this new provision, a practitioner must possess the necessary competence to engage in practice before the Internal Revenue Service. Competent practice requires the appropriate level of knowledge, skill, thoroughness, and preparation necessary for the matter for which the practitioner is engaged. A practitioner may become competent for the matter for which the practitioner has been engaged through various methods, such as consulting with experts in the relevant area or studying the relevant law.
Procedures to Require Compliance
An amendment to Circular 230, section 10.36, was finalized in May 2011, stating, in part:
“Any practitioner who has (or practitioners who have or share) principal authority and responsibility for overseeing a firm’s practice of preparing tax returns, claims for refunds, or other documents for submission to the Internal Revenue Service must take reasonable steps to ensure that the firm has adequate procedures in effect for all members, associates, and employees for purposes of complying with Circular 230.”
As a result, tax practitioners responsible for a tax practice or tax department must develop appropriate procedures and provide adequate staff supervision to ensure that all individuals they supervise comply with Circular 230. The AICPA has long-standing and well-established principles of quality control for accounting and auditing practices, which are outlined in AICPA Statement on Quality Control Standards No. 8, A Firm’s System of Quality Control. Although Circular 230, Section 10.36, does not require a quality-control system, it is considered a best practice to have one. The objective of a tax practice quality control system is to provide reasonable assurance of compliance with applicable statutory, regulatory, and professional requirements, including Circular 230, section 10.36.
Conflicts of Interest
The AICPA Code of Conduct states “in the performance of any professional service, a member shall maintain objectivity and integrity, shall be free of conflicts of interest, and shall not knowingly misrepresent facts or subordinate his or her judgment to others.” This is a philosophy which drives the ethical behaviors and rules established by the CPA profession.
As advocates, firm personnel should seek to advance the client's position as long as that position and their efforts are in compliance with applicable professional standards, including the AICPA Code of Professional Conduct and the SSTSs, and applicable laws and regulations. Positions advocated should not result in a conflict of interest for the firm or any of its personnel, compromise the credibility of the firm or its personnel, go beyond sound and reasonable practice, pose an unreasonable risk of impairing the reputation of the firm or its personnel, or subordinate the judgment of firm personnel to that of the client.