Accountants are responsible for handling a wide range of sensitive and privileged data in their work. Accountants act as watchdogs of the business world ensuring a clarity in the business reports and prepared according to the recognized standards (Alzola, 2017). It is also common to face a range of ethical dilemmas since they work with numbers and finances of the company. Therefore, it is important for accountants to maintain a professional conduct as it plays a crucial role in building public trust in business practice and financial reporting. Code of Ethics and ethical standards ensures integrity and reliability of the financial statements. Integrity means being honest and trustworthy with the work and business. It is advisable for accountants to uphold integrity and not to associate with any misleading activities. Identifying any potential legal issues and rectifying those can be a concrete step for an accountant to demonstrate their professional skills and concern towards company finances (Ferrell, 2016). Since not every accounting professional is trustworthy in their field of work, the following research proposal identifies the ethical issues being faced by accounting professionals in managing the financial statements. The research will derive a research problem, appropriate literature to support the topic, the methodologies of conducting it following with a set of recommendations.
The research will help in identifying the underlying ethical issues affecting the profession of accounting. Currently, the problem exists in identifying that if an organizational culture influences unethical practices or the individual outlook of accounting professionals on ethics. Furthermore, it is important to note that code of ethics must be embedded in the organizational culture along with the individual attitude of accounting professionals. The research will also address what can be done to reduce the ethical issues in the accounting profession and provide with relevant recommendations for accounting professionals to work accordingly.
The research will identify the importance of ethics in accounting and how ethical values has changed the working activities of an accountant. The research will also identify the recent ethical hazards in the profession of accounting. It will also identify the influence of individual perception and attitudes towards adhering to ethical practices and standards by accounting professionals. Furthermore, the research will help in identifying the views and opinions of accounting professionals directly engaged in any given accounting role and the impact of ethics on their work.
According to Shawver and Miller (2017) accountants are apprehended as one of the elite classes of the society. They are entrusted with carrying out activities relating to the handling of finances of people and delving into the financial policies of various aspects in order to follow the proper guidelines and arrive into conclusive decisions accordingly. The schemes relating to various kinds of investments must be analyzed in such a manner so that proper and appropriate services are delivered accordingly to the person concerned by the respective accountant. The laws and policies in force relating to taxation must also be taken into account by the accountant concerned as far as the disbursement of various taxes is concerned. As far as the ethical considerations are concerned, accountants must act in such a manner that there is no scope for any dispute regarding their duties. As opined by Duff (2017), the accountants should not indulge into activities with regard to embezzlement of funds and money laundering as far as misleading the general public is concerned with regard to red-herring. Accountants must maintain confidentiality as far as the ensuring of data privacy of the clients is concerned. It would result in the laying huge emphasis over the sensitivity of clients as far as their financial records are concerned. If accountants are indulged in illegal activities, they might be encountered with dire consequences as far as the imposition of penalties for various kinds of white-collar crimes are concerned. As a result, it is essential for accountants to maintain ethics during discharge of their duties. Such ethics primarily imply that misuse of money must be avoided by accountants to a large extent. According to Eresi (2017), accountants must also furnish true information to their clients and customers in order to ensure an amicable relationship between them. Any correspondence between the accountant and client must be treated as a privileged communication as far as the laws of evidence in force is concerned. Such a communication must be treated with utmost confidentiality during the proceedings in a court of competent jurisdiction. The taxes must be evaluated by the accountant in question in a proper and appropriate manner so that the concerned client does not face any kind of difficulty with reference to the filing of taxes. As a result, a hassle-free service would be ensured to the people by the accountants concerned as far as the modus operandi of the financial industry is concerned.
According to Beets, Lewis and Brower (2016) there have been a huge number of scandals related to the misappropriation of funds at various parts of the world. As a result, questions are being raised at huge levels from various quarters with reference to the ethics of the accountants as far as the discharge of their duties is concerned. Such duties primarily imply the delivery of consultancy services to people as far as the handling of their finances is concerned. The common inference drawn upon by the authors implies that any financial data of clients with reference to their investments made, taxes paid and assets purchased must be treated with utmost confidentiality by the concerned accountants as far as the compliance with basic ethics of the profession of accountancy is concerned. As opined by Flory and Phillips Jr. (2013), the various kinds of businesses concerning clients which imply that the information regarding the businesses may be quite sensitive. As a result, it is essential to maintain confidentiality of data as far as the financial aspects of the clients are concerned. The authors have also commonly emphasized over the fraudulent activities undertaken by financial organizations thereby resulting in the various kinds of scandals which subsequently highlights the malicious intentions of such organizations. The authors have also laid emphasis to a huge level upon the misappropriation by various authorities with reference to the assets as far as the employee of a company is concerned. As opined by Cameron and O’Leary (2015) the confidentiality of client’s data plays an extremely vital role in the influencing of the stability of the markets related to monetary functioning taking account of the future. The authors also seem to conclude upon a common agreement with reference to the misrepresentation of financial statements of clients by the organizations as far as deception of the clients is concerned. The accountants are to ensure that fairness is maintained in the delivery of services on their part taking account of the situation concerned and addressing of the issues in a comprehensive manner. Cameron and O’Leary (2015), have commonly laid importance over the secrecy to be maintained while conducting trade as far as the financial aspects are concerned with reference to the management concerning the prevention of the leakage of information. Financial control measures should be introduced in order to ensure stringency regarding confidentiality as mar as financial management by the accountants in an appropriate manner is concerned.
As stated by Eresi (2017), despite the common aspects regarding the rationale behind the ethical considerations for accountants, there are certain differences in the perspectives concerning the ethics to be followed by accountants while delivering services related to consultancy on financial matters. The differences also imply the disclosures about the variations in annual reports published as far as the functioning of the organization is concerned with reference to the modus operandi of their finances. If the investors are furnished with the disclosure of information, they may refrain from making investments into the organization. However, some authors are of the opinion that it is ethically correct for an organization to make appropriate disclosures of information regarding financial aspects. It has been stated by Flory and Phillips Jr. (2013) accountants are compelled to falsify information in order to protect the organization form being encountered with ethical issues. The contrary views of other authors imply that it is the role of the accountant to ensure fairness on part of the organization as far as the handling of fiancés is concerned. Due to such factors, there are dichotomies relating to the interests of people associated with the concerned financial organization. As argued by Martinov-Bennie and Mladenovic (2015), the ignoring and overlooking of vital information by the accountants have a massive impact over the decisions which are to be concluded upon by the investors with regard to the making of investment in the organization is concerned. As a result, the stock market may be affected by the role of the accountants as they are involved in dealing with that kind of financial information which is quite sensitive in nature. However, it is also viewed by some authors that accountants would have a massive role to play as far as the blowing of the whistle is concerned with regard to the disclosure of unethical activities on part of the organization as far as the sensitive information of financial aspects is concerned. It is imperative that the stability of the organization depends on the decisions made by accountants. According to Massey (2017) it is also imperative that that the top level management takes decisions with reference to the modus operandi of the organization. Such a contrasting approach implies the different perspectives people have with regard to the ethical considerations of accountants with regard to the handling of finances and providing appropriate and comprehensive services to clients as far as the fostering of an amicable relationship between the accountant and the client is concerned.
According to Picard (2016) that the codes relating to ethics to be followed by accountants have been formulated in order to ensure transparency of the modus operandi of the organization. However, challenges with regard to the following of ethics are still faced by many accountants as far as the hiding of vital information related to finances is concerned. Merchant and White (2017) deduced that various corporate giants dealing with financial services have been embroiled in scandals and subsequently liquidated due to the poor and inappropriate approaches undertaken by the accountants as far as the contravention of ethics is concerned. As a result, the authorities and regulatory bodies concerned must play an extremely vital role with reference to the implementation of such codes in a stringent manner so that ethical considerations for accountants are ensured in an incredible manner. According to Eresi (2017), as far as the managerial aspect is concerned, the Chief Executive Officers and other related officials along with the top-level management can also have a vital role to play with regard to the addressing of ethical issues on part of the accountants as far as the transparency of the organization is concerned.
Due to the constraints imposed by finances and time, the study could not be carried out to a higher level as far as the ethical considerations of accountants are concerned. It seems that still lot more needs to be done with regard to the improvements to be made in the drafting and execution of ethics as far as an appropriate code of conduct to be followed by accountants is concerned. It would subsequently set the tone for the formulation of codes of practice for accountants at various spheres depending upon the kind of the organization. However, the so called experts in the disciplines relating to finance simply play the blame game instead of working on the improvements as far as the addressing of loopholes and grey areas is concerned. Additionally, the accountants are not trained in a proper manner in order to tackle the issues as far as the ethics are concerned. This study has provided a wider scope and opportunity for future research analysts and enthusiasts to conduct and undertake research and analyses in a deeper manner so as to derive the desired outcomes in an incredible manner as far as the facilitating of the ease of research is concerned.
Thinking of the accounting professionals and staff as people equipped with specialized skills and as glorified mechanics required for keeping the financial operations of a company running significantly is easy. Despite of the above stated fact being true, the accountant professionals play another role, which is of watchdogs in the corporate world. One of their responsibilities is to make sure that financial statement and reports are stated by them accurately and in accordance with the acountancy standards (Thomas, 2012). As such, accounting professionals often put themselves in certain situations which can be legally or ethically dubious. There are various ethical issues which can be found in the accountancy profession.
When things in a business firm do not go well or as expected, one can get into high amounts of pressure. As such, the temptation of leaning on the accountant of the business for fudging the numbers and figures of the financials can be tough to avoid. This is a big issue for accountants whether they are a hired firm or employees of the same business. Accountant professionals have a specified legal and ethical obligation of reporting the financial statements correctly and accurately. Doing so can push them into being open to criminal or civil liability, which could be potential hurdles in their careers. On the other hand, if the accountants do not continue with the instructed operations, they might have the fear of losing their profession, as they also need to make a living.
An accounting professional can feel pressurized of simply leaving things out of financial statements if they casted a shadow over the firm. This might be the other side of misrepresentation or misstatement of figures, and psychologically, this might be easier. For instance, a child might deny of some bad behaviour in front of his mother, or can simply hide it and keep her unaware of the same. However, both are equally unjustified. If an investor buys or invests in a business without being aware of the potential issues underlying within the same, he might not be in a position for assessing or identifying the potential risks accurately (Klimek and Wenell, 2011). Similarly, an accountant who states about a company exactly as they expect might be leaving gaps in the information related to management, which is necessary for running the firm effectively. Such gaps could come back in the form of issues or threats to the firm if major business decisions are made based on incomplete information.
Just like lawyers and doctors, accounting professionals spend most of their time in dealing with information and data that are highly confidential. If these professionals use such information insignificantly, or fail in protecting the confidential data, then both can prove to be issues of ethics for them. One of the most obvious issues pertaining within business firms these days is insider trading which is related the usage of confidential information for taking undue advantage of a future drop or growth of the firm’s value (Duska, Duska and Kury, 2018). The other concerning issues are carrying forward company knowledge and information to its competitors, or making a possibility or loophole for outsiders to steal valuable information. However, taking a principled stand of certain ethical issues could prove to be a confidentiality breach. If sensitive moments or issues of a business are left abruptly by an accounting team, and everyone seeks for reasons for the same, the outsiders might anticipate of something suspicious.
Another issue that can be very difficult to be identified is conflicts of interest. For instance, if the senior accounting team of a company is allotted with bonuses on the basis of the stock prices, they might develop a conscious or unconscious motivation of making decisions which would be favourable towards the stock prices that are higher. In the long run, such decisions might not be beneficial for a firm or its stakeholders. Similarly, accounting professionals who are responsible for doing the auditing of businesses might follow the principle of not asking questions to which they do not necessarily require answers (Uysal, 2010). It is quite difficult to think of the biases that are built within the culture of company. However, it can help in keeping the issues from recurring over time.
Another ethical dilemma faced by professional accountants is the question of when to blow the whistle on a division or a firm which might be misstating or manipulating its numbers and figures unethically (Uysal, 2010). It is one of the concerning issues within a company. The issue could become larger if criminal investigators or regulators are brought inside a business. If the information provided by the accountant is too damaging, it might result in a business losing huge values of its stock. As such, numerous investors and stakeholders would be put into risk and financial jeopardy. There is a high risk of intimidation and backlash.
Dealing with ethical dilemmas and issues can be quite struggling for accounting professionals. There are quite a certain number of ways of dealing with the ehtical dilemmas of the accounting profession. Firstly, the potential legal issues should be identified by an accountant who should also explore and find out if the issues are regulated by a policy or law. It is always recommended for accountants to take the views and opinions of outsiders as it can help in understanding an issue in a broader sense. The parties such as the firms, stakeholders or people that could potentially be affected by the issues or by the decisions of an accountant. These parties should be identified properly. Finally, accounting porfessionals should always seek for profesional advice. If they need to report any illegal or unethical beaviour of their enployer or concerned company, they should seek legal counsel or access the resources of whistleblowing of the company.
The study will adopt an exploratory research design. An exploratory design will help in identifying and investigating the problem which is not clearly defined (Nardi, 2018). This research will be conducted to gain specific knowledge on the existing problem faced by accounting professionals due to unethical practices. For conducting this research, it will start with a general idea and the research will become a medium for a further scope of research in the field of ethical accounting practices. The use of both primary and secondary sources will be used to gather the relevant data required to identify the ethical issues and the need of ethical practices in an organization.
The research will use qualitative research method that will focus on obtaining the relevant data through a structured interview method having open-ended questions and conversational communication with the respondents. The use of qualitative research methods will allow an in-depth research on the specified topic and based on the responses, their perceptions and attitudes will be understood (Taylor, Bogdan and DeVault, 2015). This will provide a way of conducting a further research on the existing ethical practices, challenges and detecting the ethical values in the profession of accounting.
The research will be conducted with the use of both primary and secondary methods of data collection. The primary sources used for conducting this research will be from an interview process. The interview will contain open-ended questions which will record the responses from a small sample of 50 different accounting professionals. The information will be collected from the participants by a discussion protocol to assist the in-depth interview. The interview will not be more than 30-minutes but will contain all the relevant information and data required for further research.
The secondary research will be conducted by using relevant articles, journals and reports being published on the various websites. The secondary sources will help in gaining an in-depth knowledge in the field of accounting and the ethical issues being faced by accounting professionals.
The sample frame refers to a list of people or items from a population from where a sample is taken. The research will be conducted by taking a sample of 50 people or accounting professionals directly engaged in the profession. A random sampling method will be used to gather the responses from the respondents. A simple random sampling will be taken to continue with the research. This technique will make sure that every element of the population will be given an equal chance to be a part of the selected sample. The sample size will be a size of 50 accounting professionals to answer to the interview questions.
Reference List
Alzola, M., 2017. Beware of the watchdog: Rethinking the normative justification of gatekeeper liability. Journal of business ethics, 140(4), pp.705-721.
Beets, S.D., Lewis, B.R. and Brower, H.H., 2016. The quality of business ethics journals: An assessment based on application. Business & Society, 55(2), pp.188-21.
Cameron, R.A. and O’Leary, C., 2015. Improving ethical attitudes or simply teaching ethical codes? The reality of accounting ethics education. Accounting Education, 24(4), pp.275-290.
Duff, A., 2017. Corporate social responsibility as a legitimacy maintenance strategy in the professional accountancy firm. The British Accounting Review, 49(6), pp.513-531.
Duska, R.F., Duska, B.S. and Kury, K.W., 2018. Accounting ethics. 2nd Edition. New Jersey, USA: Wiley-Blackwell.
Eresi, K. 2017. Ethical Issues in Accounting from Ancient Times to Recent Times’, 3D: IBA Journal of Management & Leadership. [pdf]. Available at: https://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=127594552&site=ehost-live [Accessed 28 January 2019].
Ferrell, O.C., 2016. A framework for understanding organizational ethics. In Business ethics: New challenges for business schools and corporate leaders (pp. 15-29). 4th ed. Abingdon, United Kingdom: Routledge.
Flory, S. M. and Phillips Jr., T. J. 2013. A Reply to A Comment on “A Multidimensional Analysis of Selected Ethical Issues in Accounting. Accounting Review. [pdf]. Available at: https://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=9605305941&site=ehost-live [Accessed 28 January 2019].
Klimek, J. and Wenell, K., 2011. Ethics in accounting: an indispensable course?. Academy of Educational Leadership Journal, 15(4), p.107.
Martinov-Bennie, N. nonna. and Mladenovic, R., 2015. ‘Investigation of the Impact of an Ethical Framework and an Integrated Ethics Education on Accounting Students’ Ethical Sensitivity and Judgment’, Journal of Business Ethics, 127(1), pp. 189–203. Doi: 10.1007/s10551-013-2007-5.
Massey, D., 2017. ‘Discussion of “Recognizing Ethical Issues: An Examination of Practicing Industry Accountants and Accounting Students”’, Journal of Business Ethics, 142(2), pp. 277–283. Doi: 10.1007/s10551-016-3151-5.
Merchant, K.A. and White, L.F., 2017. Linking the Ethics and Management Control Literatures. In Advances in Management Accounting. Bingley (10th ed.). UK: Emerald Publishing Limited.
Nardi, P.M., 2018. Doing survey research: A guide to quantitative methods. 3rd ed. Abingdon, United Kingdom: Routledge.
Picard, C.F., 2016. The marketization of accountancy. Critical Perspectives on Accounting, 34, pp.79-97.
Shawver, T.J. and Miller, W.F., 2017. Moral intensity revisited: Measuring the benefit of accounting ethics interventions. Journal of Business Ethics, 141(3), pp.587-603.
Taylor, S.J., Bogdan, R. and DeVault, M., 2015. Introduction to qualitative research methods: A guidebook and resource. 5th ed. New Jersey, United Staes of America: John Wiley & Sons.
Thomas, S., 2012. Ethics and accounting education. Issues in Accounting Education, 27(2), pp.399-418.
Uysal, Ö.Ö., 2010. Business ethics research with an accounting focus: A bibliometric analysis from 1988 to 2007. Journal of Business Ethics, 93(1), pp.137-160.
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