Accounting Ethical Breaches

In the recent years, many organizations have been accused of breaching accounting ethics and principles (Guy, Carmichael & Lach, 2003). The breaches have had a negative impact on the employees, customers and the public. The most recent cases of breaching ethics in accounting have been tax evasion tactics. Company accountants devise ways and means of shielding their organization from paying taxes. For instance, in United States of America there is a provision that requires the tax collection authority to shield companies from paying taxes on certain items. As a result, some companies engage in malpractices in order to benefit from these provisions. This leads to massive losses of tax revenue, which amounts to billions of dollars every year.

Companies that engage in these practices have been able to evade paying their actual corporate tax through the help of the accountants. Indeed, preparing financial reports that do not reflect the actual financial position of a company is a breach of the accounting ethics, and has a big impact on the part of the government and the company involved. There are set international accounting standards and national accounting ethics that must be followed by accountants at all times as they carry out their activities. Failure to follow these standards and ethics for personal or other malicious intentions amounts to a criminal offense (Davis, 2001). The current situation requires that breaches should be avoided if government, employees, and customer interests are to be protected both in the long and short run.

The regulatory environment within which the accountants operate has facilitated the current breaches in accounting ethics (Davis, 2001). Many legal and technical loopholes make it hard for the regulatory authority to detect any form of fraudulent activities on the part of the company involved. I believe that the current breaches in accounting ethics can be fully dealt with if the right technical and legal framework is developed with an aim of empowering the regulatory authorities to deal with malpractices on the part of accountants.

ABC Bank Limited and Accounting Ethical Breaches

ABC Bank Limited is an international commercial bank that is engaged in provision of baking services to individuals and institutions in different parts of the world. The bank has been recording high profits in the recent years, which have been attributed to breaches in the company accounting procedures. ABC bank has the following products that it offers to its customers. These include, development loans, money transfer services, accepting deposits from customers, agricultural loans and emergency loans. In the recent years, the bank has been able to open more than ten branches in different countries, which has been attributed to attractive loans products offered by the bank to its clients (Davis, 2001). The bank has four departments, which include; accounting and finance, marketing, purchasing and risk management, and administration department.

Cases of breaches in the banking industry are not new. For ABC Bank Limited, the malpractices reported shows how accountants are influenced by top managements in making inaccurate accounts. Bank mangers persuade accountant to make false entries so that the bank can evade paying taxes to the government. ABC Bank accountants have helped the bank to invest in projects that will enable it to benefit from tax shields. Through these practices, the bank has been able to save millions of dollars through unwarranted tax shields. Accordingly, ABC Bank has been under heavy criticism from many quarters for these unethical tactics. Currently, ABC bank is under investigation from the regulatory authorities for these breaches. If the Bank is found guilty of malpractices, it is highly anticipated that it will lose its license.

The unethical issue was detected after the tax collection in United States of America got concerned in the rate at which the ABC Bank Limited tax returns were reducing at a very high rate despite the bank recording high profits. The taxman formed an investigation team, which carried out thorough investigations on the Bank. The investigation revealed rampant malpractices and breaches carried out by the company accountants, ostensibly with the approval of the top management. Instead of taking disciplinary actions against those who have been engaged in these mischievous acts, the management encouraged the accountants to continue with these breaches so that the company could benefit more from unwarranted tax shields (Cheffers & Pakaluk, 2007).

The accounting breaches greatly affect the operation in the said bank. The accounts that have been directly affected by the unethical acts of the banks accountants are those on tax returns. Through this accounts the bank has been able to get undeserved tax shields. The acts of the accounts have violated international and national accounting standards on reporting whereby they have been reporting misleading figures to the taxman with an aim of getting unwarranted tax shields. These violations have a negative impact on the operations of the bank (Guy, Carmichael, & Lach, 2003). The bank is likely to pay heavy penalties to the taxman and most probably lose its license. Moreover, the bank might also lose trust from foreign host governments. This has a direct effect on its rating and influence n customers.

As the Chief Financial Officer of the company, I would not entertain such acts. I would institute several measures to see that such acts of do not occur again in the future. First, I would encourage the accountants to behave in a socially responsible way if the bank is to achieve its goal of being socially responsible. This would entail responsible and ethical disclosure of company performance in a fair and accurate manner. I would encourage accountants to disregard pressure from outside forces who try to manipulate financial records for selfish gains. Accounts must appreciate the need of accurate reporting because breaches can lead to criminal violations as in the case of Enron. In addition, I would ensure that the management provides financial reporting measures that reflect the goals of the national accounting regulatory authority as well as the international accounting reporting standards. This will ensure that accountants do not engage in activities that go contrary to laid down provision in financial reporting and disclosures (Guy, Carmichael & Lach, 2003). Moreover, I would generate a code of conduct that will discourage all employees, and especially accountants from engaging in malpractices. Penalties for breaches would also be clearly specified. In order to implement the above-mentioned measures the bank needs to from a team of employees drawn from all departments to come up with a framework that will be used in implementing the new regulatory measures in the organization. Finally, I would encourage the management to organize seminars to educate employees on the importance of engaging in unethical activities.

References

Cheffers, M. & Pakaluk, M. (2007). Understanding Accounting Ethics. Allen David Press,

Davis, M. (2001). Andrew Stark. Conflict of Interest in the Professions. Oxford: Oxford University Press.

Guy, D. M., Carmichael,D.R. & Lach, L. A. (2003). Ethics for CPAs: Meeting Expectations in Challenging Times. Hoboken, NJ: Wiley.