Professionalism and the Accounting Profession - Essay Example

? Professionalism and the Accounting Profession Clever accountancy has gained ground in recentyears to become a major business model for many accounting firms. This paper will seek to define clever accountancy; how it came about, how it serves the public interest and how it is cursed by the tax collector. It will also point out how it has massively affected the public image of the accounting profession. In this regard, different academic theories will be cited to explain how clever accountancy has led to professionals being painted in bad light. Historical as well as contemporary evidence will be documented to support some claims. The paper, among all other things, will discuss how accounting could be done more professionally. Clever Accountancy Clever accountancy is the use or application (or over-application) of accounting knowledge to aid clients in reducing significantly their tax liability. It is the manipulative use of knowledge for ulterior motives. Clever accounting crept into the profession early but was more prevalent in the 1980s (Offeand Ronge, 1984). Prior to this, the role of accounting firm was to increase awareness on the importance of ethical professional conduct. Their members were also qualified personnel in the accounting field. Later they turned into profit oriented outfits. It was realized that more revenue was generated from consulting rather than auditing. This was when accounting firms started to ‘bend’ ethical accounting principles (McGrew, 1992). The underlying justification was that companies wanted auditors to keep them out of trouble. Clever accountancy is justified by its perpetrators (accounting firms) as being in the interest of the public. They claim that if everyone had their way, no one would want to pay taxes. On the other hand, those with the contrary opinion rubbish their claims as just lame justifications of tax evasion. Clever accountancy was at first seen to enhance professionalism in the accounting field. It has, however, played as paying taxes is a major ethical responsibility of the members of the society to the state. Everyone in the society has an important part to play in paying taxes to enhance service delivery. However, accounting firms constantly use their social position and influence in the economy to evade their core responsibility of paying taxes. This avoidance of their core responsibility is therefore described as being ethically incorrect. Engaging in activities that are contrary to social expectations is unprofessional (Johnson 1982, p. 267) Instituting initiatives whose main aim is to violate the existing rules and regulations is as well unethical and unprofessional. The available information and research findings have indicated that accounting firms in developed countries such as the United States of America and the United Kingdom have over the years devised schemes intended at impeding their role of paying taxes to the state. This evasion plays a significant role in spoiling the image of the accounting profession that was once held in high regard. Clever accountancy initiatives aim at fulfilling selfish interests of individuals and firms that seek to evade paying taxes (Habermas, 1976). In this way, clever accountancy does not support state projects and interest. The accounting profession claims to be high in professionalism. However the sale of tax evasion schemes casts them in negative light as regards their claims to professionalism. In application of the Weberian theory, paying taxes is a daily noble responsibility of everyone in the society. Weber describes that the daily activities of individuals in society is defined by practical rationality. Former American President Franklin Roosevelt once said that taxes are the “dues that we paid for the privileges of membership in an organized society”. Paying taxes is therefore considered a noble activity that one would engage in. In fact, a vast majority of business persons and private individuals pay their taxes effectively and on time (Sikka and Willmott, 2010). Those that seek or institute tax evasion schemes place a huge burden to the poor and middle class who are good taxpayers. Tax payment should be based on social status (Sikka and Willmott, 1995, p. 581). The upper and middle class should pay relatively large amounts due to their higher incomes as compared to the poor. Accountancy firms belong to this ‘well off’ group. They have, however, used various schemes to evade paying taxes. Sikka and Willmont (1995, p. 581) point out that major accounting firms have constantly engaged in anti-social activities and practices. The Marxist theory explains that the modern capitalist society is one that upholds private ownership of property and individualism in pursuit of wealth. The owners of means of productions use their economic power to ensure that they dominate the society’s economic sectors. It is evident that accountancy firms use their economic power to manipulate the implementation of the set rules and regulations (Mitchell, Sikka and Willmott 1998, p. 789). They also perpetuate the ugly truth, as observed by Marx, that laws are made for the poor section of society (Mitchell and Willmott 1998, p. 789). It is true we live in a capitalist society but it is the ethical and professional duty of accountancy firms to pay taxes. Taxes aid in improving service delivery to all citizens. In this light, everyone in society has the moral obligation to pay taxes. However, many accountancy firms have over the years designed schemes to compromise their duty to pay taxes. The avoidance of taxes by the firms is ethically incorrect. They also institute initiatives aimed at violating existing rules and regulations which is plain unethical and unprofessional. Johnson (1982, p. 267) notes that engaging in undertakings that are contrary to social expectations is unprofessional. Firms operate in a society. It is well stipulated in accountancy professional principles that an accountancy firm has the responsibility and role of facilitating social development in the society. It is also the social responsibility of profit making organizations to engage actively in social activities and practices including participating in social infrastructural development and supporting the vulnerable and disadvantaged people in the society. The firms are well aware of their responsibility to social development. Nevertheless, a good number of accountancy firms’ managers are driven by greed to further their selfish interests. Habermas (1976, p. 67) points out that they also use their financial power to control and manage virtually all regulators in revenue departments. Accounting firms are also the major contributor to organized tax evasion. Organized tax evasion has reached alarming heights in recent years. Consequently, high net worth individuals and prominent organizations have escaped taxes thus forcing ordinary people to pay huge amount of taxes (Sikka, 2008). These unprofessional activities have led to many countries recording lower revenue collection hence making them increase their deficits. A survey that was conducted in the United States of America and United Kingdom indicated that, over 60% of accountancy firms do not pay their federal taxes (Habermas, 1976, p. 67). The above information shows that accounting firms are leading other firms in tax evasion. It is also evident that the firms have also consistently failed to comply with the existing rules and regulations. In addition, with reference to the available ethical principle, it is very unprofessional for any professional to institute schemes or plans to violate the existing rules and regulations. There is evidence of unprofessional conduct of many accounting firms. However, only a paltry figure of the numerous cases has been prosecuted. In the United Kingdom, for instance, the government efforts to prosecute accounting firms that do not pay tax have proved futile. Out of 380 identified cases, only less than 30 cases have been reported so far (Shackleton, 1999). In addition, they also use their wealth to pay high profile lawyers to defend their cases on tax evasion in courts of law. Besides, the high costs of filing a case in law courts against tax defaults make many cases not reach court in the first place. The whole act of exploiting the system to evade taxes by use of resources or otherwise is unprofessional. Professional Accounting The actions of accounting firms over the years have proved that professionalism is adhered to. To enhance their public image, practical measures ought to be applied. To start with, serious attention should be given to students who wish to join the accounting fraternity. Ethical values and dilemmas need to be integrated in the school’s curriculum (Dunn and Sikka, 1998). Students should be made aware of the interpersonal challenges they might face when dealing with clients and even internal firm policies. Students should also be challenged to consider whether their value systems are in tandem with what is expected of them as they launch their careers. The government as a regulating agency and other concerned players, as suggested by Willmott, Cooper and Puxty (1993, p. 93.) should be proactive in establishing means and mechanisms of shutting down all opportunities that are available for individuals, and entities that want to avoid paying taxes for their own personal benefits. This will send the message unprofessional conduct on the side of accounting firms will not be tolerated. Systematic and severe legal action ought to be taken for organizations that institute schemes that are intended at instituting mechanisms of evading tax payment. It is very essential that progressive policies by the required stakeholders are adopted that will ensure accountancy firms uphold high standards of professionalism by paying their taxes are very essential (Cooper, Puxty, Lowe & Willmott, 1989, p. 91). Accounting firms should be able to operate in a pre-set model established that will ensure they uphold integrity and high ethical standards. Conclusion Avoidance of tax is an unethical practice and can have negative effects to society in general. The accounting profession is the major culprit in the evil when it comes to such unethical practice as it is often the main tool of the crime. A change for the better for the profession can help in alleviating the problem. The accounting profession, as indicated earlier, wields a lot of power in the current world. With such power it ought to be on the frontline in championing for positive social ideals. This can have ripple effects considering the power it has. References Cooper, D.J., Puxty, A.G., Lowe, E.A. and Willmott, H.C., (1989). The Accounting Profession, Corporatism and the State, in Chua, W.F., Lowe, E.A. and Puxty, A.G. (eds.), Critical Perspectives on Management Control, Macmillan, London. Caramanis C.V., (2002). 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