Discuss about accounting Professional ethics……………..
The code of ethics for professional accountants has establishes ethical requirements to be followed by professional accountants. According to accounting code of ethics, accountant’s responsibility is to act in the best interest of the public but not to satisfy the needs of the client or employer, (Code of ethics for professional accountants, n. d).
I will advice Mr. Ethics to follow the accounting code of ethics and refuse to follow the instructions of his boss Mr. Fraud and report the correct financial position of the company in compliance with the following fundamental principles of professional ethics for professional accountants:
Code of ethics
a) Principle of integrity
Mr. Ethics being a professional accountant should not compromise on his integrity and honest by reporting false financial position of reliable icl. and instead exercise fair dealing and trustworthy. According to this principle, Mr. Ethics should disassociate himself from reports, returns and information containing false or misleading statement and materials like in this case.
For instance, inflating the asset value of land is giving misleading information to public and owners of the company and amounts to breach of this principle. Another breach as indicated in this case is inclusion of bad debts as receivable which amounts to deliberate inclusion of false materials.
b) Objectivity principle
This principle demands that professional accountant like Mr. Ethics should exercise objectivity when carrying out their duties. They should not be biased or be influenced or engage in conflict of interest while carrying out business judgment. He should resist this undue influence and report correct financial position for the benefit of the public and the company owners.
Following Mr. Fraud’s request will amount to undue influence and conflict of interest which is against the principle of objectivity. Mr. Ethics must act in the interest of the public at whatever costs.
c) Principle of competence and due care
This requires that accountants must always act diligently in accordance with professional standards. This is breached in its entirety through presenting bad debts as receivables, unearned revenues as service revenues and inflating the value of assets amounts to unprofessional reporting.
d) Principle of professional behavior
This requires him to comply with relevant laws and regulations and avoid actions that result into discrediting his profession and accounting profession in general. A third party judgment of the situation will be negative if Mr. Ethics happens to follow the instructions of his boss. The action will also be against the laws of the company.
(Spalding & Oddo (2011).
Full disclosure concept will be violated in this case due misleading information to the investors and customers of the company. Wrong information to customers amounts to misleading investors and other stakeholders.
Prudence concept is will also be violated because the information will not reflect the correct financial position of the company. The report will not show the correct revenue of the company as required.
The matching principle will also be violated because the boss is instructing Mr. Ethics to report unearned revenues as service revenue for the year. This will lead to overstatements of the financial position of the company.
Principle of consistency has also been breached because of variation in reporting form the previous years. This is because bad debts are reported as revenues and unearned revenues as service revenues unlike it were treated previously.
In my view, Mr. Ethics should ignore instructions from his boss and report the correct financial position of the company in line with professional ethics regardless of the risks. He should not comprise of his professional ethics.
Code of ethics for professional accountants.(2006). June 2005 revised July 2006 found at http://www.ifac.org ( accessed on 12th April 2012)
Spalding, A., & Oddo, A. (2011). It’s Time for Principles-Based Accounting Ethics. Journal Of Business Ethics, 9949-59. doi:10.1007/s10551-011-1166-5
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