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Strategies for Change

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Ethics are moral principles or beliefs about what is right or wrong and guide individuals in their dealings with other, within groups (stakeholders), and provide a basis for deciding whether a particular decision or behavior is right or proper. Go online to this site and report on one case of corporate fraud the government reported. Then write at least 350 words on the case and the ethics violations you see took place within the company you chose: http://www.irs.gov/uac/Compliance-&-Enforcement-News On their website, The Washington Ethical Society (2013) defines ethics as “the elements essential to human well-being and proposes principles to be used as guidelines for generating an ethical culture”. They go on to say that “ethics also refers to the specific values, standards, rules, and agreements people adopt for conducting their lives”. Jones (2013) explains that ethics are “moral principles, values and beliefs that people use to analyze or interpret a situation and then decide what is the ‘right’ or appropriate way to behave” (p. 44). The case chosen for this assignment deals directly with violations of ethics as defined above in addition to violations of tax laws and regulations. The case is regarding KPMG and their tax shelter schemes they created to help their clients avoid paying taxes (IR-2005-83, 2013). In the case against KPMG, the IRS found that principles at KPMG had “concocted tax shelter transactions and targeted them to wealthy individuals who needed a minimum of $10 to $20 million in tax losses” (IR-2005-83, 2013). KPMG then would then collect fees, which were a percentage of the desired tax loss, from these individuals and these individuals would avoid paying billions of dollars in taxes owed to the government. Additionally, KPMG “filed or caused to be filed false and fraudulent tax returns that claimed phony tax losses” (IR-2005-83, 2013). The case is not clear on how much the federal government missed out on as a result of the tax shelters, but does indicate that KPMG had to pay, as a part of their agreement, $228 million for lost taxes as a result of the statute to run out and $3.7 billion that the IRS had collected from tax payers who voluntarily participated in a settlements of cases that involved tax shelter schemes such as the ones KPMG created (IR-2005-83, 2013). The ethics violations in this case are many, the creation of bogus tax shelters and the fraudulent filing of tax returns being the obvious. Additionally, the case outlines that KPMG’s personnel “took specific steps to conceal the existence of the shelters from the IRS” (IR-2005-83, 2013). Later in the case, it points out that KPMG was warned by its own tax experts and others that the tax shelters were questionable, but the top leadership at KPMG did not heed these warnings. In other words, KPMG not only knowingly participated in defrauding the IRS and reducing the overall tax income of our federal government, money which could have been used for any number of services to the people of the United States, they took steps to cover up their wrong-doing and disregarded the warnings from experts. As a result of the investigation and eventual agreement between KPMG and the IRS, KPMG’s tax practice was restricted and they were to pay $456 million in fines. This case is a clear example of ethics violations as it relates to tax avoidance and abuse of the law. As IRS commissioner, Mark Everson, states in the case “We simply can’t tolerate abuse of the law and professional obligations by tax practitioners”. He goes on to say that “accountants and attorneys should be the pillars of our system, not the architects of circumvention”. If only that statement were true in all cases. Certainly in this case, it would have saved the IRS and ultimately the average tax payer, a lot of money.

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