Question

In the USA, Read the following advertisement that appeared in the community newspaper where you live. Do you think the advertisement violates any of the ethics rules? Explain the reasons for your answer.

IRS TAX TERMINATOR, A Professional Services Corporation We have ten CPAs on staff and provide a full range of tax services. We guarantee a tax refund or you pay nothing for our services. Call us at (999-777-7711). Your call will be routed to one of our tax experts who will take down all the relevant information and inform you of our fee structure that includes a fixed amount regardless of the service provided and a variable amount that is based on the type of service provided.

at least 400 words / this question belongs to ethical obligations and decision making in accounting.

Answer 1

Lets question can be discussed with the view point of the Principles of the Ethics for Advertising in USA.

Principle 1 - Advertising, Public Relations, News, Marketing Communication all share a common objective of truth and high ethical standard in serving the public.

In view of the above, the advertisement is can be treated as non-ethical, as it creates a wrong demanour in the public at the initial lines which contradicts with is concluding lines. Advertisements states that firm will accept money only when it assures the user of Tax refund, however it concludes with the lines that the user has to pay a fix amount initially before availing the services of the firm. It is not clear in its intention and completely truthful to the user about the services it provides and the charges for the same. Hence, the advertisement contradicts the Principle 1 of the Ethics for Advertisement in USA.

Principle 2 - High personal ethics should be used when creating and disseminating information to people.

In the view of the above, the claims of the advertising firm is unethical as it claims that all the clients or prospective clients will be guaranteed a Tax Refund, without considering the different income levels, state tax laws and other law in force to govern the income of the reader of the advertisement. Claims laid by the company thus on the face value of the advertisement makes it unethical as it claims something it can't fully own or control. Hence, as per the guidelines of Principle 2 of the Ethics it voilates the ethics code.

Principle 5 - Advertisers should use discretion and care depending on the types of advertisements offered and the target audience.

In view of the above, advertisement doesn't clearly differentiate the target audience for the ad placed by the firm. It advertises a generic statement for all public users of the advertising agency. For eg., Differentiation could be have been created with different income levels as mentioned by the IRS. Hence, considering the above the ad contradicts the Priniciple 5 of the Ethics code.

Therefore, as per the discussion above, the Advertisement contradicts 3 out 8 code of ethics for advertisement, and hence this ad hasn't complied completely to ethical obligations and hence cannot be taken into consideration for decision making.

A CPA shall not on behalf of himself, his partner or associate, or any other individual affiliated with him or his firm, use or participate in the use of any form of public communication containing a false, fraudulent, misleading, deceptive or unfair statement or claim, or advertising which the Council considers to be self-serving rather than in the public interest. Publicity not in the public interest shall include, but not be limited to, advertising or marketing that:

(a) is false, fraudulent, deceptive, or misleading;

(b) Guarantees any service based on discretionary decisions of regulatory authorities;

(c) makes any claim relating to professional services or products or the cost or price thereof which cannot be substantiated by the firm, who shall have the burden of proof;

(d) makes claims of professional superiority which cannot be substantiated by the firm, who shall have the burden of proof; or

(e) offers inducements in any form for a professional service or product.

Here IRS TAX TERMINATOR advertises that, they guarantee a tax refund or pay nothing for their services. Which means it is against the tax rules which may be deceptive or misleading as per laid rules under Income tax authority.