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Pdf 322.86 K Int. J. Fin. Acco. Eco. Stu. Vol. 2 / No.7 / Autumn 2012 & Winter 2013 Ethical Challenges in Accounting: an Indian Case Receipt: 10 , 2 , 2012 Acceptance: 25 , 4 , 2012 vineet chouhan Assistant Professor of Sir Padampat Singhania University (Corresponding Author) Nader Naghshbandi Department of Accounting, Janardan Rai Nagar Rajasthan Vidyapeeth University, Udaipur, Rajasthan-India Abstract Accountant working in the private or public sector companies must remain impartial and loyal to ethical guidelines when reviewing a company or individuals financial records for reporting purposes. People are expecting a lot from the professional community and the quality of the complex services provided by the accounting profession have confidence. Of The information provided by accountants should significantly efficient, reliable, genuine and disinterested, then not only should be qualified accountants and professional competence are But also enjoys a high degree of honesty and integrity, professionalism and professional reputation is their most important assets. The Moral Accounting for Professional Accountants And those who rely on accounting services is very important. Businesses rely heavily on accounting ethics, whether they're aware of it or not. Unless investors, creditors and managers can be reasonably confident that the financial record keeping practices of their accounting professionals are honest, straightforward and consistent with industry standards, it is unlikely they can trust their records' accuracy. From Enron, and Satyam, it appears that corporate accounting fraud is a major problem that is increasing both in its frequency and severity. Research evidence has shown that growing number of frauds have undermined the integrity of financial reports, contributed to substantial economic losses, and eroded investors’ confidence regarding the usefulness and reliability of financial statements. Keywords: Ethics, Accounting Ethics, Ethical Challenges, Accounting Frauds, case study, India (Satyam). USA (Enron) 13 14 / Ethical Challenges in Accounting: an Indian Case 1. Introduction debated that the accountants have been the The right way is not always the popular and main contributors to the failure in ethical easy way. Standing for right when it is standards of a business. International unpopularIs a true test of moral character.’ Federation of Accountants (IFAC) has in its research report on ‘Rebuilding public - Margaret Chase Smith, first woman elected confidence in financial reporting – an to both houses of Congress international perspective’ (2003) issued a When the characters shake people in the conscious in the aftermath of the collapse of community, the community is vulnerable to Enron and WorldCom in 2002. The catastrophic. Viability and survival of a people conclusions of this report revealed that or a culture depends on the people with moral financial scandals experienced in the recent values simple things like courage, altruism, times were indications of bottomless problems respect for others and the law. A nation will not and identified that enhancement of ethical survive unless the people who possess the standards, adequacy of financial management, incentives beyond personal profit. Law, respect reporting mechanisms, audit quality and for human lives and properties, love of family, strengthening of governance regimes as means support of national goals, helping the poor and to improve public confidence in financial the payment of taxes, all personal virtues such reporting. The accounting profession has as bravery, loyalty, honesty, forgiveness, aaccountability towards these areas, whose charity, sympathetic, courteous, depend deficiencies have led to corporate scandals and decency and sense of duty. Ethics is a subject collapses. Hence, today, ethical conduct of that is inclusive of all aspects of human life accounting professionals has become a topical cover. Growing human populations and more issue. complex social relationships, created new needs. The emergence of various professions, 2. Literature Review born of an effort to respond to these Pacioli (1494) called father of accounting requirements as conditions change over time wrote on accounting ethics in his book that, and gradually shaped the course of evolution ethical standards have since then been spend . The profession because of the need for developed through government groups, division of labor and specialization of tasks are professional organization, and independent becoming more coherent and play their part in companies. These various group have led improving the general welfare of society. accountants to follow several codes of ethics to Survival of the profession and its members perform their duties in a professional work depends on the type and quality of employment environment.In 1905 AAPA (American services that provide credibility and Association Public Accountants) has issued the Confidence as a result of providing these first ethical codes were formulated to educate services to gain. The main asset of any business its member.And AICPA (American Institution is to maintain its credibility and trust are of Certificate Public Accountants) developed five paramount importance. This task requires that divisional ethical principles that its members the basic purpose of any profession and its should follow: members, community service and personal Independence , integrity and objectivity interests in the context of providing these Competence and technical standards services to interpret and follow. The business Responsibility to clients ethics is a high profile matterdue to sensational Responsibility to colleagues corporate scandals that had occurred in many As well as other responsibilities and countries producing extensive compensations practices. to the economy and society. These corporate Each of these divisions provided guidelines scandals interrogated the ethics of businessmen on how a Certified Public Accountant (CPA) in general and accountants in particular. It is should act as a professional. They have also Vol.2 / No.7 / Autumn 2012 & Winter 2013 International Journal of Finance, Accounting and Economics Studies / 15 issued a strict warning for the CPA’s regarding significance? The reasons for this are as the failure to comply with the guidelines could follows: have caused them to be barred from practicing. 1) Professional accountants to the attention When developing the ethical principles, the of the public interest and maintain the AICPA have also considered how the credibility of the accounting profession profession would be viewed by those outside of in charge, the personal interest should the accounting industry. not be considered above the public interest. 3. Business and Accounting ethics 2) Professional accountant considers itself Robert H. Montgomery “Accountants and responsible for the Employer. His the accountancy profession exist as a means of mission is to solve problems and create public service; the distinction which separates a value for his Employer. profession from a mere means of livelihood is 3) In terms of technical, professional that the profession is accountable to standards accountants should comply with the of the public interest, and beyond the technical standards of professional compensation paid by clients." service and professional conduct. Business ethics are important for managing a sustainable business mainly because of the 5. Principles of accounting ethics serious consequences that can result from Necessary to achieve the objectives of the decisions made with a lack of regard to ethics. accountancy profession by the professional Even if you believe that good business ethics accountants, compliance with fundamental don't contribute to profit levels, you should be ethical principles of accounting. It aims to able to recognize that poor ethics can have a provide professional accounting ethics are as detrimental effect on your bottom line in the follows: long term. Accounting ethics is primarily a 1) Integrity: professional accountant in field of applied ethics the study of moral values performing professional services must and judgments as they apply to be honest. accountancy.The nature of the work carried out 2) Neutrality: professional accountant by accountants and auditors requires a high should not allow any prejudice, bias or level of ethics. Shareholders, potential influence others, his impartiality in shareholders, and other users of the financial professional services, is flawed. statements rely heavily on the yearly financial 3) Competence and caring Professional: statements of a company as they can use this professional accountant should perform information to make an informed decision professional services with accuracy, about investment. They rely on the opinion of competence and diligence and maintain the accountants who prepared the statements, the knowledge and skill at a level that as well as the auditors that verified it, to would ensure. present a true and fair view of the company. 4) Privacy: professional accountant should Knowledge of ethics can help accountants and be confidential information acquired in auditors to overcome ethical dilemmas, the course of their professional services allowing for the right choice that, although it focus. may not benefit the company, will benefit the 5) Conduct professional: professional public who relies on the accountant/auditor's accountant should act in a way that is reporting. consistent with his professional reputation. 4. Need of ethics for professional
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