- 1 - Declaration of Originality and Word Count DECLARATION I here by declare that the graduation project is based on my original work except for quotations and citations, which have been duly acknowledged. I also want to declare that it has not been previously or concurrently submitted for any other courses/degrees at HELP University College or other institutions. The word counts is 9932 words HOANG VAN THU DATE: 17/10/2011 - 2 - ACCOUNTING ETHICS AND ITS IMPORTANT ROLE FOR REDUCTION OF ACCOUNTING FRAUD: AN EMPIRICAL STUDY IN HANOI By HOANG VAN THU October 2011 Supervisor: Dr. Nguyen Hong Quan ABSTRACT As we know that ethic can be defined as many way, but in this part I just want to mention that it is a set of principle of right conduct or set of moral values help by individual or group. By other way, ethic refer to the standard of right or wrong, which prescribe what humans ought to do, usually in term of rights, obligation, benefits to society, fairness. We can see that example of ethic as link to those standards, which impose the reasonable obligation to refrain from stealing, murder, and fraud. With these above mentioned ethics as a sensitive norm that related to business, especially in accounting fields. Nowadays, the code of ethics for professional accountant is providing for all people who work in this field. However, its still have some problem that relate to accounting fraud in the world. We can ask question that how can help us to reduce accounting fraud in business today. It is not easy to have perfect answer of this question. However, in this study we can see that the significant of ethic in accounting fields. And the way that help to reduce accounting fraud in environmental accounting today. In this part, I would like to - 3 - show that sample of survey on accounting fraud in Hanoi. This survey carried out 100 accountants who are work in accounting fields. In additional, they are separate into two groups. The first group include people who less experience in accounting than other. The second group includes people who have experience and less possibility to break the rule in accounting standard. Moreover, ethic also relate to other factor as suppliers, customer, investor and other relation in business. So to keep the ethical for the accountant, who depend on individual or group of accountant who have responsibilities in this field. To reduce the fraud in accounting field, we need to apply the GAAP (General Accepted Accounting Principal) in the system effectively. - 4 - ACKNOWLEDGEMENT With the position as a student I always consider that learn and collect information from the teacher or supervisor. Basing on this factor, we can expand knowledge or other significance problems. There are still having any people, who help me to complete this project. However, I would like to thank to guiding me the right way to for this part and motivate me to complete its. Firstly, I would like to say thank you to my supervisor Mr Nguyen Hong Quan for his support, guidance, and vision for all my study Secondly, I would like to say thanks you to Ms Sumathi from Help University College, for instruction and support for my project Thirdly, sincere thanks to Mr Hoang Van Nam for helping me to perform the survey effectively. - 5 - TABLE OF CONTENT PAGE DECLARATION 1 ABSTRACT 2 ACKNOWLEDGEMENT 4 TABLE OF CONTENT 5 CHAPTER 1: INTRODUCTION 7 1.1 Research and background 7 1.2 Problem and statement 9 1.3 The objective and sphere of research 11 1.3.1 Objective of research 11 1.3.2 The sphere of research 11 1.4 Research method 11 1.5 Structure of research 12 CHAPTER 2: LITERATURE REVIEW 13 2.1 Definition of Ethics 13 2.2 Code of Ethics for Professional Accountant 14 2.3 The Factors that Contribute to Accounting Fraud 16 2.3.1 Conflict of interest 16 2.2.2 Driven by profit management 17 2.3.3 Corporate transparency 18 2.3.4 Money Culture 19 2.4 The role of Accounting ethic that help to reduce Accounting Fraud 20 3.1 Research Objectives 23 - 6 - 3.2 Research Method 24 3.3 Sources of Data and Sample Selection 25 3.3.1 Collecting Data 25 3.3.2 Sample Selection 25 3.4 Scope of study 26 3.5 Hypothesis Statement 26 CHAPTER 4: ANALYSIS AND FINDING 28 4.1 Collection of Questionnaires 28 4.2 Description of Result 29 4.2.1 Part 1 29 4.2.2 Part 2 33 4.3 Result Analysis 34 4.3.1 Hypothesis 1 34 4.3.2 Hypothesis 2 35 4.3.3 Hypothesis 3 35 4.3.4 Hypothesis 4 36 CHAPTER 5: CONCLUSIONAND RECOMMENDATION 37 5.1 Conclusion 37 5.2 Recommendation 38 5.3 The limitation of study 39 5.4 The ideal or suggestion for research in the future 40 REFERENCE 41 APPENDICES 43 - 7 - CHAPTER 1: INTRODUCTION 1.1 Research and background As we know that, ethics refers to the sensitive concept with any field in business in society, in particular link to the accounting. Besides that it refers to “the critical, structured examination of how we should behave — in particular, how we should constrain the pursuit of self-interest when our actions affect others”. Moreover, ethic also reflects a personal set of value and used by individual to guide their actions and to recognize any obligation, it is not a objective, but a subjective for individual”. And it relate to the code of conduct dependence upon circumstance and the life experience of the individual. “The ethic also relates to accounting and it has difference way to define ethics. We can understand that it is one of the first field applied ethic in systems. There are several factor that have been applied in accounting as moral value, judgments” We know that accounting has their 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 can be considered as an example of professional ethics. We have to consider the code of ethics for profession accountant and some factor that relate to the accounting fraud. According to the recent survey about 150 accountants in Vietnam. All of them divided into two types. They are both from public and private companies. This result of the survey shows that, accountants who have more experience also less objectivity rather than accountant with less experience. However, there is no doubt that they are more possible to break the rule in accounting or culture rather than the one who have - 8 - more experiences. There are many ways that raise the risk in accounting ethics such as customers, suppliers, and other individual who have relationship with the organization within ethical problems. Next, I would like to introduce some problem that link to accounting ethic, specialty in Vietnam. In 2005, the Ministry of Finance of Vietnam makes the decision for auditing and accounting through professional ethical standard. There are some standard that getting from the basis of “integrity, objectivity, confidentiality, expertise and prudence, occupational status, compliance with professional standards.” All of these standards give us above are the reach and character of accounting activities should be provided in an ethical. However, we cannot exist accountant do the right way as the standards above. We know that Vietnam’s economy is increasingly and integrated with worldwide. For instance, Vietnam was joined in WTO in 2006, becoming a 150th member of WTO. When Vietnam take part in this organization, there are many enterprise may have opportunities as well as face with difficulties and challenges to compete with other rival com from other countries. Moreover, World Trade Organization will be taking to effort of Viet Nam to reach the global trading market, enhancing the position of Vietnam in the international trade market, creating a premise integration and economic development. With the member of WTO the Vietnam’s economy, particular some industries as banks, finances, services, which need to be more develops than other industries. As a result, when the demand rising, that means the quality of accountants are need to improve and upgrade to suitable with the quality of accounting in the world. To conclude, I am going to analyze the accounting ethic and its role for reduction of accounting fraud in this project. - 9 - 1.2 Problem and statement Nowadays, the ethics has been played a vital role in accounting major as well as other industries in the business. Recent year, accounting fraud is increasing more and more and it means that the important of accounting ethic is rising. As we know that, to reduce the accounting fraud in Vietnam likewise other countries in the world, which very difficult to solve its. This research about accounting ethics in Hanoi is less than this one in Vietnam, so the project will contribute to reduce the accounting fraud in Vietnam. The purpose of this research that analyze accounting ethics and its role to reduce accounting fraud in Vietnam. So the first problem that I want to mention: What does the important role of ethic in accounting? To answer this question, we need to understand that professional accountant must follow the guideline of judgments and moral values in practicing accounting. Professional accounting also need to consider ethic as the first thing to be strictly as well as the professional in the field of medicine and law. With respect of customer, “they also want to receive the service of accounting professional not only rely on his skill and ability, but also on his professional integrity”. It leads to customers, who used the service of professional accounting also need to follow the ethic followed them. So the code of ethic for professional accounting needs to be developed under these above reasons. Beside that the professional accountant must be followed them, that mean they respect customers. They have high degree responsibility of code of ethic. So accounting ethic assurance that the objectivity and integrity in this major. Now, I would like to mention that the role of ethic in accounting. It can be considered as the way for accountant to follow certain rule, when they perform their works at the right ways. Furthermore, the ethic help professional accountant have - 10 - confidence while they are doing in the public or in their own fields. According to the recent big trouble happen in business, which relate to the role of ethic in accounting, for instance, Enron, WorldCom and Global Crossing in the USA. Almost these companies also have problem with ethic in accountant. In the case of Enron Corporation, they are concentrating on preparing for the good finance practices. Since, investors and other stakeholders rely heavily on the financial statements of a company. And they need the information of the financial statement, in order to make good decision in business. So the ethic has been played a vital role for profession accountant. Next, the second problems: How does accounting ethic help to reduce the accounting fraud. As we know, accounting fraud can be defined as “deliberate and improper manipulation of the recording of sales revenue and/or expenses (with a purpose of making a company’s profit performance look better than it actually is) is qualified as accounting fraud.” There are some several actions that consider as accounting/bookkeeping fraud: -“Not listing prepaid expense or other type of assets” - “Collapsing short-term and long-term debt into one amount” - “Not showing certain classification of current assets or liabilities” So, it is not easy to reduce the accounting fraud in Vietnam likewise other countries in the world. For example, “ According to Nguyen Phuong Mai, chief of the representative office of the UK-based Association of Chartered Certified Accountants (ACCA) in Vietnam, it is difficult for training ethic for accountant. In order to reduce the accounting fraud, we need to apply the rule of General Accepted Accounting Principal (GAAP). Under this rule, we can prevent the accounting fraud effectively. Since any professional accountants [...]... people in the accounting and business-handling department of a company must comply to Since the diverse range of accounting services and recent corporate scandals, ethics issues are paid more attention within the accounting profession Stakeholders make investment decisions based mainly on the accounting information and financial statements Therefore it is the responsibility of the accounting professionals... the conduct of ethics and moral conducts when managing and controlling the business It is vital to - 13 - the companies and its stakeholders And the most important aspect of business ethics is accounting ethics Wikipedia defines accounting ethics as “the 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. ” These... implication for other companies in business We see that accounting ethic cannot bring all benefits, in order to prevent fraud or briber However, it can play vital role to help reduce accounting fraud in accounting environmental today There are several scandal related to accounting fraud as Nugan Hand Bank, Worldcom, AIG All of these scandals relate to creating new accounting, misleading financial analysis... major part of businesses also want to know why increasing cheating and committing fraud According to many experts in the world, they realize that it derived from misleading auditors, auditors looking the other way, disguising transactions, withholding information, providing unbalanced advice, and misusing insider information We also know that the accounting fraud lead to diminish the integrity and reliability... reliability of accounting and financial information And accounting fraud originally from these factors as follow: conflict of interest, driven by profit management, corporate transparency, money culture 2.3.1 Conflict of interest According to may research, conflict of interest occur when an individual or group involved in multiple interest between them Another way to define its as follow a situation in which... the code of ethics, i.e this is the role of ethics in accounting, so that nobody loses confidence given information The essence of accounting ethics is in the maintenance of professional objectivity and integrity 2.2 Code of Ethics for Professional Accountant When I mention about the rule for Professional Accountant, I always consider the code of ethic, GAAP (General Accepted Principal) for professional... its 2.3.3 Corporate transparency We know that if we have weakness in corporate governance and lack of transparency in our system This reason can be considered causes of the financial crisis, and the subsequent events of corporate collapses and accounting fraud An organization lacks of transparency in their financial report leading to stakeholder "especially investors" unsure decisions about an organization's... through information and data collected Chapter 5: Conclusion and Recommendation - 12 - CHAPTER 2: LITERATURE REVIEW 2.1 Definition of Ethics Accounting has been played a vital role and its part of our businesses and financial words However, the accounting ethic needs to be kept in mind through all transaction The terminology Ethics is sourced from the Ancient Greek “ethikos” that means the background and. .. apply its in the world In real business world, there is still having many accountants that not consider the important role of code of ethic for them And they often breaks the rule or do not follow the principle for professional accountant That means lead to many frauds occur during the business operation of large company or group in the world In other points, I would like to mention the difference of accounting. .. bribery Now, I want to mention some factors that can help reduce accounting fraud as follow: First, it can be called as “Forensic accounting it helps to deal with financial - 20 - facts of legal problems Moreover, forensic accountant, who have both side as proactive and reactive one However, the main function of it’s to prevent fraud and corruption in the areas of accounting and finance and reduce the . HOANG VAN THU DATE: 17/10/2011 - 2 - ACCOUNTING ETHICS AND ITS IMPORTANT ROLE FOR REDUCTION OF ACCOUNTING FRAUD: AN EMPIRICAL STUDY IN HANOI . that the accounting fraud lead to diminish the integrity and reliability of accounting and financial information. And accounting fraud originally from