The stakeholders in this case are Juliette, Katrina, Richard, James Hubert and Greg and all board members of both companies. The expectations they should have in this case are to ensure good accounting practices where reclassification of marketable securities should be done with every stakeholder’s knowledge failure to which it would be unethical. The stakeholders expect that the companies with which they do business are ethically oriented and ensure that their efforts and decisions meet the needs and wants of suppliers, consumers and business partners CITATION Jef12 l 1033 (Jeffery, 2012).
The ethical obligations of Positive Accounting Solutions and its CPAs to the stakeholders are responsibility, transparency, honesty, fairness and respect. Transparency is a key component of good accounting in Australia. It involves building reliable relationships with stakeholders and giving them relevant information that they can use CITATION Hof04 l 1033 (Hoffman, 2004). Responsibility in accounting is concerned with building trust between an organization, its stakeholders, customers and the general public. The ethical attribute of responsibility ensures that companies in Australia take into consideration what is in the best interest of all stakeholders both in the short and long term. It is unethical to be profit driven in their ventures.
Several ethical issues exist for Juliette, Katrina, Richard and Greg, and Positive Accounting Solutions. Legal and ethical issues are important elements of the general framework and well-being of the accounting industry. They are values and principles that govern an organization and the decisions and actions of individuals within the organization. They give a general guideline on how an organization and its employees should act in the event of a moral dilemma CITATION Hof04 l 1033 (Hoffman, 2004). In this case there was the ethical issue if transparency where Global contractors failed to inform Juliet Forbs and her company of the intended reclassification. This selective reclassification may affect vulnerable audiences in the emerging markets of developing regions of Australia. Such situations occur because the public does not have sufficient information about securities assets ploys. The action by Global contractors is unethical and may lead to a serious breach of ethical guidelines as the perpetrators step on safeguards in the disguise of making more money. It is essential that Hubert follows the ethical guidelines of financial reporting and not let acquiring more possession get in the way of their financial obligations. Hubert, who is more concerned with his company’s financial welfare compared to that of Positive Accounting Solutions and its CPAs is more likely to cause real accounting violations and become a liability to the business partnership CITATION Jef12 l 1033 (Jeffery, 2012). Accounting questions the incorrectness of financial statements through the use of features and indicators that show the degree of openness to risk. It also considers whether the sources of risk reside in corporate areas of accounting estimates and organizational culture.
This places an accountant in an ethical dilemma where one wonders whether or not to report accounting violations to the authorities. Although it is the ethical duty of the accountant to report such fraudulent activities, the ethical dilemma lies in the ramifications of the reporting. Corporate officers and senior managers may face criminal prosecution that may lead to imprisonment and fines while the company may receive bad publicity and laying off of workers when the government reviews financial records CITATION Hof04 l 1033 (Hoffman, 2004). It is the responsibility of accountants to serve the best interests of the company that they are providing auditing and accounting services for, investors and society as a whole. This can be done by providing truthful and accurate financial records. Ethical guidelines require that accountants should be honest, concise, accurate and complete while recording financial data to ensure ethics are held to the highest degree. It is also the duty of an accountant to make wise, informed decisions about the future of a company. These decisions gave notable impacts on the companies as demonstrated by Enron.
Auditor virtue plays an important role in determining what to do in this case. Auditor virtue bears the responsibility of preventing, detecting and investigating fraud through as system of internal auditing and internal control. Through this, auditors can perform a retrospective control on financial data with an aim of detecting any frauds or omissions and securing the credibility and reliability of financial statements. In this case, auditing is used to show the real picture that is obtained on the securities assets CITATION Jef12 l 1033 (Jeffery, 2012). Auditors have to provide expert evidence at the eventual trial. They utilize an understanding of auditing and accounting standards and procedures, financial reporting systems and business information, litigation processes and investigative and evidence gathering and investigative techniques to perform their work.The accounting rules for valuing so-called securitised assets that were designed using a package of outstanding mortgages came under attack in 2008- 2009 because their operation developed out of their internal dynamics instead of the context from which the public shared its perceptions CITATION Jef12 l 1033 (Jeffery, 2012). Thus, the so called securitized assets became socially irresponsible and their contributions to the market rose from their personal definitions rather than from a reciprocal engagement with the stakeholders.
Accounting rules for investments in securities changed following criticisms that the accounting rules were, at least in part, responsible for the financial crisis. Current accounting techniques are run by computers and therefore do not have any inner sense of normality. Scripts and queries in financial statements do exactly what they have been programmed to do and as a result a fraud hypothesis testing approach has been proposed to accommodate this limitation. This approach is a proactive or deductive approach used by accountants in fraud investigations. Accountants obtain a concise understanding of the business processes, environment and controls CITATION Hof04 l 1033 (Hoffman, 2004). This understanding helps them to have a proactive picture and predict the possibility of any frauds occurring. The team of forensic accountants brainstorms the possible frauds that may exist in the business environment that they are investigating and this may result in fifty potential schemes. Once there has been the identification of possible schemes, the team of forensic accountants outlines how these schemes would show up in the available data. These indicators, often referred to as red flags, are the major indicators of the occurrence of fraud in an enterprise. Given each indicator, the team of forensic accountants looks for corporate databases through the use of queries and scripts by applying accounting principles. Any anomalous transactions are set aside for further investigations and this often perceived as a sample that is to be looked into closely. Accountants analyze the results of the query in order to determine potential explanations for the anomalies which may possibly be weak controls or fraud among other reasons. Once the team has established the potential explanations to be fraud, they follow up on them and conduct further investigations by employing additional queries in order to determine the cause of the anomalies. This hypothesis testing approach has been successfully in quite a number of case studies including university environments, alcohol sales and healthcare in Australia. Once the financial statements have been analyzed, continuous investigation is possible. Unlike the normal testing on historical data, the tests are then programmed into live corporate systems so as to provide progressive monitoring of transactions. This progressive monitoring uses information technology which has been successfully used in several companies.
Accounting rules should not be influenced by Political pressure, as was the case with the changes in accounting for investments. It is ethical to maintain the right to the truth while practicing accounting and financial reporting. Those who use financial statements have the right to accurate and truthful information when engaging in investment strategies. Clients have a legal right to receive competent and professional services from accountants who have a legal obligation to perform their responsibilities within the constraints of their skills CITATION Hof04 l 1033 (Hoffman, 2004). It is often argued that most accountants lack ethical ability to recognize and solve ethical dilemmas. This has necessitated the need to include ethics education as a major component of the accounting profession. The development of professional ethics and values should be initiated early in the accounting profession and be emphasized throughout the career. Teamwork and leadership are two important components that must be in alignment so as to provide effective high quality and efficient accounting services. A strategic human resource management model provides guidance to accounting teams and leaders to deliver high-quality services in a timely manner. Accounting operates within a performance measurement that tolerates no errors. Therefore, a state-of-the-art investigation requires scientific leadership working with major stakeholders as a team to provide the best accounting services to a fraud investigation CITATION Hof04 l 1033 (Hoffman, 2004). The new techniques of accounting are significant steps in the right direction and they require leaders with skills and business tools to apply concepts such as efficiency, cost benefit analysis, economies of scale and cost-effectiveness analysis that will measure continuous improvement on a regular basis. Effective leadership is needed to develop, design and implement a solution that would resolve the core competency of an organization. Strategic leadership in fraud investigations provides quality and timely accounting services to a company. Such leadership brings together a fragmented system consisting of thousands of accountants working within a fragmented system of organizations. Effective teamwork and leadership in accounting shows the way through the development of new innovative fraud investigations for the future CITATION Jef12 l 1033 (Jeffery, 2012).
BIBLIOGRAPHY Hoffman, W. M. (2004). The Ethics of Accounting and Finance: Trust, Responsibility, and Control. New York: Greenwood Publishing Group.
Jeffery, C. (2012). Research on Professional Responsibility and Ethics in Accounting. New York: Emerald Group Publishing.
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