The accountancy profession requires a professional working in the private or public sector to maintain a number of ethical guidelines. They need to remain impartial and loyal to the ethical guidelines while reviewing the organization or an individual’s financial records mainly for the reporting purposes. Such professionals often have to encounter various types of ethical dilemmas regardless of the industry he is working in (Gavnor et al. 2015). It is very much important for the accountant professional to be vigilant continually for the reduction of the various outside forces that manipulate financial records leading to criminal and ethical violations. Each nation has their own set of ethical guidelines for their accountants, which are expected to be followed by the professional to ensure honesty and integrity in the data provided to public. All these when followed properly ensures ethical practices. However, often many situations arise which prevent the professionals to conduct practices, which go against the guidelines like tremendous pressures from management, unethical demands of employees, employer’s pressure and many others (Jing 2017). The assignment will mainly show how ethical guidelines help in proper accountancy. It will also show the ethical dilemmas faced by professionals and what initiatives they can take to overcome them effectively.
Responsibility:
Individuals who are pursuing the accountancy profession always have a considerable amount of responsibility towards the public. Such individuals handle information about the companies that they provide to the public so that the public can make investment decisions for their children education, retirement and even large investments like buying homes and others. In order for the public to gain confidence, it is important for the accountant to provide an ethical behavior that is necessary to prevent fraudulent activities and gaining trust of public. Different sets of accounting guidelines are followed by every nation.
Different ethical guidelines that need to be followed:
The Australian accounting Standards Board mainly helps in developing and maintaining financial reporting standards. These guidelines by AASB need to be followed in the public as well as private sectors of the Australian Economy. They help in contributing to the preparation of the global financial reporting standards (Christensen, Cote and Latham 2016). In this context, one can also state of the ‘International Financial Reporting Standards – IFRS’, which are a set of accounting standards in an international domain. These guidelines show how particular type of transactions well as different other events can be reported in financial statements. They were mainly established, so that accounts and business can be understood from company to company and form one country to another country. CPA or the certified public accountant is a designation given by American Institute of certified public accountant ensuring that the professional enforces professional standards of the university. The professional codes of conduct set out by them ensure that accountants conduct activities and responsibilities for public interest. It also ensures that the profession emphasizes integrity, due care and also objectivity (Mele,Rosanas and Fontrodona 2017).
Unethical behaviors done by accountants:
It is indeed important for the accounting professionals to be ethical in their practice as they have the responsibility of the public on their shoulders. They ways of their financial representation of the companies alter the purchasing decisions of the citizens and they should be careful in this regard. Many accounting professionals are often seen to be highly tempted to modify the financial results of organizations or of particular individuals. They often clarify and rationalize the behavior by calling this act to be creative as well as aggressive accounting. Aggressive accounting can be defined as the process by which professionals are often seen to employ questionable methods of accounting in the name of aggressive accounting to boost results (Martinov and Mladenovic 2015). Both employers often face various kinds of pressures from management or individual employees to alter records and data may be to stop the organization from identifying losses or to show incorrect expenses. Such pressures make them record revenues in an incorrect manner or also lead to omitting of expenses altogether. Researchers are of the opinion that such repeated incidences of aggressive accounting are mainly the result of lack of ethical behaviors.
Important ethics:
However, in many cases it is seen that accountant although they try to attain proper ethics in practices, they still face many dilemmas.
Integrity:
Integrity is one such important ethical element that requires accountants to be honest, candid and also forthright with all the financial information of the client. They should try their best to restrict themselves from personal gain or advantage by using confidential information.
Objectivity and independence:
Secondly, another important element is objectivity and independence. These elements state that the professional should remain free from conflict of interest and even of various questionable business relationships during the conducting of accounting services. Researchers are of the opinion that failure to meet the elements hampers the professional’s ability to provide honest opinions about the company’s financial information.
Due care:
Another important ethical element is the due care (Arjoon 2016). This element states the necessity of the professionals to observe all technical and ethical accounting standards by reviewing generally accepted accounting principles (GAAP). It wants professionals to exercise proper competence, diligence and proper understanding of the financial information to conduct ethical practices. All these ethical elements ensure that professionals practice their work being confidential, true, honest and caring for the public and maintaining organizational reputation (Schneider 2015).
Different ethical dilemmas and necessity to be ethically correct:
In spite of the ethical guidelines provided by respective accountancy boards of the nations and international standards, the accountants face various kinds of ethical dilemmas. They need to handle them successfully so that they not only remain true to the organization where they serve but also care for the public who believes on them.
Pressure from the management:
The first one is the pressure from the management. There remains high burden on the public companies, as they need to succeed at high levels. As a result, there remains an undue stress and pressure on the accountants in creating balance sheets and financial statements, which align with the company’s plan of showing profit level to the income tax departments (Voss 2017). This however is a dishonest demand of the organizations to which the accountant needs to abide by. These demands often make them face ethical dilemma, as they cannot maintain integrity element in their work. In such situations, the ethical issues for such professionals mainly involve maintaining true reporting of company assets, liabilities, with profits without giving in to the pressures placed on them by higher authorities like by management or corporate leaders (Fulop, Avornicului and Szekely 2016). Accountants who are unethical can succumb to the pressures, modify the financial records of the company, and help the higher officials by maneuvering numbers and painting false pictures of company success and showing less revenue. Although this may make the companies escape certain taxes and experience short-term prosperity but in the long-term, it may lead to huge issues. Altered financial records will ultimately result in the downfall of the companies when Securities and Exchange Commission comes to know and discovers such frauds (Dellaportas et al. 2014).
Whistleblowers:
Another ethical dilemma faced by accountants is the reporting of the accounting violations to the Financial Accounting Standards Board. Although it is the duty of the accountant to report these cases of dishonesty and violations, dilemma mainly arises when ramification of the reporting is noted. If the accountant acts as a whistleblower and makes the public, know about the scandal, governmental reviews will take place. Such governmental reviews of the company financial records and the bad press that results as consequences of the scandal cause a number of issues. It may result in rapid decline of the company. This will in turn lead to thousands of employees losing their jobs. The executive and other higher officials face criminal prosecutions that may result in their imprisonment or heavy fines (Anh 2017). Therefore, they should handle the situation by proper critical thinking skills and come out with ideas that help them overcome such issues and manage the situation tactfully.
Omission:
In many cases, a corporate officer or manager may ask the accountant to leave or omit certain financial figures from various balance sheets in order to prevent the business being painted in bad light to different investors and public. Such omission may result in breaching of ethics, which may involve direct manipulation of numbers and records. The accountant should try to be vigilant ethically in order to avoid falling in such traps. It is very much important for accountants to be ethical and follow guidelines to prevent themselves from being stuck in legal obligations (Ho et al. 2015).
Conclusions:
From the entire discussion above, it is seen that accountants often face various ethical issues. However, they need to be ethically correct every time by applying proper critical thinking methods and reasoning skills. Ethical guidelines like objectivity and independence, integrity, due care and others need to be followed by every individual while practicing their work. They may face ethical decisions like pressures from employers or mangers that force them to take unethical decisions. Also while acting as whistleblowers, he may result in letting an organization closing down with thousands losing their jobs. In many cases, they often get instructions to omit or leave certain financial figures so that the company is not portrayed in bad light. Such situations may lead in ethical dilemmas of the accountants that they need to handle properly. They should follow all ethical guidelines and should develop critical thinking skills to handle such situations properly. They should try to handle the situations in ways by which they do not get entangled in legal obligations but can also save their jobs and keep up the trust of the public.
References:
Anh, T.C., 2017. Orientating, Training and Fostering Professional Qualification of Accounting to Meet Integration Requirements. Management, 5(5), pp.445-450.
Arjoon, S., 2016. of Management Studies; Accounting Forum; Journal of Business Research; Journal of Busi-ness Ethics; and International Business Review. His research has secured more than£ 400,000 in grants, both internally and externally from bodies such as the British Academy. He holds a Visiting Professorship in Corporate Social Responsibility at the Toulouse Business School, France. Corporate Governance in Developing and Emerging Markets, 2011, pp.2002-2005.
Christensen, A.L., Cote, J. and Latham, C.K., 2016. Insights regarding the applicability of the defining issues test to advance ethics research with accounting students: A meta-analytic review. Journal of Business Ethics, 133(1), pp.141-163.
Dellaportas, S., Kanapathippillai, S., Khan, A. and Leung, P., 2014. Ethics education in the Australian accounting curriculum: A longitudinal study examining barriers and enablers. Accounting Education, 23(4), pp.362-382.
Fülöp, M.T., Avornicului, M.C. and Székely, S.V., 2016. The Role Of The Accounting Profession Ethics Code. Management Intercultural, (37), pp.429-434.
Gaynor, G., Janvrin, D.J., Pittman, M., Pevzner, M. and White, L., 2015. Comments of the Standards Committee of the Auditing Section of the American Accounting Association on IESBA Consultation Paper Improving the Structure of the Code of Ethics for Professional Accountants.
Ho, S.S., Li, A.Y., Tam, K. and Zhang, F., 2015. CEO gender, ethical leadership, and accounting conservatism. Journal of Business Ethics, 127(2), pp.351-370.
Jing, H.E., 2017. Research on Several Problems of Accounting Professional Ethics Education. DEStech Transactions on Economics, Business and Management, (icem).
Martinov-Bennie, N. 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.
Melé, D., Rosanas, J.M. and Fontrodona, J., 2017. Ethics in Finance and Accounting: Editorial Introduction. Journal of Business Ethics, 140(4), pp.609-613.
Schneider, A., 2015. Reflexivity in sustainability accounting and management: Transcending the economic focus of corporate sustainability. Journal of Business Ethics, 127(3), pp.525-536.
Voss, G., 2017. Certificate of Ethics in Accounting and Professional Independence of Accountants. European Journal of Economics and Business Studies, 9(1), pp.212-220.
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