Tax practitioners are required to follow Circular 230 before the IRS. This is designed to provide
protection to taxpayers and the IRS by requiring tax practitioners to be competent and adhere to
ethical standards (Sawyers & Gill, 2021). Unethical behaviors can have a very negative impact on a
business, so it is very important these behaviors are avoided. An example of unethical behaviors
that can hurt a business are an executive stealing money or documents being falsified. To work on
preventing this behavior, it is important that companies implement a code of conduct for
employees and managers to follow. It is also important for executives and those in a management
position to lead by example. If unethical behavior does occur in a workplace, there must be
consequences that are reinforced. In addition, companies that hire individuals that are skilled
workers and create checks and balances within the company have a lower risk of unethical
behavior occurring (Brookins, 2019).
An example that affected a company’s employees and investors was the unethical behavior by
KPMG LLP employees in 2017. The SEC investigated the company and found that KPMG LLP did not
act with integrity by using Public Company Accounting Oversight Board (PCAOB) confidential
information to improve the results of the PCAOB inspection of their audits. KPMG employees and
partners shared answers to improve their scores and manipulated the servers to edit employees
scores. Scores were able to be manually inputted so select scores to pass the exam even if they did
not pass. This exam is a requirement by the SEC and if was found KPMG LLP was practicing
unethical behavior and improper conduct which ended up resulting in a client’s reporting violation
(U.S. Securities and Exchange Commission, 2019). This situation absolutely could have been
avoided if partners and executives lead by example and practiced ethical behavior. Partners and
other executives were sharing the confidential information to pass the exams, so other employees
saw this happening and followed suit. In addition, if there were checks in place to make sure that
the score an employee received was the score inputted into the system, employees would not
have been able to change their score to a passing score. b
Teaching ethics to accounting students and professionals is widely considered to be crucial for
several reasons. Some of these reasons include maintaining trust and integrity, industry
professionalism, legal and regulatory compliance, conflict resolution, risk management, long-term
sustainability, and globalization. For accounting students and professionals, ethics education might
encompass case studies, discussions of real-world ethical dilemmas, exposure to codes of conduct,
and the exploration of ethical theories. Integrating ethics into accounting curricula and professional
development programs helps individuals develop a strong moral compass and the skills needed to
navigate the complexities of their field. There may be difficulties, such as figuring out the best
ways to teach ethics, dealing with cultural variations in ethical standards, and maintaining ongoing
ethical awareness in a business environment that is constantly changing. However, it is still widely
agreed that training accounting professionals in ethics is crucial for fostering responsibility, trust,
and accountable financial practices.
Personally, I feel that there needs to be a balanced mixture between "buyer beware" and
implementing more checks and balances. A framework for ethical behavior should be provided by
regulatory frameworks and industry standards, which should be added to the teaching of ethics to
accounting students and professionals in order to give them the skills to make ethical judgments
and decisions. An environment where ethical lapses are less likely to happen and where the
consequences of such lapses are properly addressed is helped by a balance between individual
responsibility and systemic oversight.
One of the most famous examples of a lapse in ethics that caused massive financial stress on the
markets was the scandal at Enron. The main causes of the collapse of Enron were dishonest
accounting techniques and false financial reporting. The business entered into intricate financial
arrangements and joint ventures that allowed it to conceal debt and inflate profits. These actions
were designed to give the impression that Enron was a very profitable and successful business,
driving up its stock price and drawing investor interest. This case underscored the need for
stronger regulatory measures and ethical education to prevent similar situations in the future.
References:
Curwen, L. (2021, August 3). The collapse of Enron and the Dark Side of Business. BBC News.
https://www.bbc.com/news/business-58026162
CFI Team. (2022, December 12). Accounting ethics. Corporate Finance Institute.
https://corporatefinanceinstitute.com/resources/accounting/accounting-ethics/
Brookins, M. (2019, February 1). Ways to Prevent Unethical Behavior in the Workplace. Small
Business - Chron.com. https://smallbusiness.chron.com/ways-prevent-unethical-behavior-
workplace-21344.html
Sawyers, R., & Gill, S. (2021). Federal Tax Research (12th ed.). Cengage Learning US.
U.S. Securities and Exchange Commission, SEC Administrative Proceeding. KPMG LLP. File No. 3-
19203 (June 17, 2019) (available at https://www.sec.gov/litigation/admin/2019/34-86118.pdf)
