Question

What makes the practice of accounting/auditing/business challenging from an ethical perspective? Provide at least two examples of decisions that accountants/auditors/business practitioners must make that have ethical dimensions. Put yourself in the position of the decision-maker in your examples, and identify decision tools, processes, theories, or other useful perspectives that would help you to make ethical decisions in the examples you chose

Answer 1

Ethics is something that is supposed to be followed in every organization by every employee working over there.

It has always been challenging for the auditors or accountants handling a business following the ethics.

There are many things that make them challenging.

1) There is always a pressure from the management to make the earnings in possible to inflate.

2) The companies being audited expect that their informations should not be revealed and exposed.

3) Shareholders always expect that auditors are making financial reports properly and the informations presented to them are correct

4) Employees involved in auditing and accounting should be solely responsible for any mistake been made and they have to work independently and impartially overall.

5) It is also the duty of auditors to note down any misstatement or fraud found in the financial reports and report that to the higher management.

These are possible duties which they have to perform. Now this has not been easy as auditors are having pressure of various persons, they have their own perspective and also they have to think what is right which is to be done. Taking all in mind, and deciding what should be done, may be difficult to decide. Therefore these roles of auditors or accountants are really challenging.

Any small misconception or mistake regarding these can lead to big changes in the financial reports that later on can be regarded as fraud for misleading the shareholders or the company could be blamed to present wrong information about their company to outsiders.

Therefore auditors and accountants should do their work under certain rules which are framed so that they do not go through doing anything that is unethical.

For example, let's consider, there is a company who is involved in manufacturing of such items that are banned in the market. Management forces accountants and auditors to hide all the transactions taking place for that particular item so that it would not reflect in the financial reports and no one would come to know about the company.

Now I as an accountant it's my duty to understand what is ethical to do in this situation. Whether I should go with the management's decision on not. This type of situation always creates a dilemma for the accounting person.

Well if seen ethically, I would report this matter to the higher authority who is not involved in this scam. They would be taking action against this. But if any accountants and auditors do what people from management expect them to do, this will be misleading all the stakeholders, outside people interested in the company and also its not fair for the name of the company.

Thus an accountant or auditor should always do what is ethical.

Let's take a second example, while auditing a firm finds that certain manipulations have been done by a firm to negotiate their costs, showing less income so that they have to pay less tax. The auditor should immediately inform this to the higher authority and strict action should be taken against the firm. Thus is the ethical behavior apt for this situation.

If I would have been in the auditor's place, I would first confirm that what complications are coming and whether they are done intentionally or unintentionally. I would infirm rhe details regarding all the matter to the higher authority and then devidion has to be taken, whether the misstatement occurred is under control to be changes or not.

If the internal controls could be utilised to manage the problem, that is all books of accounts should be reviewed and all transactions should be written down at their right cost. Then the financial reports would be prepared. And finally the auditing can be corrected.

If its found that company has done this intentionally, then the company officials should be punished and fined penalty for this, so that they would not think of repeating this again.

If this was done unintentionally, then the various internal controls like precentive internal controls, have to be properly set, so that before any issue arises, it could be easily detected and prevented from making further losses.

There should be works deligated so that one can have check on others works and accuracy can be maintained. Most of all, it is important that every employee should understand the importance of ethics being followed.