Analysis of Ethical Issues in Accounting: A Report

This report provides a comprehensive analysis of the ethical issues encountered by accounting professionals, auditors, and financial consultants. It delves into various aspects of ethical dilemmas, including fraud in financial reporting, misappropriation of assets, and disclosure problems. The report highlights the significance of ethical conduct in the preparation of financial statements, emphasizing the potential consequences of unethical practices, such as misstating financial transactions to portray a more favorable financial position. It presents real-world cases of financial statement fraud, such as the Enron and Waste Management scandals, to illustrate the impact of unethical behavior on investors, employees, and the overall market. The report concludes by stressing the importance of ethical decision-making and the adherence to ethical standards to maintain the integrity of financial reporting and protect stakeholders from fraudulent activities. It also emphasizes the role of accountants and auditors in upholding ethical principles and acting as whistleblowers to prevent financial fraud.

Introduction
This assignment is about the professionals of accounting, in this assignment we are going to
discuss about various aspects of the ethical issues that is faced by the auditors, accountants or the
consultants of the organization (Ittelson, 2010). Financial accounting is all about preparing
financial statements of an organization that shows the financial position to the investors,
governments, general public, potential investors, competitors of an organization. Every
organization in this world whether operating its business on a small scale, medium scale or a
large scale is required to prepare financial statements as it comes under a compulsory legal laws
(Helfert, 2016). Every organization in this world is liable to prepare and maintain its financial
statement. The financial statements are made by professional accountants or auditors, these
financial statements cannot be verified and published until it is thoroughly checked and signed
by an auditor or an accountant (Fridson, 2014). These statements are sometimes contains false
information to show an organization more profitable than it actually is. So in this assignment we
are going to discuss about these ethical issues. The financial statements are of various types and
all these are need to be prepared by an organization, these statements are; Income Statement,
Balance Sheet, Cash Flow Statement and Statement of Retained Earnings (Tracy, 2013).
Critical Analysis
Financial statements are the statements that show the financial standing of an organization to the
outer world. Sometimes these statements are prepared with wrong intentions of showing an
organization much more profitable than its actual position, this is done in order to raise more and
more of capital from the market (Brodersen, 2014). There have been so many cases worldwide of
this kind of fraud by many big business organizations. These kinds of organizations do not
believes in any ethics, all they want and do is to loot people by preparing false or untrue financial
statements (Fraser, 2012).
An accountant or an auditor or a finance consultant is the peoples that are so experienced in
preparing these statements that only one accountant can prepare false statements for an
organization and no one can make a mistake in such statements for years. However not every
accountant, auditor or consultant are corrupt or under the influence of graft. Some work with all
their ethics and believes in only ethical working (Fabozzi, 2013). Such kind of accountants,
auditors, consultant has to face different threat and ethical issues (Epstein, 2016).
An accountant or an auditor whosoever is preparing a financial statement for an organization
must keep in mind the ethics of doing right and lawful act while preparing the financial
statements, sometimes it is the organization itself that wants their accountants to prepare the
financial statement and do not disclose the facts of loss so that it does not lose its market share
by the true disclosure of the facts. There are different types of ethical issues that are faced by the
accountants or auditors in an organization while preparing the financial statements of a firm
(Lister, 2016):

 Fraud in Financial Reporting: The burden from management on the accountant to not
to or to misstate the financial transactions of the organization so that it does not shows
any inflow or outflow of the cash, or recording of some transactions that are not as per
the accounting principles.
 Misappropriation of Assets: It is the misuse of the assets of the organization in a way
that it incurs losses for the organization. Management puts burden on the accountants or
the auditors to not to disclose any misappropriation of the assets.
 Disclosure: Another ethical issue that is faced by the accountants or the auditors by the
management of an organization is to not to disclose or to disclose wrong information to
effect the decisions of investors. Any person who wants to invest will always invest in an
organization that is earning good money, so financial statements are the tools in the hands
of the investors to judge the profitability of the organization. By false disclosures an
organization can attract a large number of investors and their money.
Cases of Financial Statement Frauds
 In the year 1998, an organization that was based in Houston, reported fake earnings of
around 2 billion US dollars. All this was done in order to raise money from the investors.
The company’s auditor increased the depreciation on the property, plants and equipments
of the organization. The main guilty personalities in this case were founder and the CEO
Dean. L Buntrock along with his top executives and their auditor Arthur Anderson
(Degree, 2017).
 Another Houston based organization in the year 2001 committed a fraud due to which the
shareholder of the organization lost their 74 billion US dollars. The organization and its
accountant did not disclose the high debts of the organization because of which its
position always shown in profits. This fraud not only left the investors in the lose but also
took the jobs of many innocent employees of the same organization.
Conclusion
Here is a brief and a concise conclusion has been provided. Ethical issues in accounting are not
new, while there are many accountants or auditors that fall for greed and ignore all the ethics of
preparing financial reports then there comes the ones who always put forward their ethics and
becomes whistleblower to put an end on the fraud practices of the organizations. The accountants
or the auditors must follow their ethics as no fraud or false disclosure can remain safe for a long
period of time. In the case of the 1rst Houston company the former CEO and auditor made fraud
while the later newly recruited team found out the fraud and reported it to the higher authorities
which resulted in the penalty on the CEO of 437M US dollars. So the final conclusion is all the
accountants and the auditors or the financial consultants should follow their ethics and must not
let the management to come in between their work and ethics.

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