Dealing in an ethical manner is critical to the ongoing success of the CPA profession.  By definition, a profession consists of a recognized body of knowledge, a standard of professional attainment, and an enforceable code of professional conduct, which includes ethical behavior that is monitored by the profession. Since the accounting scandals of a few years ago, the AICPA and other professional accounting organizations have made concerted efforts to educate members on ethical behavior and one of the most important areas where this applies is in consulting services. 

While Tax and Audit services often represent the bulk of revenues for firms, consulting is often a very lucrative part of the CPA practice.  With pressures to maintain margins and constantly grow, firms can find themselves in gray areas where the easiest decision in the short term is not the best decision for the firm or the client in the long term.   In these instances the firm must have the courage and commitment to set and enforce an ethical standard and to have a process to educate their personnel on how to make ethical decisions on their own behalf and on behalf of the firm. 

Enforcement of ethical standards begins with the leadership of the firm.  Partners within the firm must set a standard as to what they view as acceptable conduct from themselves and from their personnel and must “lead by example” by adhering to these standards.  When new employees are brought into the firm, the expected code of conduct should be discussed with them along with explaining the penalties for non compliance.  When personnel display unethical behavior, the firm must have a process to evaluate the behavior objectively and management must have the courage to dole out the consequences, even if this means terminating the offender.  This can be extremely difficult when the person is a top producer or an owner, but the firm must realize that letting unethical behavior go unanswered can lead to much more severe consequences including the eventual loss of the firm, as happened a few years ago where the acts of a few people brought down one of the largest accounting organizations in the world.  

Having a standard of conduct can be even more important in the area of consulting, where clients rely on their CPA firm as their ”most trusted business advisor.”  Clients pay for specialized knowledge and experience and expect that the firm will provide the best recommendation on behalf of the client, and not because of any undisclosed arrangements or relationships with preferred vendors.  An example of a standard of conduct would be having a Declaration of Integrity that states what the firm views as a standard of behavior and could include items such as disclosing all relationships with vendors and any referral fee agreements to all clients that could be impacted by recommendations.  It can also include a standard on what are acceptable gifts from clients, vendors, and business associates and training on how to deal with these situations. 

Most people learn a personal code of conduct from their parents and community as they are growing up.  As individuals, they are free to interpret the conduct around them and are free to choose their own values, which they individually have control over accepting.  As these individuals enter into a professional business environment, it is important to enforce ethical behaviors and to provide training on making ethical choices for when these individuals find themselves in a questionable work situation.  In Frank C. Bucaro’s book “Taking The High Road,” Mr. Bucaro outlines a ten step process to help individuals make ethical decisions, which is described below: 

1. Determine where the issue is coming from, who is involved, and identify the primary dilemma being faced.  This information should be crystallized it by writing it down.
2. Identify the overall goal in solving the problem, whether it is meeting the firm’s or client’s highest needs or building a better work environment; whatever the goal it must be written down.
3. Brainstorm as many alternative solutions as possible, including outlandish items that would be considered “outside the box;” the variety of solutions can help you create clarity on which action is the most reasonable and that you should take.
4. List all the facts and information that you know and understand about the situation, as well as the critical things you DON’T know but can research more thoroughly, before coming to a decision point.
5. List every person and entity that could be affected by this decision and the guiding principals that could be impacted, such as a personal code of ethics, a company mission statement or the financial impact on the bottom line.
6. Write down the risks and benefits of each solution next to those that could be impacted including the individual, their co-workers, and the firm.
7. List how important each solution is to the individual, firm, and to the community, as well as the likelihood that it could happen.
8. Write down your reasons for choosing each solution based on your position and responsibilities within the firm.
9. List your preferences as to how this decision should be made and prioritize the list accordingly.
10. Keeping in mind the items you wrote down in the first nine steps above, resolve to make the decision.  By carefully contemplating each step in the order above, you will have the best information, thought process and overall opportunity to make the right choice.

By having a declaration of integrity and a firm code of ethics, your partners are taking the courage to stand up for what is right for the firm, its personnel, and clients for the long run.  By teaching employees this code of behavior and training employees on making ethical choices, the firm is showing commitment from the owner group.  By living by the standards of conduct and not accepting any unethical behavior the firm is making a stand for what is right and each member will be able to look at themselves in the mirror knowing that they are better today then yesterday for making the right ethical decisions.

This article is reprinted with the publisher's permission from the CPA Practice Management, Forum a journal published by CCH INCORPORATED. Copying or distribution without the publisher's permission is prohibited. To subscribe to the CPA Practice Management Forum or other CCH Journals please call 800-449-8114 or visit www.tax.cchgroup.com.