A professional accountant’s responsibility should not only be satisfy on individual clients, they should observe and comply with the ethical requirement of the code. Therefore, five fundamental of principles are introduced its included integrity, objectivity, professional competence and due care, confidentiality and professional behavior (CIMA, 2015). In the first part, three principles will be discussed. In the second part, I will talk about the fundamental principles of ?? and subsequent threats which is related to Samantha Tibour and Philip Witherspoon individually and then the Templemead Accountants LLP can use what safeguards to help eliminate their threats.
The first principle is integrity which mean being honest. In addition, it also means that accountants should have the strength and courage to stand up for what they believed is right when providing professional knowledges. For example when an accountant hide or misrepresent an untruthful information to their clients intentionally, they are violating the principle. In the business world being sincere is the key element to establish a good relationship with clients. It will bring a huge consequence if promises are break such as destroying the reputation of the business which is placing their future in jeopardy. The Possible threats that it will bring is self-interest. There is an example illustrating this. HSBC accused of helping wealthy clients to avoid paying their tax. Cash were hide from tax authorities when they help their clients to set up offshore accounts which is illegal (Moore, 2015). \In this case, why HSBC will help their clients evade taxes even though they knew that they have violate the principle, it is because they can get benefits in both financially and internally.
The second principle is objectivity. It means that accountants should be unbiased and not influenced by anything for example personal feeling or friends when performing their professional or business judgement. Other than only being neutral when making a decision, accountants should not allowed conflict of interest to happen. Its means that they should not put into account of their direct or indirect financial interest while making decisions which is also a threat towards the prinicple. An example of Volkswagen has the similar situation. Volkswagen, which is a car manufacturer, had been caught installing defeat devices to cheat in the diesel emission test (Ruddick, 2016). They admitted their invention of the software can detected whether the car is under an air-pollutant test or not and behave to suit the emission limit. A Report from Voelcker (2015) stated that to reduce the diesel exhaust they can inject urea liquid in the converter however it is very expensive. Volkswagen cannot make the decision objectively as they will benefit financially from their sales profit with low production cost thus they have breach the principle. (safeguards???)
The third principle is professional behavior. Being a professional accountant need to be highly skilled and trained and also be aware of their behavior which will not bring their profession into disrepute.(do you have another method to say this Gaga?) They should abide by the laws and regulations. An example of Tesco had clearly shown that they have contravene the prinicples. Tesco was found deducting cash from supplier’s account. They pay their accrual debts later but collecting the prepaid money earlier. Ruddick (2014) reported that they had been violating the law “Groceries Supply Code of Practice” which was introduced from last year. The possible threats are self-interest threat. In this case, Tesco can benefit financially when they boost their profit using their supplier.
The framework-based approach is vital as it helps accountant to identify the possible threat and access to problems that will affect the ethical standards and consider the possible safeguards before the things happened (CIMA, 2015). Accountants can also determine whether their act is acceptable or not and immediately bring out the appropriate safeguards to eliminate threats through the framework-based approach. This can ensure accountants work professionally and reduce the unethical cases towards their clients.
In the situation of Samantha Tibour, four fundamental principles are relevant. The first one is objectivity. Annabelle, who is one of the partner in the firm and also a close friend with Samantha, asked Samantha to submit the MWFW account by not implementing the additional tax levy. The factor that influence Samantha’s judgement is the relationship with Annabelle because she do not want to disappoint her. Therefore she will violate the objectivity principle as there is a familiarity threat which drive her decision into biased
The second one is Professional Behavior. It means that accountant should follow the law and regulations and shouldn’t do anything that will defame their professional. Although Samantha knows that helping MWFW to evade taxes is illegal and had breached the principle for not acting professionally, she has a six month appraisal pending with Michelle. If she do not obey with Annabelle, her future in the firm may be imperiled. Samantha had faced an intimidation threat in this situation.
Integrity requires accountant to be honest so Samantha should stand up for what she believe is right instead of helping MWFW to dodge tax and cover up the illegal act . Professional competence and due care expect accountants to assure clients are aware of limitations inherent in services that provided to them. Therefore, Samantha should tell MWFW clearly that the consequences of avoiding tax and refuse to comply with them. However, MWFW is the leading client in the firm and Samantha know exactly that they cannot lose this clients as it will brings a great loss in the firm which will have direct relation to her benefit also so she could just comply to what she was told to. The self- interest threat had threaten the two principles in this situation.
In the case of Philip Witherspoon, he informed a close colleague who works for a rival firm after he noticed the firm had not implemented the additional tax levy as required. Firstly, he had violate the confidentiality principle which stated that the accountant shouldn’t disclose any information related to their clients outside the firm or using it for personal benefit unless it has permitted by law or gained professional rights but he failed to do so. Secondly, he had also violated the professional behavior principle. CIMA (2015) stated that any action that will affect the reputation of the profession for example informing third party of information related to the firm or clients should not be done. Philip is a university student who is working on a one-year work placement with the firm. He had been offered to be a full time contract in the firm after his placement. Therefore there in an intimidation threat as this has threaten the future of Philip and also Mike had fired him directly after he found out that Philip had disclose the information to their competitor.
According to the situation of Samantha and Philip, there are a few safeguards that could be addressed to help eliminate the threats. Firstly, both of them are new to the company therefore they should have more training and educational experience. MWFW is a leading clients in the firm, so they should send a senior accountants to supervise in this case instead of send two new accountant to work on themselves. Secondly, the firm can also authorized a third party that is legal to help reviewing the reports and information within the firm. This can ensure that no bribery or tax avoiding can be found. Thirdly, the importance of complying the fundamental principles should be stressed within the firm. The above safeguards can help reduce the unethical problems that happened in the firm. In conclusion, a framework- based is very important to lead the accountants to work according to the principles to provide an ethical and fair environment between clients.