Fraud and Forensic Accounting Essay

Paper Type:  Essay
Pages:  4
Wordcount:  999 Words
Date:  2022-06-06

Nelson and Co. is a most profitable accountancy firm that provides professional audit and accountancy in the country. The company serves audit clients and performs tax, accounting, and business advisory services. Nelson & Co. offers a range of services which are guaranteed to improve the efficiency of businesses, and ACCA has approved their rates. This paper aims to appraise two propositions made by the development manager of the firm with an aim to improve the firm.

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The first suggestion of the company placing an advertisement in the local daily will enable the company to reach a wide range of people who would wish to seek the services provided by the company. The advert is explicit and describes what the company does. The advert is appealing because it gives the clients information about what they will benefit if they seek the accounting services of Nelson & Co. Similarly, the advert is specific and offers the new clients a 25% discount if the client seeks both auditing and tax services. The rate given will be able to attract more clients to find the functions of the company. The suggestions made raise the ethical and professional issue.

The new partner who has joined Nelson & Co. has more experience in the banking sector. The experience would not be needed much in the operations of Nelson &Co. The reason behind this is that Nelson and Co. majorly deal in performing tax, accounting and business services. These suggestions also raise ethical issues. Ethics is critical aspects of accounting because it is deeply concerned with the manner in which people make right and moral decisions about the preparation, presentation, and the disclosure of information regarding finances (Jefrey, 2018). The ethical issues raised by the statement are the new partner negotiating with the client's bank on behalf of the customer. Also, the amount charged for the provision of the service would be dependent on the client obtaining the money with a borrowing charge below the market rate. It is also a violation of the financial, ethical standards set by financial institutions. A conflict of interest is therefore evident in the action of the partner (Zadek, Evans, & Pruzan, 2013). The partner is bound to receive bonus from the policy based on the service price. It is, therefore, going to result in an ethical dilemma

As the manager of Nelson and Co., I have initiated an internal discussion board where existing matters arising from the company. The employees and partners are therefore in a position to debate on issues that emerges from the organization. I have also issued one placement to the panel that is concerned with the obligatory alternation of audit firms. After the predetermined period, an audit firm will resign from office, and a new audit provider will replace him or her.

There are ethical threats that the long association with an audit client creates. There can be cases of sins of omission. It arises when an auditor feels the pressure of merely omitting out of the financial auditing. Sins of omission are the reverse of misrepresenting numbers (Thomas, 2012). On an ordinary occasion, it might be easier psychologically. Sins of omission are equivalent to a child in a dilemma, trying to choose between lying to his or her mom and just simply leaving a room to continue staying happily, while unaware of any bad behavior committed by the child. The long association with an audit client can, therefore, give the auditors the chance to commit sins of omission which might negatively impact the operations of the company.

If Nelson &Co. Associates with other auditing firms for a long time, confidentiality issues are bound to arise. Matters of confidentiality are imperative in almost all the fields that offer services to the public. Such areas include medical and law fields. The accounting industry is no exception. According to Thomas, (2012), long association with other auditing firms can lead to lack of confidentiality and leakage of vital information. Other auditing firms are also competitors to Nelson & Co. When information is used inappropriately during this association, there will be the transfer of knowledge to a competitor, and this will eventually lead to the collapse of Nelson & Co. It will quickly make it possible for outsiders to steal the vital information necessary for the growth and development of Nelson &Co. in its attempt to expand

Long association with other audit firms can eventually lead to a conflict of interest. Conflict of interest is a thorny ethical issue to recognize in this aspect. The auditing firm that Nelson & Co. partners with could be in a position to receive bonus based on the returns (Thomas, 2012). These partners have access to the financial statements and can conspicuously attempt to overturn things, since they may not ask questions that they know the answers.

There are also advantages and disadvantages that come with mandatory audit firm rotation. One of the commonly used arguments in favor of audit firm rotation is concerned with the assumption that long association with an auditing firm can result to a relationship becoming recognized between the auditor and the said company (Nelson &Co.). As a result, it will compromise the independence of the auditor and goals. (Cameran et al., 2014). In cases where there is a compromise of freedom of an auditor as a result of the long association with a company, there are breaches in the financial statements. The rotation of an audit firm also avoids situations where auditors have a connection with managers of the partnering company. Such a relationship can interfere with the independence of the auditor.


Cameran, M., Campa, D., & Pettinicchio, A. (2014). IFRS Adoption among private companies: Impact on earnings quality. Journal of Accounting, Auditing & Finance, 29(3), 278-305.Jefrey, C. (Ed.). (2018). Research on professional responsibility and ethics in accounting. Emerald Publishing Limited.

Thomas, S. (2012). Ethics and accounting education. Issues in Accounting Education, 27(2), 399-418.

Zadek, S., Evans, R., & Pruzan, P. (2013). Building corporate accountability: Emerging practice in social and ethical accounting and auditing. Routledge.

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