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Muhammad Hussain 21721 Assignment#2

This document contains Muhammad Hussain's answers to two questions regarding ethics for accounting and finance professionals. [1] It explains that ethics are moral principles that distinguish right from wrong and are important professionally to uphold an organization and society. A code of ethics provides clear guidance for accounting professionals facing ethical dilemmas or ambiguity. [2] When faced with an ethical dilemma, one should consider: what the law says, the most ethical course of action, and who to ask for guidance. It gives examples of dilemmas for accountants, like misdeclaring information or disclosing classified data. For external auditors, examples given are ignoring company omissions for a job or needing training on new software that impacts work

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Hussain Jawed
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70 views3 pages

Muhammad Hussain 21721 Assignment#2

This document contains Muhammad Hussain's answers to two questions regarding ethics for accounting and finance professionals. [1] It explains that ethics are moral principles that distinguish right from wrong and are important professionally to uphold an organization and society. A code of ethics provides clear guidance for accounting professionals facing ethical dilemmas or ambiguity. [2] When faced with an ethical dilemma, one should consider: what the law says, the most ethical course of action, and who to ask for guidance. It gives examples of dilemmas for accountants, like misdeclaring information or disclosing classified data. For external auditors, examples given are ignoring company omissions for a job or needing training on new software that impacts work

Uploaded by

Hussain Jawed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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AUDITING

Assignment#2
Muhammad Hussain 21721

Q1. What is Ethics and why is there a need for a Code of Ethics for accounting and finance
professionals?

Ans1. Ethics are the moral principles that govern how a person lives, it is ethics that helps us in
understanding and differentiate between what is wrong and right. It needs to be understood that
being ethical is different from being lawful as sometimes laws can deviate from being right, but
being ethical would stop someone from doing an individual from doing that thing. Ethics is not
only prevalent in one’s personal life or interaction with others but being ethical is also quite
important professionally as being morally correct not only uplifts the organization or profession
one is involved in, but it also uplifts the society as a whole, for example, if an auditor is ethical,
he would make sure there are no misstatements in an organization’s claims, hence this would
help in stakeholders getting a fair view of the organization’s performance and claims, which
would enable them to take the required further action.
Being ethical is especially important for those people studying accounting and finance or are
involved in the relevant profession for example internal or external auditors, accountants for a
company, bankers, etc. This is because they are dealing with a huge amount that is not only of
interest to their employer but to other stakeholders as well (ie shareholders, government,
customers), hence if they are not ethical it could affect a lot of people. moreover, to make sure
there is clarity and consistency about ethics among accounting and finance professionals, there
should be a code of ethics for them.
A code of ethics will prove to be a guide for accounting and finance professionals on what is
right or wrong, which is quite important especially for new or young professionals because every
person can mistake or misunderstand something, however, due to the nature of the profession
they are involved in they cannot make mistake, a clear guidance for them would make sure there
is no ambiguity or uncertainty in their mind which would help them in doing the right thing.
Secondly, all the companies must be on the same page so that comparisons can be made easily,
also ethics can sometimes be subjective which means there might be something wrong for an
individual but it may be completely fine for another person, so to make sure everybody is on the
same page and are ethical, a code of ethics should be present so that the practices by them is by
the generally accepted code of ethics.
Q2. Watch the following two videos on Ethics:
(a) What are the three questions you need to ask yourself in such situations?

Ans2a. Ethical dilemma is a situation an individual finds themselves in which a difficult choice
has to be made between different courses of action and avoiding one of them would mean doing
something unethical. Those employed in the accounting or auditing profession quite often find
themselves facing such ethical dilemmas, for example, an auditor may be asked by one of its
loyal customers to not give a true opinion on the financial statements of the company as they
have had really bad luck. On one hand, the company is a loyal customer and the auditor would
want the company to do well, however, if he does not do his job properly, he would be
compromising his integrity and risking the stakeholder’s dependent on his report. Moreover,
when faced with such a dilemma an individual should decide based on three questions.
First of all, the person must try to find what the law says about the issue, and the steps taken to
counter the dilemma should be lawful. It could either be laws by the federal government a
regulatory body or even an institution the person is a part of for example American Institute of
Certified Public Accountants.
Secondly, it must be decided what is the best course of action that is most ethical and least
problematic, once the problem is identified, the alternative courses of action should be analyzed.
All of the alternative practicality, consequences and sustainability should be considered before
deciding what course of action should be pursued.
Lastly the individual needs to find out whom they can ask for guidance or help, when faced with
a dilemma it is important that a second opinion is taken on the matter. But one can not ask
anyone, hence depending on the problem it is important to find people who can help in
countering the dilemma.

(b) Think about at least two possible ethical dilemmas/examples of situations that can arise for the
following professionals:
(1) Accountants

One possible ethical dilemma an accountant could face is being asked by the company to leave
out essential parts or misdeclare something in the financial statements. The accountant may be
pressurized, threatened to be fired, or somehow bribed to do so, but an accountant needs to be
truthful to their profession and despite the pressure from the company, they should be ethical and
avoid any sort of misdeclaration.
Accountants have classified information about the company and may be forced or asked to
disclose this information to others by any competitor or beneficiary. Moreover, as the accountant
is part of the company and the company has trusted the accountant with the classified
information, moreover they should remain ethical and avoid it.

ii. External Auditors


An external auditor is performing his last audit after which he is looking for a job as an internal
auditor, the company for which he is doing the audit currently knows this and has offered him a
job if he agrees to ignore some of the omissions the company has made in the financial
statements. This would be an ethical dilemma for the auditor as if he ignores the omissions, he
would get a good job instantly, however, he should adhere to the code of ethics and do his job
honestly.
An external auditor is aware that new software is being used by companies about which he is not
well informed or trained, and without getting proper training he would not be able to audit the
financial statements properly. However, this would mean, he would have to take up a course on
the software after his working hours which would mean he would have lesser free time. In this
ethical dilemma, the auditor should know it is his duty to be aware and up to date on all
necessary practices that would enable him to do his work with due diligence.

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