Question

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 300 words / this question belongs to ethical obligations and decision making in accounting

Answer 1

A. General Guidelines

1. A firm shall not seek to obtain clients by any communication or advertising (written, oral, or electronic), or other forms of solicitation:

(i) in a manner that is false, fraudulent, misleading, deceptive, unfair, tends to promote unsupported claims, or

(ii) which is accomplished or accompanied by the use of coercion, duress, compulsion, intimidation or vexatious or harassing conduct. A false, fraudulent, misleading, deceptive, unfair, unsupported statement or claim includes (but is not limited to) those that:

(a) create false or unjustified expectations of favourable results;

(b) contain a misrepresentation of fact;

(c) imply the ability to influence any court, tribunal, regulatory agency or similar body or official;

(d) consist of statements that are self-laudatory and that are not based on verifiable facts;

(e) make incomplete comparisons with other firms;

(f) contain testimonials or endorsements;

(g) is likely to mislead or deceive because in context it makes only partial disclosure of relevant facts;

(h) relate to fees or a range of fees not fully disclosing all variables and other relevant facts; or

(i) contain any other representations that would be likely to cause a reasonable and ordinary prudent person to misunderstand or be deceived.

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.

C. Prohibited activities by members

1. Making exaggerated claims on services that one is able to offer, qualifications possessed or experience gained. This can be in quotations, firm’s profiles or other communication to current and prospective clients who have requested for such information.
2. Making disparaging reference or unsubstantiated comparisons to the work of others. 10 36. Allowing clients to make use of the name and description of their auditor in business document or literature other than financial statements.
3. Publishing audit reports on headed notepaper
4. Using logos which have slogans or mottos which are not factual or objective in nature in the firm’s materials, correspondence or literature.

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.