Accounting : Duties and Responsibilities

Gordon Klein

Table of Contents

Chapter 1 – Duties as a ...... 1 Learning Objectives ...... 1 Am I Ethical?...... 1 Introduction ...... 2 What Is Whistleblowing? ...... 3 The Types of ...... 4 Internal Whistleblowers ...... 5 External Whistleblowing ...... 7 Whistleblower Motivations ...... 9 Revenge ...... 10 Reputation Preservation ...... 11 Altruism ...... 12 Collecting Financial Rewards ...... 12 Adversities Faced By Whistleblowers ...... 18 The Downside of Whistleblowing ...... 18 Whistleblower Protections ...... 20 Employer Manipulation of the Anti-retaliation Rules ...... 22 Employee Manipulation of the Anti-retaliation Rules ...... 24 Outside Auditors as Whistleblowers ...... 25 Divulging Client Improprieties ...... 25 Divulging Firm Improprieties ...... 26 Whistleblowing in Tax Practice ...... 27 The American View ...... 27 The International View...... 27 Cultural Aspects of Whistleblowing ...... 28 Biological Aspects of Whistleblowing ...... 28 Encouraging an Ethical ...... 31 Deciding Whether to Become a Whistleblower ...... 32 Solution to “Am I Ethical?” ...... 33 Review Questions ...... 34 Review Answers ...... 35

Chapter 2 – Duties of Tax Professionals ...... 37 Learning Objectives ...... 37 Am I Ethical?...... 37 Introduction ...... 37 Professional Responsibilities in Tax Practice ...... 38 The Governing Sources of Guidance ...... 38 The SSTS Framework ...... 39 Duties as a Tax Return Preparer ...... 39 Obtaining Client Information ...... 40 Filling in Information Gaps ...... 42 Formulating Tax Return Positions ...... 43 Evaluating Uncertain Tax Positions ...... 44 Completing a Tax Return...... 50

Table of Contents

Correcting Past Tax Returns ...... 50 Completing the Client Engagement ...... 53 Duties as a Taxpayer Advocate ...... 53 Duties as a Tax Planner ...... 54 General Professional Duties ...... 56 The Taxpayer’s Duties ...... 57 The Importance of Truthful Tax Reporting ...... 57 Solution to “Am I Ethical?” ...... 58 Review Questions ...... 59 Review Answers ...... 60

Chapter 3 – Duties of Fiduciaries: Financial Planners, Trustees, and Executors ...... 63 Learning Objectives ...... 63 Am I Ethical?...... 63 Introduction ...... 64 Fiduciary Relationships ...... 64 The Nature of Fiduciary Relationships ...... 64 The Legal Consequences of Being a Fiduciary ...... 65 Personal Financial Planners and Asset Managers ...... 66 Applicable Professional Standards ...... 66 General Legal Standards...... 67 Specific Duties Associated with Custody of Assets ...... 68 How to Avoid Creating a Fiduciary Relationship...... 69 Trusts and Trustees ...... 69 The Structure of a Trust ...... 69 Advantages of Trusts ...... 70 Special Kinds of Trusts ...... 71 in Trust Practice ...... 74 The Specific Duties of a Trustee ...... 76 Executors and Administrators ...... 78 The Structure of an Estate ...... 78 Accountants in Estate Practice ...... 79 Fiduciary Issues in Tax Practice ...... 80 Negotiating Tax Refunds ...... 80 Resolving Conflicts of Interest ...... 80 Auditor Independence Requirements for Trustees and Executors ..... 81 The Ethical Dilemma ...... 81 The Independence Rules ...... 81 Solution to “Am I Ethical?” ...... 82 Review Questions ...... 83 Review Answers ...... 84

Chapter 4 – Duties in the Workplace...... 87 Learning Objectives ...... 87 Am I Ethical?...... 87 ii Table of Contents

Introduction ...... 87 Equality in the Workplace ...... 88 Hiring Discrimination in the Workplace ...... 88 Fair Pay in the Workplace ...... 91 Privacy in the Workplace ...... 94 Privacy Rights on the Job ...... 94 Privacy Rights off the Job ...... 96 Respect for Freedom of Association, Property Rights, and Contracts ...... 100 Covenants Not to Compete ...... 101 Trade Secrets and Confidential Relationships ...... 102 Employment at Will ...... 103 The Duty to Tell the Truth ...... 105 The General Principle...... 105 Giving Notice to an Employer ...... 106 The Duty to Protect Employees from Physical Harm ...... 107 Solution to “Am I Ethical?” ...... 108 Review Questions ...... 109 Review Answers ...... 110

Glossary ...... 111

Index ...... 115

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