Accounting Ethical Issues in New Zealand Research Paper

Table of Contents

1. Introduction
2. Description of the Case
3. Accounting Violations
4. Failure of Management
5. Prevention Mechanisms
6. Conclusion
7. References

Introduction
Every profession has guidelines on how its operations can be carried out. This is due to the diversity in human beings that can
lead to variance in the work produced by individuals of the same profession. On the same note, there is a high probability that
people can act in a manner that only serves their interest if they are left free. Similarly, since conflicts cannot be avoided not
only at places of work, but also at all social places, there should be guidelines on how to solve conflicts. As a result, the ethical
codes of conduct have been formulated to help in guiding various people on how to work. It is important to note that the ethical
code of conduct gives limits on what actions a professional can take in any situation. Nevertheless, there are scenarios when
some people breach the code of conduct of their profession leading to dire consequences not only to the firm they work for, but
also to the reputation of the profession as a whole. These cases have been reported even in the accounting profession and
actions have been taken on those found to breach the codes of ethics.

Description of the Case

In New Zealand for example, the New Zealand institute of chartered Accountants (NZICA) has in place the code of ethics that
guides all accountants. Unfortunately, cases of breach of the code of conduct including that involving an accountant from
Wanaka have been reported (Smith, 2012). In the case of the accountant from Wanaka, Alistair Rickard King was found to have
accepted a job knowing that there could be conflict of interest. While still serving a client associated with a rival company, King
accepted an appointment as the receiver of William Hill Winery Limited (WHWL). The two clients being obviously competitors in
the same industry, avoidance of conflict was impossible (Smith, 2012). However, King went ahead and accepted the position
without taking into consideration the conflict of interest that was eminent.

In case where a professional accountant notes potential threats to the professional code of conduct, it is upon the accountant
to take safety measures to ensure that the threat is reduced to manageable levels. For the case of king, he deliberately took the
appointment without putting in place any precautions to ensure that the conflict of interest is reduced to the minimum. At
WHWL, King was representing Southland Building Society (SBS) a secured creditor (Smith, 2012). These two clients had
conflicting interests in this venture and it would have been wise for King to withdraw from the engagement. It is important to
note that king should have recognized these issues given the fact that he had access to all the necessary information.

The engagement that King agreed to undertake had adverse effects to both clients and King knew this (Smith, 2012). Similarly,
while the clients would have wanted King specifically to represent them may be due to his renowned experience, it was upon
him to advise them accordingly. These actions led to a scenario where King would be compelled to favor one client and
negatively impact the other.

Accounting Violations
It is a requirement of the accounts ethical code of conduct that an accountant will evaluate any appointment and ensures that
there are no threats to compliance with the professional code of conduct. The professional will only accept an engagement only
when it has been proven that there exists no threats or when substantial safeguard measures have been put in place to mitigate
the effects of the threats (Hall, 2011). In this case, King was aware of the threat of conflict of interest but assumed and
accepted the engagement.

One of the canon principals of accounting is objectivity. All accountants are supposed to report and advise their clients without
any biasness or favor. On the same note, accountants are expected to take precautionary measures to avoid any scenarios that
may hinder their objectivity when performing their duties (Jeffrey, 2012). On the contrary, King knowingly exposed himself to
circumstances where he was highly likely to be subjective.

In addition, while the ethical code of conduct requires all accountants to avoid conflict of interest and prevent any adverse
effects to the clients. King went against this requirement by accepting an appointment with two clients who had conflicting
interests in the same matter. Professionally, King should have declined the offer. He therefore went against the requirements of
the accounting profession (Hall, 2011).

Failure of Management
Wanaka management failed to discover the ethical breaches that King was undertaking. As an accounting firm, it was the
responsibility of Wanaka to ensure that all the accounting ethics are followed to the latter. There should be a compliance
department that is dedicated at ensuring that all accountants strictly adhere to the accounting code of ethics (Gibson, 2010).
To begin with, King should have been compelled to report to the management all the appointments that he was about to take.
The management would then evaluate the appointments for any possible threats to compliance of fundamental guidelines.
There can even be punishments for non compliance to the code of ethics in order to ensure that all accounting standards are
upheld.

On the same note, it is the responsibility of Wanaka management to ensure that they know all clients that their accountants
represent. Management has the role of general oversight over all accountants in the firm. By knowing all the clients that are
represented by their staff, they will be able to tell possible threats and possible safety measures. However, for the case of
Wanaka, it is evident that the management was not aware of the clients that King was handling. Consequently, they were not
aware that the appointment that he took up posed a conflict of interest that would adversely affect the client (Hall, 2011). On
the same note, it is expected that it would be the role of management to take up any proposal for engagement and decide on
who among their accountants is best suited to take up the job. Nevertheless, this is not the case in Wanaka because king
accepts the appointment on his own.

Prevention Mechanisms
If I was the chief financial officer in the firm, I would have put in place several measures to avoid breach of ethical code of
conduct. To begin with, management should have taken the role of evaluating all appointments before allowing any accountant
to handle the same. This will increase objectivity as management will not be obsessed by the need for money so as to neglect
any potential threat. On the same note, this will ensure that all engagements are assigned to the most appropriate person.

In addition, I would ensure that all accountants fully disclose to the management the clients that they handle. This will be crucial
in ensuring that management is aware of the activities of each client. This way it would be easy to know whenever there is a
potential threat and take the necessary measures to mitigate the effects. Moreover, continuous training of the accountants is
crucial in ensuring that they are competent (Jeffrey, 2012). As a result, I will ensure that internal trainings are carried out at
regular intervals. In this way, we will be able to enhance not only the skills of the accountants, but also their awareness of the
ethical code of contact.

Similarly, there is need for compliance department in any organization. This is the department which has the role of ensuring
that all professional requirements are observed (Gibson, 2010). Consequently, I will formulate a compliance department and put
in place measures to ensure that every accountant works together with this department. Notably, rewarding people is a very
good way of ensuring they uphold the good behaviors. As a result, positive rewards can be introduced for accountants that
have exhibited professionalism in their work. This will not only help in encouraging them to continue working hard, but will also
compel others to behave accordingly. On the same note, warnings and punishments should be instituted to discourage non-
compliance to the ethical code of conduct.

Conclusion
Adherence to the professional code of conduct is a fundamental requirement of any career. However, often people either
deliberately or unknowingly find themselves in scenarios where they have breached the code of ethics. For accountants,
breaching the code of ethics is quite serious given the fact that it leads to financial losses not only to the accounting firm, but
also to clients. As a result, caution should be taken to ensure that the code of ethics is observed.

References
Gibson, C. (2010). Financial Reporting and Analysis: Using Financial Accounting Information. Stanford: Cengage Learning.

Hall, J. A. (2011). Accounting Information Systems. Stanford: Cengage Learning.

Jeffrey, C. (2012). Research on Professional Responsibility and Ethics in Accounting. Bingley: Emerald Group Publishing.

Smith, B. C. (2012). Accountant to Pay $26,000 for Ethics Breach. The New Zealand Herald.