Tài liệu Accounting ethics and its important role for reduction of accounting fraud an empirical study in hanoi

ACCOUNTING ETHICS AND ITS IMPORTANT ROLE FOR REDUCTION OF ACCOUNTING FRAUD: AN EMPIRICAL STUDY IN HANOI BY VU HAI YEN Graduation Project Submitted to the Department of Business Studies, HELP University College, in Partial Fulfillment of the Requirements for the Degree of Bachelor of Business (Accouting) Hons JUNE 2010 1 Declaration of Originality and Word Count DECLARATION I hereby declare that the graduation project is based on my original work except for quotations and citations which have been duly acknowledged. I also declare that it has not been previously or concurrently submitted for any other courses/degrees at HELP University College or other institutions. The word count is 9,477 words Vu Hai Yen Date: 2 Abstract ACCOUNTING ETHICS AND ITS IMPORTANT ROLE FOR REDUCTION OF ACCOUNTING FRAUD: AN EMPIRICAL STUDY IN HANOI By VU HAI YEN June 2010 Supervisor: Dr. Le Van Lien Ethics is a sensitive concept of any profession in society, especially for career that closely associated with economic activities such as accounting. Given the code of ethics for professional accountant, and the factors that contribute to accounting fraud, this study aims to examine the significance of ethical issues that challenge professional accountant in good corporate governance and sustainable business practices. It is carried out via a survey of 200 accountants which are divided into 2 groups. They are both from public and private companies. The result of this study shows that, accountants who have less experiences work more objectively than the one who have more experiences. But they have more possibility to break ethical culture than the one who have more experiences. And, ethical conflicts commonly arise in the organization's relationship with customers, employees, suppliers, and other individuals, and also as a result of these acts as courtesy gifts, kickbacks and discriminatory pricing. 3 Acknowledgements This study wouldn’t have been performed without the help of helpful people. Sincere thanks to my supervisor, Dr. Le Van Lien for his support, guidance and vision for all my study. Sincere thanks to Mr. Dang Ngoc Quang for helping me conduct survey quickly and effectively. 4 TABLE OF CONTENTS Page Declaration of Originality and Word count 2 Abstract 3 Acknowledgements 4 Table of Contents 5 Chapter 1: Introduction 9 1.1 Research Background 10 1.2 Problem Statement 12 1.3 Objectives and Sphere of Research 14 1.3.1 Objectives of Research 14 1.3.2 Sphere of Research 14 1.4 Research Methods 15 1.5 Structure of Research 16 Chapter 2: Literature Review 17 2.1 Code of Ethics 18 2.2 Code of Ethics for Professional Accountant 19 2.3 The Factors that Contribute to Accounting Fraud 21 2.3.1 Corporate Transparency 21 2.3.2 Corporate Values and Behaviour 22 5 2.3.3 Money Culture 24 2.3.4 Vices of a Capitalistic Society 26 2.3.5 Legalistic Culture 28 Chapter 3: Research Methodology 30 3.1 Research Objectives 31 3.2 Research Method 32 3.3 Scope of Study 33 3.4 Sources of Data and Sample Selection 34 3.4.1 Collecting Data 34 3.4.2 Sample selection 34 3.5 Hypothesis Statement 36 Chapter 4: Result Analysis 37 4.1 Collection of Questionnaires 38 4.2 Description of Result 39 4.2.1 Part 1 4.2.1.1 Integrity 40 40 6 4.2.1.2 Objectivity 41 4.2.1.3 Professional competence and due care 42 4.2.1.4 Confidentiality 43 4.2.1.5 Confidentiality 44 4.2.2 Part 2 4.2.2.1 Money culture 45 45 4.2.2.2 Corporate values and behaviour and vices of a capitalistic society 46 4.2.2.3 Corporate values and behaviour, corporate transparency and legalistic culture 4.3 Result Analysis 47 48 4.3.1 Hypothesis 1 48 4.3.2 Hypothesis 2 49 4.3.3 Hypothesis 3 50 4.3.4 Hypothesis 4 51 4.4 General Discussion 52 Chapter 5: Conclusion and Recommendation 53 5.1 Conclusion 54 5.2 Recommendation 56 5.3 Limitation of Study 58 7 5.4 Suggestion for Future Research 59 References (Harvard System) 60 Appendices 64 8 CHAPTER 1 INTRODUCTION 1.1 Research Background 1.2 Problem Statement 1.3 Objectives and Sphere of Research 1.3.1 Objectives of research 1.3.2 Sphere of research 1.4 Research Methods 1.5 Structure of Research 9 1.1 Research Background Ethics is a sensitive concept of any profession in society, especially for career that closely associated with economic activities such as accounting. If there is no professional ethics, the quality of accounting services provided to society will not ensure its use value. For accountants, the professional ethics are “intangible assets”. In Vietnam, Ministry of Finance issued a decision on the issuance and publication of professional ethical standards of accounting and auditing in 2005. These standards are built on the foundation of “independence, integrity, objectivity, confidentiality, expertise and prudence, occupational status, compliance with professional standards.” (http://www.tailieu.vn). They indicate that the scope and the nature of accounting activities should be provided in an ethical way. However, in practice, accountants do not always follow the rules and apply them in every aspect. How many bosses will raise wages for employees if they do the work to comply with ethical standards, benefit the public but the boss made a loss, if they deny wrongdoing or ethical behavior can cause damage to the organization in a short time, but in the long term it can provide greater benefits to reputation as well as financial by the organizational decisions that remove acts as dishonest or fraudulent? It is a big and difficult question. Clearly, the boundary between “ethical” and “unethical” is very ambiguous. Vietnam's economy is increasingly integrated with worldwide. The financial institutions like banks, financial leasing companies, securities companies are appearing more and more. This also means that when demand increases, the quality of accountant 10 are discussed in a prominent position than ever, and their activities and behavior affect strongly to the health of a nation. 11 1.2 Problem Statement For an organization, ethics plays an important role in curbing accounting fraud. Like Nguyen Phuong Mai, chief of the representative office of the UK-based Association of Chartered Certified Accountants (ACCA) said that expertise can train but training ethics is very difficult (http://vietbao.vn). And, the lack of ethical behavior in the accounting profession causes extremely serious consequences. The collapse of companies such as Enron, WorldCom and Global Crossing in the USA are typical examples. The life of an accountant was filled by the laws and the figures which should be calculated accurately. Every day they have to face many problems such as competition, outstanding figures, the charges "not official" and commissions. Any deviation regarding accounting data also seriously affect the decision process. For instance, data is adjusted to suit the changing market, competitive effects, or "latency" in business cycles in the financial statements. Following business perspective, it is positive adjustment in order to reassure investors and encourage them to continue to pour capital. But shareholders may be deceived and feel there is instability in the operation of the business. How to balance between private interests and public interests? How to avoid accounting fraud? It depends greatly on doing the right thing voluntarily. It is a big problem that senior managers, the boards of directors, the accountants have to face in building a culture based on ethical values. Vietnam’s goal by 2020 is comprehensive and equitable integration with countries in the field of accounting and auditing, including import and export accounting 12 and auditing services (http://www.vntax.vn). Therefore, along with the reform of accounting systems, accounting ethics is also a concern especially because it is the foundation for sustainability and long-term development of an organization. 13 1.3 Objectives and sphere of research 1.3.1 Objectives of research  To determine applying the code of ethics for professional accountant in Vietnam.  To define the factors that contribute to accounting fraud related to the state of Vietnam  To reflect reality from theoretical model to practical theory  To recommend some suggestions to investors, companies for the importance of ethics within an organization to curb accounting fraud 1.3.2 Sphere of research  Place of conducting research: National Economics University, Hanoi capital, Vietnam  Object of research: accountants, students who are major accountants  Companies in research : public companies and private companies  Time period of conducting research: from 31 may 2010 to 15 June 2010 14 1.4 Research methods The project is based on real investigation: The researcher conducts a survey among accountants who are working in public companies and private companies, as well as students studying master degree in accounting in Hanoi city, Vietnam. The questionnaire and measurement are created based on the knowledge and information of previous researches. The method used in this research is qualitative method with the sample size n = 200. By dividing questionnaire to accountants who are different age, gender, and experience, the researcher can be based on that collected data and see how well the perception of accountants toward ethical problems. In the research, statistical technique such as chi-squared test will be used in order to help the researcher in analyzing and inspecting the measurement after collecting information. Besides, the research will also be using collective analysis methods based on historical data in past researches. 15 1.5 Structure of Research This project is divided into five chapters: Chapter I: Introduction Chapter II: Literature Review Chapter III: Research Methodology Chapter IV: Result Analysis Chapter V: Conclusion and Recommendation 16 CHAPTER 2 LITERATURE REVIEW 2.1 Definition of Ethics 2.2 Code of Ethics for Professional Accountant 2.3 The Factors that Contribute to Accounting Fraud 2.3.1 Corporate Transparency 2.3.2 Corporate Values and Behaviour 2.3.3 Money Culture 2.3.4 Vices of a Capitalistic Society 2.3.5 Legalistic Culture 17 2.1 Definition of Ethics There are many definitions of ethics such as the science of human duty; the body of rules of duty drawn from this science; a particular system of principles and rules concerning duty, whether true or false; rules of practice in respect to a single class of human actions (http://www.brainyquote.com). In conclusion, the word 'Ethics' is derived from the Ancient Greek word ethikos; means customs and habits. It is a major branch of philosophy which is the study of values and customs of a person or group and covers the analysis and employment of concepts such as right and wrong, good and evil and do's and don'ts (Ghazala Saeed). Accounting has its own definition of ethics, which is primarily a field of applied ethics, the study of moral values and judgments as they apply to accountancy. It is an example of professional ethics. Accounting ethics were first introduced by Luca Pacioli, and later expanded by government groups, professional organizations, and independent companies. Ethics are taught in accounting courses at higher education institutions as well as by companies training accountants and auditors. 18 2.2 Code of Ethics for Professional Accountant Code of Ethics for Professional Accountant is issued by the International Ethics Standards Board for Accountants (IESBA), an independent standard-setting board within IFAC. It set the ethical requirements for professional accountants and provides a conceptual framework for all professional accountants to ensure conformity with the five fundamental principles of professional ethics. These principles are integrity, objectivity, professional competence and due care, confidentiality, and professional behavior.  Integrity: A professional accountant should be straightforward and honest in all professional and business relationships.  Objectivity: A professional accountant should not allow bias, conflict of interest or undue influence of others to override professional or business judgments.  Professional Competence & Due Care: A professional accountant has a continuing duty to maintain professional knowledge and skills at the level required to ensure that a client or employer receives competent professional service. A professional accountant should act diligently and in accordance with applicable technical and professional standards when providing professional services.  Confidentiality: A professional accountant should respect the confidentiality of information acquired as a result of professional and business relationships and should not disclose any such information to third parties without proper and specific authority unless there is a legal 19 or professional right or duty to disclose. This information should not be used for personal advantage by professional accountant.  Professional Behaviour: A professional accountant should observe the relevant laws and regulations and should avoid any action that discredits the profession. The code of ethics for accountant is developed following a rigorous due process that includes input from the general public, IFAC member bodies and their members, and the IESBA Consultative Advisory Group. It is applied to all professional accountants, those in public practice, industry, commerce, the public sector and education. Under the framework, all professional accountants have to determine the threats to these fundamental principles and, if there are threats, apply safeguards to ensure that the principles are not compromised (http://www.ifac.org/ethics/Pronouncements.php). 20