TACC615 CAPSTONE INDIVIDUAL ASSIGNMENT
SUBMITTED BY
SUBMITTED TO
DATE OF SUBMISSION
COURSE TITLE
Question Statement
“Professional accountants need to embody high ethical standards so that governments and the
public trust them to act in the public interest, the ethical conduct of accountants reflects on the
credibility of both the individual and the entire profession.”
Agreed or Not?
“Professional accountants must adhere to ethical principles, and I agree with this fact. In doing
their work and in their relationships with their clients and employers, both practicing and
working licensed accountants shall uphold a high level of professional and personal behavior.
And I will back up this claim with ethical accounting practices as well as scandals that play a key
role in demonstrating why ethical principles are necessary.”
Introduction
The aim of the IFAC code of ethics for professional accountants is to ensure a standards-based
approach to the application of basic ethical guidelines and a philosophical structure. The IESBA
has emphasized the importance of a principles-based strategy in auditing, which provides
guidelines for addressing potential conflicts of interest. The principles-based method is
recommended by IFAC over the rules-based strategy because rules-based ethical conduct and
ethics cannot cover all situations. When a standards-based approach leads to unquestioning
conformity with rules, it can result in insufficient or ineffective protections for basic ethical
values (Christopher et al., 2009).
The code is often based on standards and provides trained accountants with flexibility. The
principles-based solution to all potential situations in the Code often contains various guides.
Furthermore, in several diverse contexts, IFAC’s theory-based approach offers a stable
framework. It is also ideal for companies that change quickly to allow multiple instances.
The ethical code establishes high expectations and professional workplace accounting to
represent the interests of the public in a transparent, reliable, and productive way. To represent
the public interest, independence is critical for truthfulness and transparency of financial
statements to investors. The Code of Ethics was released in response to the growing public
interest and maintains a principles-based strategy to reinforce independent requirements
(Christopher et al., 2009).
Professional accountants
Accounting is the jargon of the business, and the general populace has a set of standards for audit
firms’ financial reports. Any dishonest activity, misjudgment, contradictions, or financial
insatiability are regarded as shortcomings by professional auditors and accountants. According to
Okolie and lagaga, “Public requirement of the accountant should foster dialogue, accountability,
capacity building, and cooperation with applicable laws, bodies, and authorities”. Reduced
interest in financial reporting would lead to a shareholder withdrawal and a rise in the prices of
capital, thus improved trust in such statements would lead to an increase in the cost of debt.
The financial consequences of ethics violations and bad judgment can be immense, accountants’
ethical obligations are extremely significant. Exchanging a client’s and a company’s financial
records in breach of a CPA code of ethics, whether intentionally or unwittingly, will have far-
reaching repercussions for both concerned. If CPA principles and CPA ethical guidelines are
broken, the consequences may be serious, varying from a consulting firm’s loss of revenue to a
CPA’s employment loss to criminal charges. Accountants are charged with a great deal of
responsibility: they organize and assist with the management of a company’s and an individual’s
accounts. And the level of accountability necessitates a high level of trust. Upholding ethical
standards should be a top priority for all professional accountants (Hadjistavropoulos, 2011:
p.176)
Accounting ethics is a key is a very important part of the accountant’s practice and career. In this
sense, professional ethics can be summarized as the management accountant’s obligation to offer
a valuable service to management. This commitment implies that “the managerial accountant
possesses the necessary skills, integrity, confidentiality, and objectivity to effectively serve
management”. (Lawson et al., 2015: pp.149).
Integrity: When providing financial services, the professional accountant must be transparent
and truthful. Accounting professionals must fulfill all official responsibilities with the utmost
dignity to preserve and expand public trust. Integrity is a positive quality that is essential for
professional acceptance. It is the standard by which a competent accountant must eventually
assess all decisions, and it is the source of public confidence. Integrity necessitates a licensed
accountant's honesty and candor when working under the confines of customer confidentiality.
Financial enrichment advantage does not take precedence over public services and government
confidence.
Confidentiality: A licensed accountant shall maintain the secrecy of information obtained when
providing consulting services and must not use as well as reveal any details unless proper and
clear permission and unless there is a legitimate or legal right or obligation to do so
(Olufunmilayo,2020).
Objectivity: A professional accounting officer must be objective and not allow bigotry,
ideology, potential conflicts of interest, or the power of others to cloud their judgment. In
carrying out professional duties, an accountant can uphold objectivity to avoid bias. Accounting
professionals who serve in the accreditation function must be autonomous of their employers and
have a self-reliant mindset. Connections that threaten to impede a participant's objectivity in
making accreditation facilities are prohibited by independence. Maintaining independence and
objectivity as a licensed consultant in the professional sector necessitates a continuous evaluation
of customer relationships and public accountability. In both form and substance, a licensed
accountant who performs regular audits, as well as other accreditation services, must be
autonomous (Kiradoo, G., 2020: pp, 241)
A system without ethical thinking would not be able to accomplish its desired aims and
priorities, as well as those of its partners, for a long time. Because as the globe has now become a
multinational economy, “the focus on the implementation of the International Financial
Reporting Standards has shifted to a standardized collection of comprehensive financial
statements for all countries, which is led by the International Accounting Standards Board”.
Tax system
The tax system must be equitable and responsive to the needs of individuals, markets, and
cultures. The tax laws should explicitly state how the sum of money is calculated, whenever the
tax is due, as well as how the tax is paid. It is important to provide certainty about a person’s tax
liabilities rather than ambiguity. The size of the bill, whenever the tax is levied, and also how the
money is paid should all be specified in the tax laws. Both for the government and the taxpayers,
the cost of collecting a tax must be held to a minimum. It’s important to keep administration and
regulatory expenses to a minimum. These expenses include the state’s administration costs,
which are affected by the number of taxation authorities required to manage the levy (Yang,
2020: pp, 51).
Basic tax codes are required so that shareholders can learn the rules and follow them properly
and efficiently. For both taxpayers and the tax authorities, consistency in the taxation system is
essential. To allow the government to assess the frequency and volume of collecting taxes, tax
structures must have acceptable degrees of consistency, reliability, and efficiency. To respond to
evolving demands and technical and commercial advances, a complex and scalable tax structure
is needed. It is critical that a tax structure be versatile enough to satisfy the government’s
existing revenue requirements but still responding to evolving needs over time.
Accounting scandals
Accounting scandals endanger the “accounting profession’s credibility and objectivity, as well as
the integrity and consistency of the financial reporting system, they further erode stock markets’
and market investors’ interest in the accuracy of financial data”. It reduces the efficiency of the
stock market,” accounting irregularities often result in litigation losses, it has a negative impact
on a country’s development and prosperity, and it destroys the daily activities and profitability of
the accused firms’. Scandals in the accounting industry have harmed auditors' reputations in a
variety of ways. Due to which “non-extended accounting term impairs auditors' discretion and
ability to control ethical skepticism on issues before them and it should also be remembered that
non-adherence to the letter and the spirit of company law has also contributed to company
scandals” (Aruwa & Atabs, 2011).
Tesco Scandal
Tesco is a British international grocery and general goods chain based in Hertfordshire, England.
It is the third-largest retailer in the world by total sales. Tesco is the industry leader in
supermarkets in the UK and has stores in seven countries throughout Asia and Europe (UK).
Tesco began as a street market in 1919, established by Jack Cohen (BBC, 2013).
Tesco’s stock is listed on the London Stock Index, and since April 22, 2015, the company’s
strategic objectives were around £18.1 billion. Fraudulent accounting procedures were
discovered at the company, which led to defections. In 2014, the Tesco scam and fiasco revolved
around a £250 million accounting vacuum. Pull-forward reporting was used in this case, which
means that incomes were registered and recorded early, which was indeed an unconstitutional
accounting procedure view (Business Insider UK, 2017).
Tyco International Scandal
Tyco International Company was based in “Ireland that specialized in defense systems and
Princeton, New Jersey, served as their organizational headquarters”. Tyco International is mostly
composed of two industry divisions and Security and Fire Protection were the two segments of
business (Forbes, 2016).
Tyco International’s founders were found to be have siphoned thousands of dollars from the
manufacturer of electronic, health, and safety devices in 2002. The majority of the funds were
used to support “Tyco’s Chief Executive Officer (CEO), Dennis Kozlowzki’s lavish lifestyle.
Several apartments, a $6,000 bathroom curtain, and a $2 million birthday celebration for
Kozlowzki’s wife were among the objects”. Following the Tyco Accounting standards,
Kozlowski and other company executives were sentenced to 25 years in jail (The Guardian,
2015).
Toshiba Scandal
Toshiba is a multinational Japanese corporation based in Tokyo. In 1939, it was created. Digital
technology and telecommunications equipment and systems, electrical components and supplies,
power electronics, manufacturing and infrastructure systems, consumer products, household
items, medical facilities, office furniture, illumination, and transportation are just some of the
goods and services provided by the company. The Tokyo Stock Market is where Toshiba's shares
are exchanged (Toshiba, 2018).
Toshiba overstated its earnings by almost $2 billion over the previous seven years, according to a
report released in 2015. Toshiba's financial controversy and bribery revolved around improper
accounting and inflated earnings. As a consequence, Toshiba had been charged with a lawsuit by
a consortium of shareholders (Fortune, 2016).
Conclusion
With the accounting scandals and bribery that began in the early twenty-first century, the trust of
investors and shareholders was shaken. To ensure the re-emergence of the lost confidence
ecosystem and to prevent irregularities, this was decided that autonomous auditing agencies
should be supervised and an independent statutory body of public control should be established.
Reported incidents and frauds throughout history have shown that including impartial auditors is
insufficient. For ethical accounting professionals to represent the public interest, the IFAC code
of ethics is important. The Code emphasizes the importance of impartial external audits in
providing fair assurance engagements. Professional accountants may have high moral standards
practice and access to validity and secrecy financial statements whether they follow the Code’s
guidelines.
The Code’s rules are very dynamic because it offers a multicultural, multi-lingual, and multi-
jurisdictional context with a flexible structure. This method also offers the most appropriate
solution for sudden changes in the market climate that enable a range of practical circumstances.
Consequently, the Code specifications will address the evolving demands of the interest of the
public and represent both the consumer and capital markets well.
Financial scandals significantly diminish public trust in the financial statements and that’s
because they assume that consultants must be integral and reliable in their opinion of the truth
and fairness of the financial reports; thus, the increase in public trust in the financial report
remains the responsibility of the auditor Technical organizations should continually monitor and
extend current professional, guidelines, manuals, and ethical codes, and business owners must
prioritize the needs of clients above self-ambitions. To deliver the credible, correct, appropriate,
accurate, precise, readable, and complete financial report in a truthful and reasonable view of the
solid financial status and results, auditing and accounting practitioners accountable for the
preparing of accounts must strictly adhere to the ethical code of auditing
and accounting practices The reason is, these financial reports and accounts lay the foundation
for a confident judgment by stakeholders.
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