Challenges and Ethical Dilemmas in Accounting Profession

This study discusses the challenges and ethical dilemmas faced by accountants in the accounting profession. It covers topics such as conflict of interest, managerial pressure for earnings inflation, and illegal activities. Proposed solutions to these dilemmas are also provided.

Accounting

Table of Contents
Introduction......................................................................................................................................3
Part A...............................................................................................................................................3
Ethical dilemma faced by accountants........................................................................................3
Conflict of interest...................................................................................................................3
Managerial pressure for the inflation of earnings....................................................................3
Illegal or fraudulent activities..................................................................................................3
Proposed solutions...................................................................................................................4
Part B...............................................................................................................................................6
Challenges associated with sustainability in accounting profession...........................................6
Government regulation............................................................................................................6
Reporting requirements...........................................................................................................6
Conclusion.......................................................................................................................................7
References........................................................................................................................................8
INTRODUCTION
The present study is based on the critical evaluation and analysis of the challenges and issues
related to sustainability and ethics. The first part of the study covers the description of three
ethical dilemmas, and the key stakeholders affected by the same while considering its effects on
accounting profession reputation, public interest and fundamental ethical principles. Following
this, the second part of the study is focused on the identification of two key sustainability
challenges, that affect the accounting profession and threatens the planet exists as a whole.

PART A
Ethical dilemma faced by accountants
Conflict of interest
In the space of accounting, a significant concept closely associated with that of conflict of
interest is independence. In other words, independence is increased by reducing potential conflict
of interest. In this way, the accountant must maintain full independence from the customers and
eliminate any of the emerging conflict of interest (Bero and Grundy, 2016). The ethical dilemma
that is mainly faced by accountants is a conflict of interest, such as the need for independence
and requirement to secure business by an auditor, the requirement to hold a client and client
pressure to consider the manipulation of financial statements or provide an unprofessional audit
report (Duska, Duska and Kury, 2018). A professional accountant in the public practice and
business might be experienced with a conflict of interest when conducting a professional service,
a conflict of interest forms an objectivity threat, and might creates to related basic principles
(Payne and et al. 2019). These threats might be formed when the professional accountant offers
professional service associated with specified matter for clients whose interest in respect with
matter in conflict or the professional accountant interest in regards with specified matter and the
client interest from which the professional accountant offers a professional service associated
with that matter are in conflict (Bazerman and Sezer, 2016).
Conflicts that take place in the accounting profession are the same as those take place in the legal
profession. In the field of accounting, conflicts occur when an organization offers various
services to a similar client for example audit, bankruptcy services, tax and forensic accounting.
There are several stakeholders affected by the conflict of interest, namely; shareholders,
managers and government. This can also adversely impact the reputation of the company, if the
company acts in its own interests and discourages the public interest (Schwartz, 2016).
Managerial pressure for the inflation of earnings
Regardless of the rise in ethical codes, training and education, there is higher pressure by
organization on accountants to act in an unethical manner. Management is willing to see a
profitable balance sheet, effective income reports and optimal cash balances. In this way,
unethical accountants can easily transform the financial records and trick numbers to picture

false corporate success (Espinosa-Pike and Barrainkua, 2016). The public, corporate burden to
succeed at greater levelsmay position stress and force on accountants forming financial
statements and balance sheets. Further, the ethical dilemma for these accountants becomes
maintenance of faithful reporting of assets, liabilities and proceeds in the absence of providing it
to the force placed by management on them. Thus, this can result in short term affluence, but
these altered financial records will eventually cause corporate downfall. The actions requested
by the management affects the reporting of overall performance and generally the tax position of
the entity (Reinstein and Taylor, 2017). By managerial pressure to present false income and
profits, stakeholders such as employees and shareholders will be greatly affected. It is because
the unfaithful representation of financial statements can create a false image of the company in
front of investors and shareholders, which can in long-run, reap adverse and negative impacts, in
the way of deteriorating the image and reputation of the company. This will create a lack of trust
among clients, shareholders and investors, and if the misstatement is approved by the
government or regulatory authorities, then this can thus result in heavy penalties and fines.
Illegal or fraudulent activities
Fraudulent financial reporting is stated as the entailed misstatement by the accountant. This is
conducted with the intention to mislead investors and maintain higher share prices. While the
impacts of such fraudulent activities might simulate the stock process in the short term, but can
come up with ill impacts in the long term. Fraudulent activities can take place from an array of
issues. These issues can ultimately ruin the corporate financial position and also create an
adverse impact on auditors for not revealing and disclosing the misstatements (Payne, Corey and
Raiborn, 2018).
Rising fraud activities and ethical consideration by an accountant reduce the oversight level and
supervisions, which further creates hurdles for auditors to involve in such unethical behaviour
and cover the evidence. It also forms opportunities for considerable manipulations of data,
resulting in the commitment of severe crimes like tax evasions and illegal activities. It can
adversely affect the reputation of the business; the unethical activities performed by accounting
professional can impact the trustworthiness and image of the organization. Lack of trust can arise
because of unethical activities carried out by firm spoiling their identity and making it complex
to carry out business. In addition, these also lead non-useful financial statements, an accountant’s

unethical behaviour are contraventions of regulation due to entailing the manipulation of
information of financial statements (Kranacher and Riley, 2019). As a result, such statements
possess lower suitability in their legal status, largely impacting the decision making the process.
All the involved stakeholders, inclusive of shareholders, employee, government, clients and even
company as a whole would be negatively impacted by this ethical dilemma.
Proposed solutions
While facing an ethical dilemma, an accountant is required to determine the case facts and
figures while identifying the ethical issues and the related stakeholders who will be affected by
the ultimate decisions. It is also crucial that the accountant consider their obligations in respect
with their stakeholders and their expectations. They must make a reflection on the penalties for
the violation of the professional code (Anders, 2018). The must not involve their feelings and
remember that account falsification might result in short-term gains but in long-term financial
records that are altered will spell down the company. In such unethical dilemma, accountants
must act ethically; as they hold a fiduciary position for this aspect they shall act in public
interest.
A general aspect to guidance for resolving ethical dilemmas to assist accountants in describing
and applying the basic principles in their professional, ethical code (Goel, 2019). A distinctive
mark of the profession of accountancy is the liability to act in the professional ethics and public
interest, having an expectation from an accountant for the self-regulation of their conduct as per
the Code of Ethics for Professional Accountants established by International Ethics Standards
Board for Accountants (IESBA).
To combat ethical dilemmas, there are five areas which require special focus from individuals
considering operations in the accounting profession:
Independence and objectivity: Independence and ethics have significant places in the accounting
profession. A crucial element of trust is conducting unbiased decisions and solutions that are
beneficial to the client. In terms of conflict of interest, for remaining independent and objective,
it is essential from the side of accountants to make sure that recommendations are not subjected
to external influence. The professional judgement of the accountant is sacrificed if they lower
their judgements (Duska, Duska and Kury, 2018).

Integrity: Demonstration of integrity is all about being honest and true in a professional
relationship. Retaining integrity needs that accountants are involved with information that is
materially misleading or fraud, or that is falsified by omission (Shawver and Miller, 2017).
Confidentiality: Financial information disclosure by an accounting professional with no express
permission breaches the trust that is the key of a business relationship, till the time there is a
legal rationale to do so (Mastracchio Jiménez-Angueira and Toth, 2015).
Professional competence: There are changes in best practices and legislation; for this aspect, a
professional accountant must keep themselves updated with such changes. For practising ideal
judgement, they should remain abreast of changes and developments that can impact their
decisions.
Practising due care refers to realizing the accountant’s skill level and not recommending those
aspects which they do not have the expertise (Jefrey, 2018). Accountants must also make sure
that their subordinates derive proper guidance, to conduct their responsibilities ethically.
Professional behaviour: Ethics needs accounting professionals to make compliance with the laws
and regulations that supervise their work-related bodies and jurisdictions. It is essential that they
prevent actions that can adversely impact the professional reputation.
Therefore, ethics in accounting is inclusive of severe compliance to guidelines as well as
cautious considerations of situations wherein there is a strict requirement of professional
judgements (Tormo-Carbó, Seguí-Mas and Oltra, 2016). Interpretation of the ethical structures of
integrity, independence, due care, professional competence and confidentiality can help in better
decision making and upholding the reputation of the accounting field.
For enhancing the overall accountancy ethical regime, the profession comprising regulators,
practitioners, professional organizations, must work more closely for formulating principles and
standards that prevent conflicts of interest. They must emphasize highly internalized and ethical
behaviours in the professional development of professional accountants, with increasing their
managerial incentives and boosting those behaviours. A greater extent of coordination should be
positioned to achieve the same, and a key role is played by professional bodies in making this
change. Further solutions are inclusive of systemic solutions, honesty and transparency within

participation, peer support, empowerment and inter-stakeholder communications (Crain and et
al., 2016). The ethical dilemma can come in the form of if the accountant has inexperience in the
specified area of work can lead to an incorrect assessment of books and can eventually result in a
conflict of interest. In addition, further, it is essential that accountant has an optimum amount of
knowledge, skills, expertise and understanding regarding the work so that activities and
operations can be run smoothly, without any issues and disputes
Compliance with the basic principles might be threatened by an array of situations. Most of the
threats belong to these categories:
(a) Self-interest threats, which may take place as a consequence of the financial or professional
accountant interest of a sudden or close family member (Ishaque, 2019).
(b) Self-review threats, these may take place when a past judgment is required to be re-analyzed
by the professional accountant liable for the same judgement.
(c) Advocacy threats, this may take place professional accountant bears promotion of a position
or belief to the extent that eventual objectivity may be compromised;
(d) Familiarity threats which might arise due to a close relationship, wherein sympathy for
other’s interest has been possessed by a professional accountant.
(e) Intimidation threats which may emerge if a professional accountant may be discouraged by
an objective act by threats, real or perceived (Al Nawaiseh, and Alnawaiseh, 2015).
Thus, the safeguards that might reduce or alleviating these threats to an agreeable extent fall into
two key categories which are: safeguard formed by regulation, profession or legislation and the
safeguard in the working environment (Islam, Uddin, and Ghose, 2019). These include
education, guidance, training and knowledge requirements for this professional entry, corporate
governance regulations, professional standards, regulatory monitoring, professional development
requirements and disciplinary procedures, as well as external review by legal third party reports.

PART B
Challenges associated with sustainability in the accounting profession
Professional accountant’s functional roles ad position clearly related to the corporate sustainable
development gradations. Further, at each strategic, accountants practice their power as a value
creator, and at the level of operating they have the role of sustainable development value
providers, and at the level of reporting they act as reporters (Schaltegger and Zvezdov, 2015).
Therefore, the professional accountant role in sustainable development is required to be revised
in accordance with the new economic conditions. Simultaneously, means of professional
competence for accountants needs further investigation, as various accountant groups are liable
for superior and relevant sustainable reporting based on information as well as for analytic
support of sustainability. There are several challenges related to sustainability in the field of
accounting. However two of the most significant sustainability challenges in the accounting
profession are namely; government regulations and reporting requirements (Schaltegger, Burritt,
and Petersen, 2017).
Government regulation
Apart from compliance, the challenge for accountants is to be prepared for the new regulation
that might affect costs and the business environment. Modern economies are dependent on the
cross-border transaction and international capital free flow. Investors seek for investment
opportunities and diversity throughout the world, while corporations raise capital, and consider
transactions and international operations in several countries (Mio, 2016). In previous years,
these cross-border activities were complex by multiple countries maintaining their individual
accounting standards sets. Further, thus mix of accounting requirement integrated costs, risks,
complexity to companies for the preparation of financial statements, to investors and accountants
to make financial decisions.
With the application of the national accounting standards, the amount to be reported in the
financial statements may be computed at a different basis. Undoing this complexity was engaged
with examining the details of national accounting standards, as even a minor difference in the
requirement can create a considerable impact on the reported financial performance, health and
position of the company.

Proposed solution
It is critical for the accounting profession to initiate its contribution in a direct or indirect way, to
attain the goals. There is a need to articulate the manner by which the accountancy profession
facilitates this achievement, and the improvement area (Gray, Adams, and Owen, 2017). For this
aspect, there is a need to establish a diversified and string profession that can continue to
improve professional accountants with reasonable skills and knowledge to make a contribution
towards sustainable and resilient firms, markets and the economy as a whole.
By satisfying the internal accountant demand with a variety of skills, but also adding leadership
and business-related skills, with offering reliable, professional training and skills at the core of
this profession. This can also be solved through continued development to accountant across
their careers, assisting them in maintaining relevancy and an affirmative contribution to the
sustainable results(Guthrie and Parker, 2016). To combat this challenge, accountants must be
enabled to promote sustainable consequences by integrating sustainable development to
education of accountancy and serving ongoing global support to ease the participation of
accountants in sustainable business practice.
Reporting requirements
Since there is more demand for information from the side of external stakeholders; auditors
should continuously make progress in the financial reporting with sustainable reporting, it is
because sustainability is seen as a crucial issue, in terms of reporting. For disclosure and
reporting structures like integrated reporting, several organizations are issuing sustainability
development report and the propagation of supple purpose company offer instances on the
influence of sustainability in the accounting profession and the business environment (McNally,
Cerbone, and Maroun, 2017).
It can be stated that sustainability accounting and reporting enables the company to showcase
qualitative and quantitative information regarding the management of society, environment and
the preferences of corporate governance (Adams, 2017). Further, this data offers information to
managerial authorities, creditors and investors that can be used to reasonably consider the
performance as a whole. Under the U.S financial accounting system, the requirement of
transparent material information disclosure is there for accounting professionals to investors
which thereby make the market more effective, resilient and liquid.

Proposed solution
An in-depth interpretation of new requirements and their implications, comprising related
subsidies and tax, will be required to establish suitable action plans. Furthermore, the
professional accountants are required to extend and maintain the regulation related knowledge
applicable to the business with which they are engaged, so to be capable of offering time to time
information regarding reasonable environmental as well as social issues (Schaltegger, Etxeberria,
and Ortas, 2017). With the tax and subsidies expansion, aimed to support sustainability,
accountants will be more involved with the plan to make a reduction in the specified affects so as
to reduce the tax burned. Some practical ways have been suggested by IFAC for accountants to
fulfil their roles in sustainability, by making sustainable decision making, providing information
credibility by effective governance and communication to drive transparency (Bebbington,
Russell, and Thomson, 2017). Thus, accountants should be experienced in offering information
by implementing costs saving measures, implementing corporate social responsibilities policies,
developing management information system and ensuring supply chain procedures.
The sustainability concept is being conducted in a wide setting with a broad and rapidly
increasing experience level in sustainable development measurement. It realizes the financial
information role and reflects the manner by this can be advanced to the social as well as the
environmental level (O'Dwyer and Unerman, 2016). However, there is not a developed structure
of reporting; the corporate report content can be heavily identified by factors, regulations,
guidelines and reporting standards. Further, this trend provides the company more flexibility as
compared to financial statement, and effective report thus serves information is aligned with the
objectives and involves individuals in a manner that supports communication exchange and
flows.
CONCLUSION
On the basis of the above analysis it can be concluded that accountants are greatly engaged in the
reporting process, they disclose and analyse the company performance and progress. They act as
guides and translate the ideas of Triple Bottom Line by making use of the benchmark of
corporate sustainability. Accountants reduce information asymmetry and consider investment
risks; they form integrated audit and reports, offer and tests sustainable accounting standards,

auditing and reporting in the new business model. With specific skills and engagement in
governance, decision support, business analysis, risk management, corporate transparency, anti-
corruption activities can be ensured. At present, professional accountants are re-considering their
roles, due to corporate sustainability. They assist the corporate sector in reframing their business
procedures in accordance with the current challenges. Strategies for sustainable corporate
development requires re-formatting of current information as well as the analytical provision of
decision-making procedures based on social, environmental and economically sustainable
development dimensions. In regards to this, professional accountants are correlated with the
support of sustainable development initiatives at the level of corporate.

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