The importance of ethics in accounting practices and its influence on business performance Table of Contents 1. PROJECT CONTEXT 3 2. PROJECT PROPOSAL 5 2.1 BACKGROUND INFORMATION 5 2.2 AIM AND OBJECTIVES 6 2.3 RESEARCH QUESTIONS 6 2.4 LITERATURE REVIEW 7 2.5 BRIEF METHODOLOGY 8 2.6 ORGANISATION OF THE PROJECT 8 3. GANTT CHART 9 4. REFERENCES 10 5. EVIDENCE OF TUTOR ENGAGEMENT 12 1. PROJECT CONTEXT As being commencing and nearly come close to the completion of my Master of Professional Accounting degree, it is clearly visible that practicing accounting in a professional manner would be my future career path without any doubt. According to Schweikart (cited in Bonawitz, 2002) accounting is more of an art then a science and that no two accountants will determine the exact same results from the same data because the accounting principles allow too many unwritten choices that require accountants to make decisions based on their accounting knowledge and ethical judgement. Professional accountants are considering as a key pillar in business by helping to create and sustain organisational value and growth (Adkins & Radtke, 2004). Indeed, when it comes to upholding the quality of financial reporting and providing the broader public with reliable financial information, accountants are consider as the front runners in any business (Ismail, 2014). Additionally, a competent professional accountant is a valuable asset to any business or entity. They support businesses with corporate strategy, prepare budgets and keep records of financial information, provide financial advice, help to reduce business costs, assist top line management, provide tax advice and help to alleviate risks (Hooper & Xu, 2012). Then, by using their knowledge, skills and intimate understanding of the company and the environment in which they operates, professional accountants ask challenging questions (Copeland, 2015). Further, due to their training in accounting, they are capable of adopting pragmatic and objective approach to solve identified issues and problems. Moreover, Ismail (2014) stated that, as a profession accounting has been given a privileged position in the society as it deals with a wide range of issues that directly and indirectly related to broader public interests. Thus, professional accountants are not only expected to maintain high level of professional standards but also expected to act ethically in all occasions. Conversely, there were several events had been occurred over the past years, which evident that professional accountant were involved in manipulating accounting information, breaching accounting principles and standards, and involved in other fraudulent activities. All these events have resulted to question the integrity of the profession and thus several laws were implemented and initiatives were designed to restore the public’s trust in the accounting profession (Abdolmohammadi, 2005). However, accountants frequently face conflicting situations between upholding their client’s demands and maintaining their ethical values and integrity to the profession. In such scenarios, accountants need to exercise their professional judgements to carry out their roles so that when times get challenging, they do not initiate actions that might be consider unethical or direct towards loosing public trust in the profession (Bonawitz, 2002). 2. PROJECT PROPOSAL 2.1 BACKGROUND INFORMATION Ethical standards and principals are crucial for every profession and business entity that aims to survive successfully in the market and want to progress their overall professional capabilities and efficiencies. Particularly, accounting is a profession that extensively relies on the professional’s judgement and their principal of independence, objectivity, integrity, confidentiality, competency, professional behaviour and due care (Park & Blenkinsopp, 2013). The accounting profession performs various functions, such as, recording of all business events that are of financial character, classifying and summarising them, recording and presenting them in the form of profit and loss statement, balance sheet and cash flow statement etc (Holmes, Marriott & Randal, 2012). The way all these activities are performed is very critical and thus it requires the accountants to act ethically and maintain it throughout the entire process and subsequently. However, the globalisation and diversification of accounting services, combined with market competition and high profile corporate collapse has drawn attention to the integrity of the accounting profession and its alleged ethical standards (Ponemon, Ashkanasy & Windsor; Armstrong et al.; Leung & Coper cited in Jackling, Cooper, Leung & Dellaportas, 2007). In fact, the accounting profession has been involved in a variety of ethical misconducts ranging from a lack of independence by accountants on audit engagements, tax fraud and elusion, engaging in creative accounting and conflicts of interests, as well as failure of duty of care towards shareholders and the public (Jackling et al., 2007). Therefore, the value systems of the accounting professionals are now questioning by critics, whether they are strong enough to endure client and economic pressures that potentially compromise professional judgement (Douglas, Barker & Schwartz, 1995). Ethics is basically the “fundamental concept of right human conduct, which involves differentiating between good and bad, right and wrong” (Abuznaid, 2009, p.279). In particular, Joseph (2010) characterised the ethical accounting practices by honesty, fairness and equity in interpersonal professional and academic relationship and respecting the dignity, diversity and the right of individuals and groups of people. In fact, ethics is a fundamental requirement in the accounting profession as accountants radically contribute to the economic growth of the nation, thus, it is their responsibility to preserve the public interest and to ensure good execution of public and private finances (Mohamed Saat, Porter & Woodbine, 2012). Then, Buell (2009) also indicated that the financial statements prepared by the accounting professionals containing organisational financial information is of great value to the investors and other interest parties as they significantly relied upon those information. Indeed, the success and failure of a business immensely depends on the accuracy of that financial information and thus, an accountant should not manipulate the accounting figures in order to hide any information. For example, in terms of balance sheet, the information regarding cash, accounts receivables/payables, inventory, prepaid/accrual expenses, long term receivables/payables etc must need to be presented precisely. Therefore, accounting ethics need to be applied in each and every aspects of the accounting process, so that the complete, accurate and reliable information can be presented to the desired users of financial statements. 2.2 AIM AND OBJECTIVES The aim of this research is to explore and identify the importance of ethics in accounting practices and how these ethical practices influence the overall business performance. The perceive aim and objectives of this research are as follows: • To investigate the importance of ethics in accounting practices. • To evaluate the influence of ethical accounting practices on business performance. • To concrete a framework and create a strategic guideline that will assist and encourage accounting professionals to understand and adapt ethical accounting practices. 2.3 RESEARCH QUESTIONS Through analysing the situation and conducting some research, there are number of questions has been identified that needs to address for the research purpose. The identified research questions are as follows: • Why ethics play such an important role in the accounting profession? • What is the connection between ethical accounting practices and business performance? • What ethical issues and barriers accounting professionals face to carry out their duties? • What strategies could be adopted to overcome such ethical barriers? 2.4 LITERATURE REVIEW The accounting profession is experiencing its deepest crisis over the last two decades, when it was revealed that accountants are involved in the fraudulent financial reporting that directed to the collapse of some big corporations such as Enron, WorldCom, HIH Insurance, OneTel, and Parmalat (Taylor, 2013). These high profile scandals and embarrassing corporation failure has called to question the integrity of the accounting profession both from within and outside the profession and leading to increased demands for ethics in the profession. In fact, the financial crisis of 2008 revealed that how derivatives and other complicated financial products are capable of hiding the reality of organisational financial information even from the experts eyes (Boda & Zsolnai, 2016). Consequently, Brooks (cited in Jackling et al., 2007) stated that few financial scandals are the results of methodological errors; rather they are more likely to occur from professional judgement errors. Further, Lee (1995) affirmed that the accounting profession has been criticised for seeking to protect its self interest rather than serving the interests of the clients or third parties. According to Modarres and Rafiee (2011), the accounting standards are mainly influenced by the public interest and accountants should work in a manner that leads to the highest standards of professionalism and the highest level of performance. However, extensive client pressures, burden of regulations and self-interests put professional accountants in challenging and conflicting situations and required them to compromise accounting and financial reporting rules and standards which are not ethically acceptable (Buell, 2009). For instance, client might pressures accountant to record inventories at higher values or select alternative accounting methods which present a favourable financial picture of the corporation’s health (Chartier cited in Adkins & Radtke, 2004). In such situations, accountants always need to maintain their professional integrity and adopt the approach that is ethically right. In support, Su (2014) also acknowledged that organisations stability and survival vastly depends on the consistency and quality of ethical financial decisions made by accountants. Indeed, studies have shown that businesses with higher ethical commitment are engaged in less earning management; have higher market valuation and are perceived to have higher corporate financial performance (Ghazali, 2015). 2.5 BRIEF METHODOLOGY The research will undertake both primary and secondary sources to critically analyse and to achieve the set objectives for this study. The research methodologies are as follows: • Surveys/Questionnaires and Data Analysis: Primary information will be collected through on-line and face-to-face surveys/questionnaires and interviews from the selected sample of professional accountants and top managements across different industries. Then, collected information and data will be critically evaluated and examined to present the idea why accountants needs to be ethical and how ethical accounting practices help businesses to perform better in the long run. Both quantitative and qualitative method will be used to analyse the collected data from the samples. • Developing Key Techniques/Strategies: Finally, after examining information obtained from surveys/questionnaires, interviews and data series, number of key techniques/strategies will be developed with the aim to assist the accountants to overcome the ethical barriers and maintain the level of integrity of their profession for the greater good. 2.6 ORGANISATION OF THE PROJECT The study will be organised into five chapters according to the following format:  Chapter One is an introduction of the research topic and will describe the background of the problem, definitions of terms, base theory, purpose and significance of the study and research objectives/questions.  Chapter Two will conduct an in-depth review of the literature by including a detail discussion on the importance of ethics in accounting practices and how it influence on overall business performance.  Chapter Three will outline the research methodology which will include both primary and secondary research techniques, hypothesis, discussion of sampling methods and the data analysis methods.  Chapter Four will present the finding and analyse the research data.  Chapter Five will summarise the research results, discuss the implications and limitations of the study and provide recommendations for future research. 3. GANTT CHART Task Name Start Date Duration (Weeks) End Date Project Proposal 23-12-16 2 weeks 06-01-17 Literature Review 07-01-17 5 weeks 10-02-17 Data Collection 11-02-17 10 weeks 21-04-17 Data Analysis 22-04-17 4 weeks 19-05-17 Final Report Submission 20-05-17 4 weeks 16-06-17 4. REFERENCES Abdolmohammadi, M. J. (2005). Ethical training in graduate accounting courses: Effects of intervention and gender on students’ ethical training. Research on Professional Responsibility and Ethics in Accounting, 10, 37-62. Abuznaid, S. A. (2009). Business ethics in Islam: the glaring gap in practice. International Journal of Islamic and Middle Eastern Finance and Management, 2( 4), 278-288. Adkins, N., & Radtke, R. R. (2004). Students’ and Faculty Members’ Perceptions of the Importance of Business Ethics and Accounting Ethics Education: Is There an Expectations Gap? Journal of Business Ethics Vol. 51, 279–300. Boda, Z., & Zsolnai, L. (2016). The failure of business ethics. Society and Business Review, 11(1), 93-104. Bonawitz, M. F. (2002). Analysis and comparison of the moral development of Florida International University Miami, Florida: UMI Microform 3049799. Buell, E. K. (2009). The relationship of ethics education to the moral development of accoutnign students. H. Wayne Huizenga School of Business and Entrepreneurship: UMI Number: 3369513. Copeland, M. K. (2015). The importance of ethics and ethical leadership in the accounting profession. Research on Professional Responsibility and Ethics in Accounting, 19, 61-98. Douglas, P.C., Barker, R.T. and Schwartz, B.N. (1995). An exploratory study of accounting students professional attitudes. Research on Accounting Ethics, 1, 315-30. Ghazali, N. A. (2015). The influence of a business ethics course on ethical judgments of Malaysian accountants. Journal of Asia Business Studies, 9 (2), 147-157. Holmes, K., Marriott, L., & Randal, J. (2012). Ethics and experiments in accounting A contribution to the debate on measuring ethical behaviour. Pacific Accounting Review, 24(1), 80-100. Hooper, K., & Xu, G. (2012). From legitimacy by character to legitimacy by image Ethics and accounting practices inNewZealand. Managerial Auditing Journal, 27(8), 754-773. Ismail, S. (2014). Effect of ethical ideologies on ethical judgment of future accountants: Malaysian evidence. Asian Review of Accounting, 22(2), 145-158. Jackling, B., Cooper, B. J., Leung, P., & Dellaportas, S. (2007). Professional accounting bodies’ perceptions of ethical issues, causes of ethical failure and ethics education. Managerial Auditing Journal, 22(9), 928-944. Joseph, K. O., (2010). Effect of ethical behavior on organizational performance: evidence from three service organizations in Lagos, Nigeria. Journal of Research in National Development, 8(1). Lee, T. (1995). The professionalization of accountancy: a history of protecting the public interest in a self-interested way. Accounting, Auditing & Accountability Journal, 8(4), 48-69. Modarres, A., & Rafiee, A. (2011). Influencing factors on the ethical decision making of Iranian accountants. Social Responsibility Journal, 7(1), 136-144. Mohamed Saat, M., Porter, S. & Woodbine, G. (2012). A longitudinal study of accounting students’ ethical judgment making ability. Accounting Education: An International Journal, 21(3), 215-229. Park, H., & Blenkinsopp, J. (2013). The impact of ethics programmes and ethical culture on misconduct in public service organizations. International Journal of Public Sector Management, 26(7), 520-533. Su, H.Y. (2014). Business ethics and the development of intellectual capital. Journal of Business Ethics, 119, 87-98. Taylor, A. (2013). Ethics training for accountants: does it add up? Meditari Accountancy Research, 21(2), 161-177. 5. EVIDENCE OF TUTOR ENGAGEMENT