Third Party Tax Preparer Ethics

The purpose of this research is to analyze, within an ethical context, the responsibilities of a third party tax preparer in American society. This analysis is applied to an hypothetical situation. Further, the analysis considers fiduciary responsibility, obligations to the tax system, and philosophical principles.

Assume that a certified public accountant (CPA) has been engaged to prepare the financial statements and the federal income tax return for a construction firm. Assume further that the construction firm is a publiclyheld company. Lastly, assume that percentageofcompletion (POC) estimates for workinprogress (WIP) are made by the construction firm, and that it is not possible for the CPA to physically verify the firm's POC estimates.

In this hypothetical situation, the CPA determined that the POC estimates appeared to be unreasonably low, considering the firm's inventory levels, direct labor expenditures, and so forth. The effect of the lower POC levels was to lower beforetax profit for the period, and, thus, to lower (1) the firm's federal income tax liability, and (2) the amount of income allocable to the common stock holders of the construction firm.

The action taken by the CPA in this situation was twofold. First, the incongruity of the POC estimates was brought to the attention of responsible parties within the construction firm the management. Secon

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iety (absolute submission of the individual to an arbitrary sovereign) on the grounds that individuals so constituted could never engage in collective cooperation. Nevertheless, Hobbes' view could provide justification for the actions of the CPA, if the CPA perceived the legal authority of the state to be a sovereign authority, to which an ultimate responsibility was owed. In the lateeighteenthcentury, Jeremy Bentham's Fragment on Government introduced the utilitarian concept into philosophy. Utilitarian ethics may be traced back, at least, to Hobbes. It was Bentham, however, who fashioned a philosophy from its theoretical bases. Bentham claimed that the motives for individual actions were morally irrelevant. In the utilitarian concept of philosophy, government was a necessary evil. Thus, in the context of utilitarian philosophy, the CPA's actions could be justified on the basis that those actions caused less pain for the CPA in the longrun, than would have been the result of the alternative course of action. John Stuart Mill extended utilitarian theory to hold that, when an ascendant class exists within a society, the greater part of that society's moral values will derive from the interests of that class. Mi
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Some common words found in the essay are:
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Approximate Word count = 1913
Approximate Pages = 8 (250 words per page)