Question | ONE

Accountants owe the duty to act in a professional and ethical manner concerning clients, as well an obligation to respect the laws that are involved with the profession. This is where a crossroads of ethics and legalities are formed and potentially the defining point of crucial decision-making. Stephen Richards and his actions under employment with Computer Associates (CA) are then examined in light of this concept.
Accusations against Stephen Richards permitting the backdating of contracts unlawfully were confirmed, giving sanction to the unethical nature of his behaviour. Henderson describes that illegal behaviour will not be deemed unethical when the legal system, accounting profession and society all agree upon the same moral assumption (p 944, 2011). Committing fraud is against the law, which is socially unethical as it is legally unethical. In this case however, the accounting profession challenges the acceptable accounting practices undertaken at CA, leading to the result of Richards’ choices.
“[a]ggressive financial reporting was not [an] uncommon… [e]vidence suggested that earnings management… was a widespread corporate practice” (Soltes, 2011). This gave CA precedence to govern their firm by societal standards, and not solely by rules and regulations. In defense, CA’s audit did assure that financial statements were in accordance with GAAP (Soltes, 2011). It was therefore believed by Richards that the manipulation of reports was merely a reflection of conforming to the expectations of the accounting profession. While this meant breaching the law, which led to severe legal consequences, intentions were merely misplaced “aggressive accounting” techniques, not unethical ones. This leads to the notion that if CA were to achieve the same results within “allowed accounting flexibility”, culturally, Richards’ actions would have been judged