PROFESSIONAL ETHICS 代写
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•Topic 7
PROFESSIONAL ETHICS AND CLIENT CENTRED CONFLICT OF INTEREST
•MAA350 Professional Ethics and Governance
•(Chapter 6 – textbook)
•LEARNING OBJECTIVES
•Describe the elements that comprise a conflict of interest
•Explain the ways in which a professional can safeguard against a conflict of interest
•Discuss the potential conflicts of interest in:
–accepting new clients and referring clients with special needs
–receiving commission-based fees
–taxpayers ethics
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•CONFLICTS OF INTEREST
•Conflicts of interest arise when the interests of the professional conflicts, or has the potential to conflict, with the interests of another party – the client or employer (Carson, 1994)
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•Conflicts of interest may cause professionals to behave in a way that compromises their professional conduct
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•Self-interest also includes looking after one’s friends and family
•Conflicts of interest can arise from the professional's desire to promote his or her own interest, as well as the interests of other related parties
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•Conflict of Interest
Click here to watch Introduction to Conflict of Interest:
https://www.youtube.com/watch?v=xnRpMQvW_ow
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•Types of conflict
–Client-centred conflicts of interest
–Employer-centred conflicts
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•A professional in public practice is one that provides professional services to clients (e.g. audit, tax, or financial analyst or advice)...
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•ELEMENTS OF CONFLICT OF INTEREST (COI)
5 elements in conflict of interest
1.Fiduciary relationship
2.Proper exercise of duty
3.Self-interest
4.Real or perceived COI
5.Actual or potential harm
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1. Fiduciary relationship
•When the professional is in a position of authority with responsibility for making judgments that have an effect on other people.
•the primary duty to act in the best interests of the other party
2. Proper exercise of duty
•divided loyalty can make it difficult to exercise sound, independent and objective judgment
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3. Self-interest
•A conflict of interest originates from a personal interest that interferes with the proper exercise of duties and objective judgment
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•When a professional favours self-interest in a professional-client relationship
–clients will suffer
–detract from the reputation and credibility of profession
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•A second type of conflict arises when the professional occupies dual roles (e.g. marriage breakdown, sell-buy transaction) representing a conflict between clients
–actions which are in the interest of one client are not in the interest of another
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4. Real or perceived COI
•It is not necessary for an actual conflict of interest to exist; there need only be the perception that it does.
5. Actual or potential harm
•Harm from unsound judgment is not a necessary condition for the existence of a conflict of interest, there need only be the potential for the harm
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•IDENTIFYING A CONFLICT OF INTEREST
•A professional has a responsibility to:
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–identify and evaluate conflicts relating to their business or clients
–be ever-vigilant in identifying relationships, financial interests and situations that could be viewed by others as presenting a COI
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•Recognising a conflict of interest is problematic when objectivity is clouded
–it may be useful to talk to a colleague about the existence of a potential conflict.
–thought experiment involving the ‘test of trust’ - Would others trust my judgment if they were aware of the conflict of interest?
•RESOLVING A CONFLICT OF INTEREST
•One can mitigate the threat of a COI by:
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–Disclosing the conflict to all interested parties
–Removing oneself from the conflict
–Seek advice from a confidential counselling service
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•Disclosure
•When a potential conflict of interest is identified
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–the professional may inform interested parties and obtain their informed consent to continue the relationship
–this will allow clients to judge for themselves the likelihood of damage, if any, and by giving consent, they bear the risk of the adverse effects from the conflict of interest.
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•Removal
•When a conflict is inevitable, one should remove themselves from the situation in which the conflict arises and allows others to undertake the task or job
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•When a colleague is invited to assume these responsibilities, consideration should be given in revealing the conflict, in case it pressures (or passes the conflict) to the incoming colleague
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•Confidential counselling
•should consider seeking guidance from an independent and objective source.
•Professional associations normally provide a counselling service that offers confidential advice to its members who may have no other place to turn to for help.
•Open and frank discussions with experienced members may help the professional to clarify concerns and articulate possible resolution strategies.
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•PROFESSIONAL APPOINTMENTS & REFERRALS
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•Professionals should withdraw or refuse to act in any engagement when there is a conflict between themselves and the client.
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•CHANGES IN APPOINTMENTS
•Clients have an indisputable right to choose their professional adviser and to change to another should they so desire.
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•Public practitioners have a corresponding obligation to ensure that they are not restricting in any way the client’s freedom to change to another adviser
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•it is considered professional etiquette to defer acceptance of the appointment until the proposed professional has communicated with the existing adviser.
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•Communication
confidentiality requires the proposed professional to obtain the client’s permission to initiate communication
similarly, the existing adviser must not disclose client related matters without the client’s express consent.
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–serves to avoid any suspicion that the proposed professional is soliciting clients away from the existing adviser
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–to properly ascertain if there are any professional reasons to withdraw from accepting the appointment
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–safeguards the proposed professional from accepting an appointment in circumstances where all the pertinent facts are unknown
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–the existing adviser must be honest, and provide full information
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•CLIENTS REFERRALS
•Principle of competence gives the professional no choice but to decline the task or job when knowledge or skill is absent
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•Rather then decline the client, a member should consider referring the client to a specialist who is competent in the tasks and who will act to the same ethical standards as the referring professional
•CLIENTS REFERRALS
•Referrals may not occur when members fear that the receiving professional (specialist) may replace the referring professional and render them redundant
–the absence of referrals may deprive clients of receiving expert advice that they are entitled to receive.
–to maintain confidence in the system of referrals, professions have developed rules that protect the referring professional by limiting the service provided by the receiving professional to the specific assignment
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•referral fees must be disclosed to the client
•COMMISSION-BASED FEES
•Commissions are generated for recommending or referring a product or service, usually for the purchase or sale of a financial product supplied by a third party
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•Commissions may give rise to a bias because advisers favour the selling of one product over another in order to earn a higher commission
– advisers are seen to recommend products based on the commission dependency rather than the needs of the client
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•Commission fees
–the public have come to see financial planners as salespeople because large insurance and investment companies rely on financial planners as their sales force and financial planners rely on such institutions to develop and manage products
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•Time-charged fees
–promoting fees charged on a time basis (i.e. hourly rates) avoids the appearance of a commission bias.
–but it may mean a rise in such fees, which would have a disproportionate impact on the less wealthy and less sophisticated clients
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•In most professions, commissions are banned unless disclosed to clients
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•Recent legislation in Australia has prohibited commissions and volume based payments to financial planners
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•A failure to provide adequate disclosure is tantamount to receiving a secret commission – prohibited by law and may entitle the client to compensation.
•ETHICS IN TAXATION SERVICES
•Tax minimisation
–occurs when a client’s taxation affairs are legitimately arranged to reduce the amount of tax payable
–nothing improper in professionals assisting clients to minimise their client’s tax liability by legal means., in fact, the professional has an obligation to put forward the position that best favours the client
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•Tax evasion
–the deliberate falsification of information and the use of deceit for the primary purpose of escaping tax liability
–schemes are unlawful and are considered a criminal offence
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•Tax avoidance
–the process of arranging one’s affairs, to secure a tax advantage by legal, albeit sometimes contentious means
•TAX EVASION
•The law is often regarded as the minimum requirement for ethical behaviour, however some taxpayers do not have the same respect for tax law as they do for ‘other’ law
–there appears to be an opinion that non-compliance (or bending) tax law, is not really breaking the law.
–those who take the greatest risks with non-compliance least understand the connection between ethics and the law
–the key to prevention is not penalties but to change public attitudes towards the taxation system
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•TAX EVASION – Professional duties
•The professional must ensure
–as far as possible that they have made no contribution to the evasion of tax
–that unlawful client behaviour is entirely of the client’s own volition.
•Responsibilities
–the information obtained from the taxpayer is accurate and complete it is not prudent to accept unsatisfactory explanations from the client without further enquiry
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•If the professional becomes aware that the client is evading tax:
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–they should refuse further association with the matter
–the professional is bound by client confidentiality and cannot inform the taxing authority
–if the taxpayer refuses to give permission to disclose the error to the taxing authority, the professional should consider withdrawing and discontinuing the relationship with the taxpayer
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•TAX AVOIDANCE
•Tax avoidance schemes comply with the ‘letter of the law’ but are not within the spirit of the law
•Tax avoidance schemes arise from legal loopholes
•Professional responsibilities
–it is not the professional’s responsibility to deal with loopholes; this is the responsibility of parliament
•Example of Tax avoidance
A British multinational accused of massive tax avoidance and depriving one of the world's poorest countries of billions of dollars. The Zambian subsidiary of Associated British Foods has confirmed it paid virtually no tax in the past five years. Such forms of tax avoidance may be legal, but as aid groups are questioning: Is it morally right? And is this a trade worth having?
To discuss this, Inside Story with presenter Mike Hanna is joined by guests: Chris Jordan, the co-author of the ActionAid report on Zambia Sugar called 'Sweet Nothings'; Keith Boyfield, a fellow of the Institute of Economic Affairs; and Stephen Barber, a political economist from South Bank University.
(watch the ABC’s Inside Story –’Sweet Nothings’ in your own time)
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Google and Yahoo – tax avoidance example
Please refer to the following link:
https://www.youtube.com/watch?v=529LLvpJD-U
•TAX AVOIDANCE– Professional duties
•Professional responsibilities
–members have overriding ethical responsibility to avoid association with any act, including devising and promoting a tax avoidance scheme
–this does not preclude a professional from advising clients of available schemes or arrangements
–must also advise clients of the potential repercussions should the legislature change the law retrospectively
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•Tax avoidance schemes present a dilemma for advisers:
–the obligation to advance the client’s interest competes with their ethical obligation to ensure that a taxpayer does not pay less than their fair share
•It is not the professional’s responsibility to act as a moral agent for the client, the morality of such decisions is up to the taxpayer
•TAXPAYER ETHICS
•The rationale supporting tax evasion or avoidance stems from a taxpayer attitude that ‘the government can afford it’ and ‘no one is being hurt’.
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•Rationalisations like these are excuses to avoid accepting responsibility for one’s actions
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•The impact on the community of widespread tax evasion can be quite severe.
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–It places a disproportionate burden on honest taxpayers - tax rates increase
–lack public resources to function effectively or provide adequate social services (e.g. education and health) which could adversely affect those reliant on such services.
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•Taxpayer ethics and compliance
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–Compliance is linked to the probability of detection from the taxing authority
•Consider Kohlberg's stage-framework
–Level of compliance is greatest when the source of taxable income is perceived to be readily and independently verifiable, e.g. interest income
–Older taxpayers, female taxpayers and taxpayers with middle to higher level incomes are inclined to overestimate the probability of detection and are therefore more compliant.
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–Evidence also shows that self-employed taxpayers, compared to wage and salary earners, have greater opportunity to evade tax (detection is lower) and are more likely to do so.
•TAXATION ETHICS – Professional roles
•The professional plays a dual role: enforcer of tax law as well as exploiter of the taxation system.
•Professionals enforce the tax law when the law is clear and unequivocal, but exploit tax law when it is ambiguous.
•Duties to clients
–to legally minimise tax liability to avoid unnecessary overpayment of tax.
–to keep their clients out of trouble
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•TAXATION ETHICS – Contingent fees
•Contingent fee - a fee for performing any service in which the amount of the fee depends on the outcome of a transaction or result e.g. size of tax refund
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•Note: a properly prepared tax return will result in an appropriately determined liability
–there is no basis for computing a tax saving, unless it represents some form of tax avoidance
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•A contingency-based fee in taxation, may unwittingly produce optimistic interpretations of the tax law, motivated by the desire to maximise the amount of the tax refund and hence the size of the fee.
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–must not accept a contingent fee for the preparation of tax return
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•SUMMARY
•Professionals face a conflict of interest when their personal interest interferes with the proper exercise of judgment
•Professionals should withdraw or refuse to act in any engagement when there is a conflict between themselves and the client.
•Strategies are in place to aid in reducing unethical behaviour in:
–appointments, referrals, fees, taxation
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History shows that where ethics and economics come in conflict, victory is always with economics. Vested interests have never been known to have willingly divested themselves unless there was sufficient force to compel them.
-BR Ambedkar, Indian politician and founder of the Indian Constitution (1891-1956)
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