The Following Are A Number Of Different Situations Where The ✓ Solved

The following are a number of different situations where there

You are asked to state whether there has been a violation of the Accountants Code of Ethics and state which ethical principle has been violated briefly providing a reason for your opinion:

(a) Peter Harmon, professional accountant, does the bookkeeping, prepares the tax returns and provides various management services for Bunker Ltd. When providing these services it frequently advises its clients to buy its computer equipment from Computer Services Ltd. Computer Services has agreed to pay Harmon a 10% commission if the referral leads to sales for Computer Services.

Paper For Above Instructions

In the scenario presented, Peter Harmon, as a professional accountant, faces a significant ethical dilemma. The core issue revolves around whether his actions in advising clients to purchase computer equipment from Computer Services Ltd., while potentially benefiting financially from such referrals, constitute a violation of the Accountants Code of Ethics.

The ethical principles that guide professional conduct for accountants primarily include integrity, objectivity, professional competence, confidentiality, and professional behavior. Upon analyzing the situation, it becomes apparent that Harmon's actions violate the principle of objectivity.

Understanding Objectivity

Objectivity is a fundamental principle that demands accountants remain impartial and free from conflicts of interest. When an accountant has a financial interest in recommending a product or service, it can compromise their impartiality. In this case, Harmon stands to gain a 10% commission from Computer Services based on his referrals. This financial incentive creates a conflict of interest that can cloud his judgment and lead to biased recommendations.

Impact on Professional Relationships

When accountants advise clients, they are expected to do so with the clients' best interests in mind. The arrangement between Harmon and Computer Services Ltd. raises questions about whose interests are truly being served. While he may genuinely believe that the equipment from Computer Services is suitable for Bunker Ltd., the underlying financial motivation introduces doubt into the integrity of his advice. Clients trust their accountants to offer objective and sound guidance. Any perceived bias can erode the trust that is crucial to the accountant-client relationship.

Regulatory Standards

The Accountants Code of Ethics outlines various regulatory standards that accountants must uphold to maintain the profession's credibility and integrity. According to the International Ethics Standards Board for Accountants (IESBA), accountants are required to avoid situations where their objectivity could be compromised (IESBA, 2018). The situation with Harmon clearly falls into this category. By accepting commissions for referrals, he has placed himself in a position where his ability to make unbiased recommendations is questionable.

Consequences of Ethical Violations

Violating the principle of objectivity can have severe repercussions for an accountant. In the immediate term, it can result in loss of credibility and trust with clients. Long-term consequences can include disciplinary action from professional bodies, damage to one's reputation, and potential legal implications. Furthermore, the integrity of the entire profession might be jeopardized when such violations come to light, undermining public confidence in the accounting profession.

Alternatives for Ethical Practices

To avoid such ethical violations, accountants should establish clear boundaries regarding financial incentives associated with their recommendations. One alternative could be to disclose any commission arrangements to clients transparently. This would allow clients to make informed decisions regarding the advice they receive. Another approach would be to eliminate financial incentives entirely and seek advice from neutral third parties on equipment purchases, ensuring that the recommendations remain unbiased.

Conclusion

In conclusion, Peter Harmon has indeed violated the principle of objectivity as per the Accountants Code of Ethics. His relationship with Computer Services Ltd., which involves receiving commissions for referrals, constitutes a clear conflict of interest. This situation serves as a reminder of the importance of ethical conduct in the accounting profession, emphasizing the need for accountants to prioritize their clients' best interests above personal financial gain. Upholding ethical standards is crucial for sustaining trust and integrity in the profession, ensuring that accountants remain reliable advisors to their clients.

References

• International Ethics Standards Board for Accountants (IESBA). (2018). Code of Ethics for Professional Accountants. Retrieved from [IESBA website link]
• American Institute of Certified Public Accountants (AICPA). (2020). AICPA Code of Professional Conduct. Retrieved from [AICPA website link]
• Association of Chartered Certified Accountants (ACCA). (2019). ACCA Rulebook. Retrieved from [ACCA website link]
• Chartered Professional Accountants of Canada (CPA Canada). (2018). CPA Code of Professional Conduct. Retrieved from [CPA Canada website link]
• International Federation of Accountants (IFAC). (2017). Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements. Retrieved from [IFAC website link]
• Institute of Chartered Accountants in England and Wales (ICAEW). (2019). ICAEW Code of Ethics. Retrieved from [ICAEW website link]
• The Chartered Institute of Management Accountants (CIMA). (2020). CIMA Code of Ethics. Retrieved from [CIMA website link]
• Financial Reporting Council (FRC). (2019). The UK Corporate Governance Code. Retrieved from [FRC website link]
• World Bank. (2017). Ethics and Integrity in the Public Sector. Retrieved from [World Bank website link]
• Council of the Institute of Internal Auditors (IIA). (2018). International Standards for the Professional Practice of Internal Auditing. Retrieved from [IIA website link]