New work dependant on success of another piece of work

Hi there,

Quick question
If winning a piece of financial work is contingeny on the success of another piece of work is this ethical

for example the client proposes that a business plan be writtne for use in application for a loan but whether you are paid for it depends on whether the loan is granted. This can be accepted as a piece of work provided you dont give you professional opionion.
But the client says that he wants some tax work doing but will only make the decision on whether this goes to you if the loan is successful.

I know that the work for the tax cannot be completed on a contingency basis but can you take on the business plan work in order to later secure the tax work.

thanks

Karen

Comments

  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 ? ? ?
    I don't see the problem with it ethically. But then if you're asking this in relation to the ethics module, I've no idea what the right answer is!

    From a business point of view, I'd tell them where to go, I don't work on contingencies, but as this is the student not the members section I guess it's an academic not a practical question?!
  • pirate
    pirate Registered Posts: 469
    hi Monsoon

    Yes I agree thats what I would do to but you are right its for a question in the ethics module.
    I suppose ethically its ok for them to request this but its a bit harsh really, as the accountant would have no influence on the acceptance of the bank loan it may put undue pressure on the accountant to do the work
  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 ? ? ?
    Thanks for the clarification :)

    It would put pressure on the accountant to do a good job - I guess it might push ethics by exaggerating/ jazzing up the business plan to get the loan, and thus get paid for the BP work and be given the tax work? If it's ethically ok to do the BP for free, with a fee contingent on getting the loan, it should also follow that it's fine to do the BP with the tax work contingent on the loan, I think it presents the same level of 'pressure.' In either scenario there is a temptation to jazz up the BP to get the loan granted.
  • sdv
    sdv Registered Posts: 585
    pirate wrote: »
    Hi there,


    for example the client proposes that a business plan be writtne for use in application for a loan but whether you are paid for it depends on whether the loan is granted.


    Karen

    This is in breach of an ethical princile of Objectivity and Independence.

    If you are to be paid on the result of loan being granted, then your declaraions/projectins may not be realistic.

    A self interest threat to Objectivity and independance.

    pirate wrote: »
    Hi there,

    But the client says that he wants some tax work doing but will only make the decision on whether this goes to you if the loan is successful.


    Karen

    Again the same princple of Objectivity and Independence.

    Here there is a threat to self interest to Objectivity and Independence. The client is dangling a carrot infront of you.

    None of the work can be taken on a contingency basis if you want to remain Objective and independent.
  • coojee
    coojee Registered Posts: 794
    sdv wrote: »
    This is in breach of an ethical princile of Objectivity and Independence.

    If you are to be paid on the result of loan being granted, then your declaraions/projectins may not be realistic.

    A self interest threat to Objectivity and independance.




    Again the same princple of Objectivity and Independence.

    Here there is a threat to self interest to Objectivity and Independence. The client is dangling a carrot infront of you.

    None of the work can be taken on a contingency basis if you want to remain Objective and independent.

    Bizarrely, the answer is that provided the client does not ask you to give a professional opinion then it's OK to do the work on a contingent fee basis. I know it seems odd but that's what the book says. I think the fact that you're not putting your name to it (ie not giving a professional opinion) means that you can "jazz it up" to try and get the loan and no one will ever know. There can be no come back from the bank because you didn't give an opinion.

    You can't do it for a tax return though as you'd be unduly influenced to adjust the tax bill accordingly.

    I know it doesn't make sense logically but whoever said logic was involved :-)
  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 ? ? ?
    And this is why I apply my own code of morals and ethics, some of the stuff in the book doesn't make sense!

    We are ethically allowed to basically fabricate a business plan to get a loan, as long as no-one knows we wrote it? How is that not fraud???????????!!!!!!
  • Rinske
    Rinske Registered Posts: 2,453
    Monsoon wrote: »
    And this is why I apply my own code of morals and ethics, some of the stuff in the book doesn't make sense!

    We are ethically allowed to basically fabricate a business plan to get a loan, as long as no-one knows we wrote it? How is that not fraud???????????!!!!!!

    It's not a matter of fraud or not, it's a matter of finding out it was you or not! :lol:
  • sdv
    sdv Registered Posts: 585
    Those who are in real world know that we as accountants actually advise, and prepare a lot of presentation work for and on behalf of our clients.

    We do this because we do have a self/financial interest in our client’s success and making money, because we will continue to enjoy the potential income form the existing client and hopefully through word of mouth get more clients and build a good reputation. We also work in a competitive market and any service that we can provide to our clients without a stance on a high morale and ethics puts us at an advantage.

    This does not mean that we lose our professionalism or integrity.

    However, our profession does have guidance on ethics and the OP is working on the ethics unit. I believe that it needed to be answered from the study/understanding Ethics rather then what really happens in the real world.

    Ethics is one of those subjects where almost every answer is correct until, someone complains and you have to justify your conduct to your professional body.

    But you don't have to do that if nobody complains. So in theory you can act according to your our own ethical and moral principles.
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