The current study examines the likelihood that accounting students will comply with the AICPA's enforceable Statements on Standards for Tax Services (SSTS). A sample of 224 accounting students completed a questionnaire including SSTS scenarios. Overall, a significant portion of accounting students was not likely to follow the standards on five out of six scenarios. A group of students that received specific instruction in SSTS was not more likely to comply with them compared to a group that did not learn the standards. In addition, there were differences based on gender, age and class grade in the likelihood of compliance.
Accounting professionals have faced increasing pressures from regulators and the public in the wake of corporate accounting scandals a few years ago. The American Institute of Certified Public Accountants (AICPA) has emphasized the need for accountants to focus on their responsibilities to the public. In the areas of tax preparation and tax planning, these responsibilities are framed within the framework of Statements on Standards for Tax Services (SSTS). These standards, effective since 2000, represent enforceable codes of conduct by CPAs in tax return preparation and tax planning.
The purpose of this paper is to investigate accounting students' likelihood of following these tax standards. Accounting students represent future CPAs and their perception of tax standards, after being exposed to them, can give an insight into their perception of the importance of such standards. Hume, Larkins, and Iyer (1999) investigated tax professionals' compliance with Statements on Responsibilities in Tax Practice (SRTP), which were advisory in nature and were superseded by the enforceable SSTS. However, in Hume et al. (1999), one possible limitation of the results was that CPAs may not have been familiar with SRTP since they were only suggested guidelines. In the current study, accounting students are divided into two groups: One group received specific instruction on SSTS and another group did not. The study examines the likelihood of compliance with SSTS and investigates whether demographic factors such as gender, age and class grade have an effect on students' compliance.
The paper is organized as follows: After this introduction is a background on the concepts of tax preparation along with a discussion of ethics and an examination of SSTS. This is followed by an explanation of the research design and sample selection. The results are presented next followed by discussion and implications for accounting education and the accounting profession.
Tax Preparation and Ethics
A significant segment of CPAs is involved in tax preparation of individual tax returns and tax planning. Approximately 55% of all federal income tax returns and even greater percentages of complex tax returns are prepared by tax professionals. The cost exceeds $11 billion annually (Yetmar & Rioux, 2004). Even with increasing complexities of tax laws and increased demand for tax preparation, CPAs face competition from accountants without the CPA designation, enrolled agents, tax-preparation chains and software programs (Fisher, 1994). This increasing competition from less-expensive sources presents CPAs with a dilemma in determining their level of conservatism.
In providing tax preparation and planning services, CPAs attempt to satisfy many constituents such as clients, employers, professional organizations and government agencies. Given these constituents with different goals and risk preferences, it is not surprising for CPAs to face ethical conflicts during their careers (Yetmar, 1997). CPAs are confronted with ethical dilemmas especially when there is client pressure to adopt overly aggressive tax positions (Hume et al., 1999; Cruz, Shafer & Strawser, 2000). Finn, Chonk, and Hunt (1988) noted this problem in an earlier survey of CPA tax preparers where almost half of them indicated their biggest problem was clients' proposals to alter tax liability and/or tax fraud. …