Ethical Dilemmas in the Accounting Profession
By Laurice Mae Calantas
INDIVIDUALS, more times than they care to admit, face ethical dilemmas and problems of
the weakness of will. Accountants as professionals are no different. In their working
life, they encounter various situations where they may be tempted to choose between
right and wrong.
Ethics, as a branch of knowledge and philosophy, deals with moral principles. In the
context of accounting and the accounting profession, ethics are associated with the
moral values and standards that provide guidance to ensure the quality of work produced.
Previous studies have argued that accounting ethics have a significant relationship with
financial reporting quality. The findings of a study made by Enofe, et.al of the
University of Benin, Nigeria concluded that high ethical standards are fundamental
in achieving an objective, reliable and transparent financial report.
A recent study published by the International Journal of Management has also revealed
that agency problems are the main reason for the emergence of ethical issues. Agency
problems can occur between management and stakeholders as well as between accountants
and stakeholders because of delicate relationships. Stakeholders place their trust in
management and in the financial reporting system. However, while management has more
power over the financials, stakeholders have little access to information. This provides
opportunities for management to place its own interest over that of stakeholders and can
result to manipulation of reports.
In such cases, the role of professional accountants is to identify and report on
accounting deviations and violations. However, a dilemma can occur as accountants and
auditors have to consider their long-term working relationships with management while
also considering their responsibilities to stakeholders and ethical duties as
professionals.
The pressure of management over accountants and lack of supervision and quality control
are other reasons associated with increased ethical issues in the profession. Financial
fraud and misstatements can transpire as a consequence of non-adherence to standards,
rules and regulations as well as due to poor organizational governance and internal
controls that affect the quality of accounting and auditing, as in the case of some of
the biggest fraud cases in history.
Behaving ethically is a critical and expected trait for accountants since they have
obligations to stakeholders, creditors, employees, suppliers, the government, the
profession and the public at large. In other words, their obligations go beyond their
immediate clients. That is why a facet of accountancy's attestation to professionalism
is its commitment to ethical standards. The product of this commitment is the code of
ethics for professional accountants, which revolves around the five important principles
of integrity, objectivity, confidentiality, professional competence and due care, and
professional behavior. Since it is not possible for a professional to anticipate all
situations, the code provides a framework that guides the CPA in making decisions or
taking actions consistent with the fundamental principles.
Perhaps we can also take into consideration the recommendations of the authors of several
papers that accounting firms should, among others, improve their employment processes so
that professionals with high levels of ethical standing are employed, put in place an
ethics and compliance department to direct and monitor ethics implementation in
day-to-day operations, and that relevant professional accounting bodies monitor the
activities of members to ensure that the code of ethics is followed in the preparation of
quality financial reports.
Regardless of the sectors we belong to, accountants at various levels of an organization
will encounter ethical dilemmas at some point. It's just a matter of how we adhere to and
embody the code of ethics, which we as professionals have taken an oath to abide by, and
our personal values in the decisions and conclusions we make.
Laurice Mae Calantas, is the quality assurance review manager of Paguio, Dumayas & Associates, CPAs (PDAC) - PrimeGlobal Philippines,
and a member of the ACPAPP. The views and opinions in this article are the author's and do not necessarily reflect those of these institutions.
Source: Ethical Dilemmas in the Accounting Profession - Manila Times