I.

Introduction of the Ethical Issue

A. Background (background information about your profession in general, the job

description of your profession)

Accountancy is a profession that deals with the preparation of financial information about a

business’ economic activities intended to be useful in the decision-making process of the

stakeholders such as owners, shareholders, employees, or the government. An accountant

must ensure that the financial information that they are preparing must always be reliable and

accurate – they must also follow the principles included in the code of ethics of accounting

which includes confidentiality, integrity, objectivity, etc.

An accountant may be employed by a private company, an accounting firm, and by a

government agency. Furthermore, an accountant's duties in a private company or in an

accounting firm may include keeping track of and analyzing company activities, auditing

financial data, providing forecasts for the budget, calculating taxes, and preparing tax returns.

On the other side, a government accountant can be responsible for auditing private businesses

and individuals to make sure they comply with federal income tax laws and other

requirements.

B. Explanation of the Ethical Issue (elaborate about your chosen ethical issue,

define, explain)

As stated, accountants have a responsibility to uphold the highest ethical standards, guided by

professional codes of conduct and regulatory frameworks but these principles may sometimes

be challenged by certain circumstances. For instance, accountants must respect the

confidentiality of client information and use it only for legitimate purposes, safeguarding

sensitive data from unauthorized access or disclosure. However, in order to protect the public

interest and guarantee the reliability and accuracy of financial information, they must also
carry out their responsibilities with integrity and objectivity. In accordance with the stated

principles, an accountant would have a difficult decision to make in case one of their clients

engaged in misconduct.

A. Circumstances behind the Ethical Issue (provide the

circumstance/situation/example shared by your interviewee)

A good example of this circumstance would be a government tax accountant who finds

themselves in a difficult ethical position because their client is purposefully manipulating

their company's revenues to lower their tax liability. The accountant is debating whether to

uphold integrity by disclosing the malpractice to the legal authorities or the general public, or

whether to maintain confidentiality by keeping the information to themselves.

This scenario presents an ethical issue primarily because it involves conflicting moral

obligations for the tax accountant. The conflict arises from the client's unethical actions of

manipulating business revenue to avoid paying a more taxes, which directly challenges the

accountant's commitment to integrity, and professional standards. On one side, maintaining

confidentiality is crucial for preserving trust and confidentiality within the accountant-client

relationship. However, this clashes with the responsibility to uphold integrity and adhere to

legal and ethical obligations. By concealing the client's malpractice, the accountant risks

being involved in unethical behavior and stain the reputation of the accounting profession.

Conversely, disclosing the malpractice may uphold ethical standards but could breach

confidentiality and harm the client's reputation.

II. Stakeholders

A. Those who contributed to the existence of the issue.

As the people who are considered to be the main users of financial statements and as the ones

who make decisions for the entire firm, the owners and shareholders of the business may be

able decide to falsify the actual report of their revenues.

The next individual who may be contributed to the existence of the issue would be the

financial manager of the client’s company since they are the one who direct financing

activities and develop plans for the long-term financial goals of their organization. They

oversee the finances of the company, and they are responsible for maintaining the health in

terms of finances. Due to this, in order to save the company’s budget, the opportunity of

manipulating the financial statements is always an option for them.

Since the company's private accountant creates financial statements to be submitted on the

government agency, they have the ability to alter the figures on their recordings by

undervaluing profits, overvaluing expenses, or just simply manipulating the revenues that led

to this situation. The superiors may have given them the task to carry out this misconduct.

B. Those who may be affected by the Ethical Issue

The violation of confidentiality has an immediate impact on the client. Customers trust

accountants to manage their financial data in a discrete and private manner. Any unapproved

disclosure may result in lost business opportunities, harm to the client’s reputation, and a

decline in the client – accountant relationship’s trust.

While the settlement of the issue lies on the accountant’s hand, they will carry most of the

impact as well. Whatever course of action they decide to take will have consequences that

they have to deal with. For instance, if they chose to violate the confidentiality principle by

not asking for their client’s consent, they might face legal charges; this might affect their

work status and their accountant career in general.

Investors and business partners are immediately impacted by the disclosure of client

confidentiality and issues of public interest because it reduces their confidence in the

company's integrity and accuracy of its financial reporting. Investors may reevaluate the risk

associated with their holdings as a result of such incidents, which might decrease stock prices

and discourage them from making further investments in the affected company. Business

partners may reconsider the terms of their engagement or seek alternative partnerships

altogether.

Although they are not directly responsible for the issue in question, the employees could still

be affected. There will undoubtedly be a chance that the client's business will be stopped

which would mean that its employees would also be suspended.

III. Explain Alternative Actions

A. Action 1
An accountant has an obligation to uphold the public interest by complying the integrity

principle and by reporting and exposing any information concerning misconduct or

malpractice. One possible course of action in this situation would be to report the act to the

public and the authorities once witnessing it.

If this action would be taken, there would be a positive and negative effect followed by it. On

the positive side, by reporting that the client isn’t complying with its tax liabilities – this may

ensure that the authorities will act quickly and that they could face charges of tax evasion.

This will act as a warning for individuals who intend to falsify their financial records;

therefore, the government's tax collection will be accurate. Additionally, the client's creditors

and possible investors would be concerned that the business is engaging in malpractice,

which could help them in making decisions that will not put them in any harm. It would,
however, also have a negative impact. In addition to the accountant violating the concept of

confidentiality which could be a legal concern, the downside of this action would also be the

termination or discontinuation of the business operations of the client’s corporation. Their

reputation would suffer as a result of the charges, which may lead to bankruptcy and

negatively impact their employees.

B. Action 2

It is a difficult dilemma in the subject of accounting ethics to decide whether to overlook

a client's income manipulation for tax reduction while maintaining client confidentiality,

but it is also one of the few options to consider.

Even while at first it seems like a good idea because it would make clients connection

easier and maybe even help you keep business; the short-term gains are balance by the

long-term consequences. Disregarding ethical standards can have positive consequences

on relationships with clients. There are also negative effects: legal risks are exposed, and

ideals of transparency and compliance are undermined. Accountants might run the danger

of damaging their reputations, undermining client trust, and risking their own financial

integrity if they ignore such practices. Maintaining ethical behavior protects the

credibility of the accounting profession as a whole in addition to ensuring integrity and

long-term trust.

C. Action 3

In line with the accountant's professional duty to maintain client confidentiality, the

alternative action that will possibly be taken is to decide not to report the incident at this

time. However, the accountant plans to warn the client that any future manipulation of

revenue will result in reporting the matter. This direct warning serves to provide the client
 with an opportunity to change their behavior and move forward abiding by the law and

ethical standards. However, there's also a potential negative outcome to consider: the

accountant's decision not to disclose the incident, despite being aware of potential fraud,

may be perceived as compromising their professional integrity.

IV. Ethical Principle

In accordance with the virtue ethics principle, regardless of the principles and rules in

accountancy, the best course of action on this ethical dilemma is to report the misconduct of

the client because personal integrity is not just a mere principle followed in accounting field

but also a quality and a characteristic that one must possess in any situation. This action also

shows honesty and upholds moral principles, contributing to a fair tax system and fairness for

everyone; preventing harm and promote trust and accountability by having the courage to

report. Additionally, it leads to a sense of fulfillment in following the core virtues: integrity,

honesty, and courage. In the end, it comes done to choosing to do the things that reflect what

kind of person you’d like to be.

References:

Kourmentza, E. (2022, January 18). Accountant job description. Recruiting Resources:

How to Recruit and Hire Better. https://resources.workable.com/accountant-job-

description#:~:text=Accountant%20responsibilities%20include%20auditing

%20financial,flair%20for%20spotting%20numerical%20mistakes.

What Does a Government Accountant Do? - Top Accounting Degrees. (2022, May 28). Top

Accounting Degrees. https://www.topaccountingdegrees.org/faq/what-does-a-government-

accountant-do/