This article follows the earlier 7 on various aspects of the empowerment of professionals seeking to practice in the chosen area. In this article, we look at professional ethics as applied to the Chartered Accountant. The other professionals may have similar limitations with some aspects less focused on and a few where the aspects discussed may not be applicable.
All tax professionals would be providing services relating to advisory, assistance (assignments), representational and attest services. We discuss the salient features of what is ethics, and how it can enhance our success. The code of conduct keeps changing depending on the environment and practices which are acceptable today which were frowned on earlier. My confident journey dates back to 1988 when Shri K.S. Ravishankar whom I consider my guru replied to my query about whether I can have an ethical practice in central excise. He replied with conviction in 2 words - WHY NOT? To be successful I practiced the suggestions given in the earlier article on how to attract clients.
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The decline in the morality among the regulators and tax authorities is being sought to be curbed by the Government of India by introducing information technology and avoiding the interaction between the officers and taxpayers. Faceless assessment, use of IT for detecting errors/ frauds are indicative steps. The days of the intermediary is contracting. Only knowledgeable long term quality advise and diligent compliance appears the way of the future. In IDT the number of professionals doing very well who largely focus on value delivery quality service proves this point. In fact, many times clients (bigger ones) come due to the fact that one is ethical and cannot depend on contacts to get the work done satisfactorily.
Our experience in different locations across India doing well after a few years also supports this view.
Serving to Build Trust
In my personal experience, the need to have a proper perspective towards the clients and earning their trust is an objective that can be met while following the code of ethics.
In business, we have a unique selling product (USP) and in the profession, it can have the unique serving service {USS}. The clients are the wealth creators in this world and we serve them to do by offering our time, effort, and advice. It is true that serving others prepares us to lead others which is a win-win for our personal mastery and the client's advantage. Albert Einstein - Only a life lived in the service of others is worth living. Everyone can be great because everyone can serve - Martin Luther King.
Every professional need to build trust. Trust can be said to be a firm belief in someone.
Professionals are advantaged that they have a mandatory oversight body that can haul them up for wrongdoings. Trust as you all know is hard to earn and it is fragile. It is easy to break/ lose- if that happens very hard to get back. Today we all believe in the higher power/ god or universe which appears to be overseeing us. In the Bible, we have as saying - As you shall sow, so shall you reap - this has been repeated in all the other religions. He who does not trust enough will not be trusted- Lao Tzu- Military strategist.
Ethical Code
We all desire to succeed in the profession with dignity and respect. We also have a bounded duty to live to our full potential. We need to remember that - We are what we repeatedly do. Excellence is a habit – Aristotle. Therefore, there is a need for us to build the following qualities/ characteristics in our professional life:
A. Integrity: Means doing the right things in an independent manner. It covers being straightforward & truthful (honest) and deal fairly with all including the client, employees, other stakeholders. Leaders need to keep their word- walk the talk to enhance the employees to get inspired and follow suit.
B. Objectivity: This means no compromise on professional judgment. It includes not having a bias. It also means that we do to expose ourselves to undue influence. Not dealing with the client or seeking their favors can be a sound approach to avoid conflict of interest. Sticking to an earlier view in spite of new understanding is an example of not being objective. In case of doubt, the validation by peers and seniors would enhance objectivity.
C. Professional Competence: We being professionals are expected to use the available and applicable technical + professional Standards. One of the best practices especially once we have many leaders within is to use a checklist- filled in real-time. It also means that we have confirmed that those who have delegated the work have sufficient expertise and also follow the standards/ checklists.
In today's fast-paced world we need to deliver quality work on time. In case, work is delayed, it is imperative to seek permission for additional time.
The proper supervision (monitoring)of work by juniors by the qualified and finally by the partner should exist. Blind belief has been known to end up in embarrassment at times. Though we are to add value to the clients, we need to deter non-compliance and though we can serve those who come to our doorstep, can avoid the errant or evaders for long-term success.
D. Professional Behaviour: This means that we do not make exaggerated claims on our competence. It would also include a disparaging reference to others who may be competing for the same assignment. Both these can bring disrepute to the profession and also erode our own worth.
E. Confidentiality: It means no inadvertent disclosure of the client's information. In our firm, we have proposed a non-disclosure agreement from all employees as a means to sensitize them on this aspect.
F. Anti corrupt practices: This could be said to a concept borrowed from the latest in ethics. Many MNCs have a requirement for the CFO to understand and agree (sign) not involved in any corrupt practices, the violation of which would mean summary dismissal and investigation thereafter.
Some practical Recommendations:
In our efforts to follow ethics which has provided long term sustained growth some of the action points which have helped are listed below ( the experience in indirect taxes has been discussed) which could be considered:
1. Making firm's policy clear to avoid expectations of managing - liasoning (negotiating to favor) with the tax/ regulatory officers. Those who have indulged have been terminated/allowed to go their way.
2. Ensuring that from the time of an offer, seeking information, draft, and final opinion/ reply/report is on record. The important oral communication with the client (to & from) is also captured by way of an email.
3. Once our professional image is created – revenue may avoid adversarial action, accept our view and even refer work!! In some cases where they harassed the client after that client has enjoyed a decade of peace.
4. In case of a doubtful interpretation, we can examine and give options as per you including payment under protest to protect the client against the interest/ penal costs.
5. Client to be communicated risk of disputes and possible short term outgoes ( pre deposits) and long term impact, rather than keeping quiet about it. This can be in opinions, SCN replies, or in certification.
6. One can guide on way forward also to avoid dispute – the amendment of PO/contract, credit to the receiver ensured.
7. We should have the willingness to avoid/ lose errant clients who force us to give their opinion.
8. When our considered opinion is that there is a liability always advises to pay. The client may or may not which may not be our responsibility unless we are also certifying.
9. We have seen that when we focus on the long term advantage of compliance, clients (especially at the owner level) would see that as preferable.
10. Correct/ retract/ add to change of our view as we are always learning. In case of conflict, it makes good sense to withdraw when mistakes identified, not after a few years when the regulator or tax authority starts an investigation.
11. Seek an appointment with revenue/regulator officially and share the client's stand in writing. (send by RPAD previous day). The meeting to also be documented with CC to the client and if officer difficult mark to the higher officer.
12. Initial Disclosure on various aspects of supply, rate of tax, exemptions claimed, place/time of supply, valuation, ITC, and record keeping. Seek confirmation.
13. The professional should not advise in a way in which dispute happens. Must make all efforts to avoid notice. The attitude should be to resolve doubt – not drag on.
14. Empower/ support the client in case of possible summons/statements to be recorded by suggesting a letter sent prior to the summons date.
15. Any untoward action at the regulators/ tax office – politely put on record to higher officer, vigilance if harassment continued.
16. Once ethical/ face value created – revenue will toe the line of not bothering the professional or his client on the presumption that they would be compliant. [This may take a few years to establish]
17. Any repeated visits to be put on the record and escalated to a higher officer. This may be needed for refunds as well as MEIS/ SEIS claims. Seeking interest for delay can make the officers personally responsible.
18. In case of a Personal hearing, send a synopsis in advance with the updated case laws, circulars, etc. Document the personal hearing if the record of personal hearing not provided. In case of the direction of the argument being new, send additional submissions to be considered before order on record.
19. In case of adverse order- assess the chances. If not in favor suggest paying the tax with interest to avoid the penalty and continued interest cost. See whether the tax can be passed onto the customer for him to avail the ITC.
Conclusion:
The IFAC looking into the future is looking at ethics as the way of the future for the individual professionals as well as the firms in accounting and consulting practice. In the initial stages, it looks impractical and many may laugh. Persevere for a few years to enjoy the sweet fruits of prosperity. We will not have doubts about whether to practice and also not feel that we need to retire. However, once we are able to do well economically while following ethics, an option opens up to continue to grow with contentment and respect of all. Reading the biographies of professional celebrities would indicate that they followed good ethical practices with smart working.
The author can also be reached at madhukar@hiregange.com
Read the next article in the series - Chapter 9: Excellence in Quality
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