American Accounting Association 2006 Midwest Region Meeting March 30 – April 1 Chicago, Illinois

Friday, March 31, 10:20 a.m.-12:00 noon Concurrent session 2C - Fraud, Ethics, Equity and Partnerships (Taxation)

Title: Ethics Standards for the Professional Tax Practice: New Developments and Regulations

Cynthia E. Bolt The Citadel

ABSTRACT: Tax advisors have become the most recent profession exposed for their unethical practices. When an international firm receives penalties of almost one-half billion dollars due to fraudulent tax activities, the issue of professional accounting ethics again comes to the forefront. Existing ethics standards and regulations related to tax services have been recently modified to provide better direction for practitioners and greater authority for implementation.

The professional standards address a wide-range of topics, from required probability analysis of tax positions to sanctions for noncompliance. The AICPA’s Statements on Standards for Tax Services (SSTS) replaces the non-enforceable Statement on Responsibilities in Tax Practice and contains more in-depth ethical guidance for the practitioner. All tax preparers working in the area of federal tax are subject to the Treasury Department’s Circular 230: Regulations Governing the Practice of Attorneys, Certified Public Accountants, Enrolled Agents, Enrolled Actuaries, and Appraisers before the Internal Revenue Service. This guideline provides detailed procedures for ethical practice before the IRS – particularly focused on curbing abusive tax shelters.

This paper describes and analyzes the fundamental theory and requirements of the two recently-revised tax ethics standards and addresses the potential effect on current practice.

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