Dilemma For The Accountants
Dilemma For The Accountants
Dilemma For The Accountants
SUBJECT-FINANCE
SUBMITTED TO
Prof.Kriti Utareja
NMIMS SOL,Navi Mumbai
SUBMITTED BY
Pratishtha shree
(81022200027)
B.B.A LL.B (Hons.)
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ACKNOWLEDGEMENT
I, Pratishtha Shree, would like to thank and appreciate everyone who assisted me in
completing this project. A special thanks to Prof.Kriti Utreja , the FINANCE subject
teacher who allowed me to work on the project topic " Dilemma FOR THE
ACCOUNTANTS : ETHICS OR PROFITS " I express my gratitude to her for
her assistance,stimulating suggestions, and encouragement, which enabled me
to successfully complete this project. The project would not have been
completed without her assistance. I would also like to thank NMIMS IT
Department for providing me with access to the Library and Databases, which
assisted me in gathering information for the research project. Last but not least, I
would like to thank everyone who encouraged me to complete this research project.
Pratishtha Shree
(81022200027)
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DILEMMA FOR THE ACCOUNTANTS : ETHICS OR PROFITS
Pratishtha Shree
(81022200027)
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DILEMMA FOR THE ACCOUNTANTS : ETHICS OR PROFITS
TABLE OF CONTENT
Catalog
DILEMMA FOR THE ACCOUNTANTS : ETHICS OR PROFITS ..................................................5
Pratishtha Shree ............................................................................................................................ 5
NMIMS School of Law, Navi Mumbai ........................................................................................... 5
ABSTRACT ................................................................................................................................. 5
Introduction .................................................................................................................................. 6
Literature Review ..........................................................................................................................8
OBJECTIVES ...............................................................................................................................9
RESEARCH QUESTION .............................................................................................................. 9
RESEARCH METHODOLOGY ....................................................................................................9
RESEARCH ANALYSIS ............................................................................................................ 10
1.WHAT ARE ACCOUNTING ETHICS? .................................................................................... 10
2. THE ETHICAL CONFLICT IN ACCOUNTING ...................................................................... 11
3. ACCOUNTING ETHICS' IMPORTANCE ............................................................................... 12
4. ACCOUNTING SCANDALS IN INDIA .................................................................................. 13
FINDINGS ................................................................................................................................. 14
CONCLUSION ...........................................................................................................................15
REFERENCE ............................................................................................................................. 16
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Pratishtha Shree
PRATISHTHA.SHREE027@nmims.edu.in / pratishthashree478@gmail.com
ABSTRACT
The core principles of accounting ethics are those that accountants choose to uphold in
order to promote their profession, keep the public's trust, and show that they are honest
and fair. The main objective of this study is to enhance knowledge on the importance
of ethics in the accounting industry. The accounting industry must respect the
principles of truth, transparency, and dependability in financial reporting. According
to this study, effective ethical behaviour among accountants is important for reducing
ethical problems in the workplace.
The findings of this study show that there are numerous moral and ethical dilemmas
that may have an impact on the standard of accounting.The quality, fairness,
and credibility of accounting accounts must therefore be ensured by adhering to
ethical norms and standards.
The results can be used as a benchmark for accounting firm leaders to develop their
ethical reasoning, decision-making, and accounting practises, which will impact their
ability to produce accurate accounting and financial statements.
Keywords: Accounting and ethics, ethics of accounting, Ethical accounting, financial statements.
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Introduction
Ethics are crucial in both business and daily life. Individual decisions lead to ethical
behaviour. Business ethics play a crucial role in how businesses operate and
the development of entire industries. Accounting ethics are a crucial component
of accounting or auditing rules when doing accounting operations. Concerns about
the ethics of the accounting profession have also been developing. In the
accounting industry, moral quandaries may arise frequently. Therefore, this study
would revisit several key arguments supporting the value of ethics in the accounting
profession in preventing legal and financial difficulties.
What is ethically good and evil, as well as right and wrong, are the subject of
the philosophy known as ethics. An accountant is aware that performing his
tasks properly is his duty. Since accountants frequently interact with the financial data
of companies, they have the potential to abuse this data, particularly when
conducting audit procedures. In order to avoid this from happening, certified public
accounting regulating organisations have established a set of standards that will
also direct accountants in operating with honesty, integrity, and morals. However,
unanticipated ethical conundrums occasionally arise in which a tough decision
must be made between two courses of action, one of which breaches a moral norm.
The accountant cannot win in this case, or if he does, he may suffer the appropriate
repercussions.
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Ethics deals with judgments of what is right or wrong based on moral obligations and
duties. It is a subfield of philosophy that includes arguing for a path of action that is
morally justifiable. Values and the results of the activity are the foundation for
decisions. Accounting and business ethics safeguard stakeholders from efforts at fraud
made by staff members who lack moral integrity. Accounting must be practised with
the highest honesty since its goal is to provide financial information about the
condition of an institution or organisation. While certain business choices are
governed by the law, others are unrestricted by it. This frees up the individual to use
their judgement (Nwakpa, 2010).
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Literature Review
In their study, Deppe et al (1991) suggested that accounting students should develop
competencies in seven areas, including communication skills, information
development and distribution skills, decision-making skills, knowledge of accounting,
auditing, and tax, knowledge of the business environment, professionalism, and
leadership development. They also explained that accounting education must change
to meet the requirements of the changing profession of various business organisations.
(Das, 2017).
Increased ethical education and in-depth classroom discussions were much desired by
the academic community, and it was seen to be a worthwhile undertaking to
determine how accounting ethics education affected the ethical decision-making of
accounting students and practitioners (Adkins & Radtke, 2004).
Renu & Aggarwal (2014) used the CA procedures used by Satyam Computers and
Enron Company, which resulted in their respective collapses, to demonstrate the
negative aspects of the CA. Yadav (2014) covered a range of CA-related topics.He
discovered that when managers try to enhance profits in difficult circumstances, CA
techniques rise, and he made the argument that excellent corporate governance
measures can reduce such behaviours. (Bhasin,2016).
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According to (Mayper, Pavur, Merino, and Hoops, 2005), there would be a lot of
opposition to change because of the economic dominance of higher education and the
methods-based approach to accounting education. But we can affect that shift by
helping students grasp the ethical dimensions of our field.
OBJECTIVES
A systematic review of the body of literature is what this study's goal is.
The study's goals include:
RESEARCH QUESTION
RESEARCH METHODOLOGY
The thorough examination of the literature for this inquiry was done using the qualitative
method. To collect, analyse, and synthesise the information from the literature and
provide a response to the research question, systematic reviews are carried out. The data
demonstrating the importance of ethics in the accounting profession will be summarised
in this qualitative systematic study.
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RESEARCH ANALYSIS
According to Mariana and Maria Ciurea, in the domain of accounting and the accounting
profession, ethics may be connected to the moral standards and norms that guide
professional accountants in upholding the correctness of their work and disclosing
financial information that is "accurate and fair."
The code of ethics has a strong relationship with the profession of accounting,
according to Luca Paciol, also known as the "Father of Accounting," who wrote about it
in his book "Summa of Arithmetic, Geometry, Proportions, and Proportionality"
(Summa de Arithmetica, Geometria, Proportioni, et Proportionalita; cited by
Sahar).The fundamental ethical rule governing the accounting profession includes
competence, professionalism, and secrecy. It also includes professional integrity.The
importance of these ethical standards in the accounting profession has also been
acknowledged by the International Federation of Accountants (IFAC), which has said
that acting in the public interest is equally as important as serving the interests
of specific customers.Determining a solution for the issue of financial fraud and
accounting errors is particularly crucial since they have cost nations a lot of money.
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The difficulty auditors may have in providing the honest and fair financial statements
of the company and the need to safeguard management interests are two factors that
might contribute to an ethical issue in accounting and auditing of corporations.Due to
the agency issue that may arise between management and stakeholders as well
as between accountants and stakeholders, presenting truthful financial statements
may also provide ethical challenges.Financial statements may be altered as a
result of management pressure, interest, and greed.But given that auditors must
uphold their long-standing working relationship with company management while
simultaneously carrying out their tasks with scrutiny, a conflict may arise.
Financial frauds and misstatements may be the main problem with the current
accounting system because of the accountants' disdain for accounting rules, laws, and
regulations. Organizational governance and internal control systems are equally to blame
for having an effect on the standard of accounting and auditing, as in the situations of
Enron, WorldCom, and Tyco.
These cases all serve to illustrate how managerial pressure on accountants is one of the
main causes of ethical issues. When the interests of an organization's management
conflict with those of its stakeholders, conflicts of interest can also result. Accountants
also confront moral dilemmas since management has such a strong influence over
auditors and the power to jeopardise their interests. Other elements that contribute to the
developing ethical issues in the accounting profession include inadequate
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1
Cheng, Xin, and Yinxing Li. "Study on Improving for Morality and Integrity Issues of
Accounting Profession." In 2016 International Conference on Humanity, Education and
Social Science. Atlantis Press, 2016.
2
Shawver, Tara J., and William F. Miller. "Moral intensity revisited: Measuring the benefit
of accounting ethics interventions." Journal of business ethics 141, no. 3, 587-603. 2017
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The founder of Satyam Computers, Mr. Ramalinga Raju, falsely exaggerated assets on
Satyam's financial sheet by $1.47 billion in 2009. The company's claim to have
about $1.04 billion in cash and bank loans was false. On its balance sheet, Satyam
also underreported liabilities. According to (Bhasin 2013), the Satyam scam was the
biggest fraud in the history of Indian business. The accounting scam at Satyam has
been nicknamed "India's Enron" by the media. Over a number of years, Satya m
inflated earnings almost every quarter to satisfy analyst expectations. He overstated his
income by claiming interest from fictitious bank accounts. Additionally, Mr. Raju said
that during the past few years, he set up 6,000 phoney payroll accounts and stole the
money when it was deposited.
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FINDINGS
The gap in the literature that has been found has played a key role in the research's
conclusions. There is a scarcity of data in the literature that specifically relates to the
kinds of ethical difficulties that accountants and auditors could encounter. Financial
misstatements and financial frauds that were not recognised or that were
concealed through unethical actions were the main factors that contributed to the
financial troubles, according to the financial crisis of the last few decades.
Financial management strategies have a number of problems that contribute to an
increase in financial scams. The research has identified principle and agent
problems as the causes of ethical problems. 3 Financial management strategies
have a number of problems that contribute to an increase in financial scams. The
research has identified principle and agent problems as the causes of ethical
problems. The connection between management, who acts as the agent, and
stakeholders, who are the principles, is particularly delicate. Stakeholders put their
faith in the company's management and financial reporting system because they
are concerned with the organisations' financial health.
3
Todorović, Zoran. "Application of Ethics in the Accounting Profession with an Overview
of the Banking Sector." Journal of Central Banking Theory and Practice 7, no. 3, 139-
158. 2018
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The results of this study also revealed the importance of codes and ethical standards in
shaping accounting practise. Accounting professionals must act honestly and fairly at
all times to uphold their professional integrity and the interests of the public.
The results of this study provide a substantial contribution to the body of literature on
the value of ethics in professional accounting. The best strategy for reducing financial
and accounting problems may involve working in the public interest and making sure
that professional practise is significant for advancing stakeholder interest.
CONCLUSION
This study concludes that ethical norms and principles are critical for the accounting
profession's legitimacy. Various stakeholders rely on accountants and auditors to offer
them with a fair and accurate picture of the financial records.
Accounting professionals' professional and personal beliefs are related to their ethical
principles, which help them make moral judgments. Only with strict adherence to
international accounting standards and ethical principles can ethical quandaries in
accounting be avoided. This study adds to our understanding of the ethical obstacles that
accountants may face in the workplace and how tight compliance might mitigate such
issues.
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REFERENCE
Adkins, N., & Radtke, R.R. (2004). Students’ and Faculty Members’ Perceptions of
the Importance of Business Ethics and Accounting Ethics Education: Is There
an Expectations Gap?. Journal of Business Ethics, 5(1), 279-300.
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Turkish Universities. Critical Perspectives on Accounting, 20,614-63
https://accountantnextdoor.com/what-is-accounting-ethics/
Kannaiah, D. & Kumar, N.S. (2009). Research note An Urgent Need for Ethics
Education for Accountants, Issues in Social and Environmental Accounting, 3(1), 88-
94.
Karla, R., Bhatia, M. & Sachdeva, S. (2014). Creative accounting: Boom or Course-
Instances From India, Indian Journal of Management Science, IV(2), 8-16.
Mayper, A.G., Pavur, R. J., Merino, B.D. and Hoops,W. (2005). The Impact of
Accounting Education on Ethical Values: An Institutional Perspective, Accounting
and the Public Interest, 5(1), 32-55.
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