DILEMMA FOR THE ACCOUNTANTS : ETHICS OR PROFITS

TOPIC- DILEMMA FOR THE ACCOUNTANTS :

ETHICS OR PROFITS

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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DECLARATION BY THE CANDIDATE

I, Pratishtha Shree, would want to express my gratitude and appreciation to everyone

who helped me finish this project. I would like to express my sincere gratitude to Prof.
Kriti Utreja, the teacher of the FINANCE course, for allowing me to work on the project
"Dilemma FOR THE ACCOUNTANTS: ETHICS OR PROFITS." I want to thank her
for all of the help, motivational advice, and support she gave me so that I could finish
my project. Without her help, the project could not have been finished. I also want to
express my gratitude to the NMIMS IT Department for giving me access to the library
and databases, which helped me gather data for the research project. Last but not least, I
want to express my gratitude to everyone who supported me in finishing this study
project.

Pratishtha Shree

(81022200027)

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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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DILEMMA FOR THE ACCOUNTANTS : ETHICS OR PROFITS

Pratishtha Shree

NMIMS School of Law, Navi Mumbai

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.

The accepted behaviour in the field of accounting is known as accounting ethics. It is a

branch of applied business and human ethics that includes moral principles and
accounting-relevant judgement.

In order to maintain the correctness of dependable and auditable financial statements,

which brings to the firm profits that are reliable and free from errors and bias sensibly,
accountants must fulfil their tasks with the highest care and honesty. The
truthful method of giving figures and justifications for things that truly happen or
occur.

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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Financial scandals involving false claims and financial fraud have

increased significantly over the past two decades, involving several accountants and
important accounting companies.The management reporting and supervision
procedures' shortcomings are seen as some serious ethical problems.Scholars
have expressed doubt and questions about the function of auditors and accounting
experts in light of the failure of several large businesses and organisations
throughout the world.Concerns about the ethics of the accounting
profession have also been developing.In the accounting industry, moral quandaries
may arise often.As a result, this study will review some key arguments for and against
the accounting profession's use of ethics to help avoid ethical and practical problems.

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).

According to research by (Sugahara et al., 2008), Australian students who believed

accounting to have a more procedural image did not major in accounting, whereas
Asian students other than Chinese who tended to view the accounting profession as
one with a less procedural image did. According to this result, there is still a window
of opportunity for Australian colleges and professional accounting organisations to
hire candidates from numerous Asian nations. Compared to their Australian
counterparts, these students typically have a more positive perception of the
accounting industry. Due to the negative perception of the accounting profession,
Australian students have a wide array of elective courses to pick from rather than a
single accounting major.

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:

 To comprehend what accounting ethics are.

 To evaluate the role of ethics in accounting and
 To comprehend the root of ethical conundrums.

RESEARCH QUESTION

The purpose of this study is to provide a solution to the question, "What is

the relevance of professional and personal ethics in accounting profession for
decreasing professional ethical dilemmas?"

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

1.WHAT ARE ACCOUNTING ETHICS?

According to Zorna's research, ethics may be viewed as a collection of moral princip

les and standards that have an impact on people and organisations, as well as how the y
conduct themselves in both professional and
private endeavours.

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 primary goal of accounting and auditing, according to studies, is to

present stakeholders with the company's accurate and fair financial state.

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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2. THE ETHICAL CONFLICT IN ACCOUNTING

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

monitoring and poor quality control.

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3. ACCOUNTING ETHICS' IMPORTANCE

The economic repercussions of ethical accounting practise are extensive. At

some point during the organization's lifespan, an accounting expert provides
information to every corporate entity. Many accountants are motivated to
manipulate financial outcomes, and they frequently defend their actions by referring
to them as creative or aggressive accounting. The practise of aggressive accounting
involves using dubious accounting techniques to improve results. An accountant
may incorrectly record income and expenses or may completely omit expenses.
Aggressive accounting occurs frequently as a result of unethical actions.

While objectivity suggests that accountants must use their professional

judgement while performing audits, the professional ideal of integrity implies that
accounts must demonstrate professional honesty and fair conduct 1. Principles of
professional conduct and competence in accounting have been determined to be
important for avoiding behaviours that harm the reputation of the profession and
for assisting auditors and accountants in their work by assisting them in adhering
to legal and regulatory obligations.2 Accounting ethics are crucial for minimising
fraudulent activity. Internal control and corporate governance issues can lead to
loopholes that allow accountants to engage in unethical behaviour. Additionally,
this damages the reputation of the
company.

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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4. ACCOUNTING SCANDALS IN INDIA

Due to the flaws in Indian accounting standards, businesses engage in unethical

accounting activities; creative accounting uses original methods of account
presentation. These methods are against the letter of the accounting laws. It implies
that they are legal. By adhering to national laws and regulations, creative accounting
works to make a company's finances appear healthier than they actually are in
the commercial world. It appears to be a window covering. Although it is not
unlawful, doing so takes advantage of gaps in the laws and regulations, giving the
corporation a false appearance of enhancement. For this reason, the government
is constantly working to change the law to close these gaps. Due to their
falsified accounting, creative accountants are viewed negatively by ethical
accountants.However, cooking books are forbidden, unlike creative accounting.
(Kalra, Bhatia & Sachdeva 2014) mentioned in his study that in 1996 Wipro Ltd.
converted fixed assets into stock; the excess amount was credited to reserves, which
improved their net worth per share and current ratio and neutralised the effect on profit
on the reduction of land value. These are just a few examples of loopholes used by
companies in India from the past to the present. According to reports, a Wipro
employee stole a password and transferred funds from the company's account to his
personal bank account, embezzling roughly $4 million. Through the transfer of loan
liabilities at a reduced value in 1999, Larsen & Toubro Ltd. demonstrated income
recognition.Bombay Dyeing and Manufacturing Company's 2003 firm purchase
contract included a contingency for potential losses, which was later written back,
turning operating losses into operating profit. Again in 2003, Hindustan Zinc Ltd.
demonstrates the reclassification of investments into physical assets in order to
evade the necessity for asset valuation. In order to inflate the value of fixed assets
and understate revenue and expenses, ONCG Ltd. took advantage of a loophole in
2004 by capitalising interest and other intangible assets.

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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.

Five key ethical principles—integrity, objectivity, confidentiality, professional

competence, and professional behavior—are considered to constitute the foundation
of the accounting industry's code of ethics.Any of these rules that are not followed in
professional activity can cause moral conundrums. The research's
conclusions highlight the significance of the roles that supervisors and oversight
boards play. The oversight and oversight of such bodies are currently lacking in
the accounting
profession.

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.

Strict monitoring requirements must be put in place by professional

administrators and supervisory organisations to guarantee that accountants
carry out their responsibilities in a professional and ethical way.

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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the Importance of Business Ethics and Accounting Ethics Education: Is There
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Bhasin, M. L. (2016). Creative Accounting Practices: An Empirical Study of India,

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Celik, O. & Ecer, A.(2009). Efficiency in accounting education: Evidence from

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Das, S.C.& Singh, R. K.(2018). Accounting Education in India and USA:A

Comparative Study, Journal of Commerce & Accounting Research, 7(1) , 55-64.

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