Edition 438 – Ethical Standards

An accountant is approached by a potential client for help with their compliance matters. The client is late with their prior year’s tax returns and needs things undertaken as soon as possible. The reason for the hurry is not because the authorities are chasing them up. The client needs finance for a property they’re purchasing and, as part of the loan process, copies of most recent tax returns are required. That, in itself, is probably the first warning sign.

After some to and fro, the tax returns are prepared. The client submits the returns to their mortgage broker, who proceeds to tell them the numbers don’t stack up to service the loan. The broker suggests that, perhaps with some creative accounting, the returns could be changed to make one of the numbers larger than it needs to be. The fact that this would be an incorrect treatment of an item, and lead to a higher tax bill, is apparently lost on the broker. Perhaps, this is the second warning sign.

The accountant, who has the relationship with the client, both professionally and personally, takes on board the broker’s “recommendation” and suggests to the client that, perhaps, the returns need to be changed so they can get their loan over the line. The client really wants the property, and needs the loan to come off, so consents to the changes. Warning sign number three.

We expect professionals that are in positions of trust to honour their ethical obligations and do the right thing by their profession. The fact that this accountant is even considering going down this road suggests:

1. They’ve lost sight of their moral and ethical obligations, that they signed up to when they completed their professional qualifications.
2. They’re prepared to put money before what’s right.
3. They are so inept, that they can’t (or won’t) actually properly advise the client and tell them they’re not going to get the loan because the bank says they can’t afford it.
4. They will be forever swayed to bend, or break the rules, to do what suits the client, and never act according to their professional standing.
5. They’re complicit in committing fraud!

What’s worse in this situation, is that all three participants have fallen seriously short in their ethical and moral obligation, not just the accountant. It’s just that the accountant is the only one bound by rules of ethical conduct.

If the client is prepared to lie to a bank about their income, doesn’t that indicate they don’t care if they fall short on their loan commitments, and the bank repossesses their home? Isn’t that a cost to society, let alone the bank’s shareholders?

If the mortgage broker is prepared to suggest the engineering of a financial number, to get a loan application over the line, doesn’t this then tarnish all their clients with the same brush – being individuals who lie, in order to get their way, with money that’s not their own?

When one individual in this example is breaking the rules, that’s bad enough. When all three are doing so, that suggests there’s a much larger ethical and moral dilemma at play in society.

How are these people being raised by their families?

How are they being educated at school, and beyond?

Are they taught to cheat, from a very early age, to the point where it’s acceptable behaviour?

If so, what does that mean for the future of a society where people are prepared to cut corners, to achieve their ends?

This Week’s Tip

“Once, my wife spotted a pair of sunglasses that someone had left behind in the post office. She went to reach for them, to hand them in when another person beat her to it, proclaimed “finder’s keepers”, then walked out the door with something that was never there’s.”