Highlighted The Ethical Issue At KPMG Essay


Discuss About the Highlight the Ethical Issue at KPMG?



The ethical issue refers to the case published in the Wall Street Journal that highlighted the ethical issue at KPMG. The case features the ethical breach that occurred at KPMG office that led to the firing of 6 officials at the firm due to access to audit warning from a third party on audit information. KPMG accounting firm has its six employees fired after accessing improper warning ahead of planned audit inspection by the regulatory body, Public Company Accounting Oversight Board.

In the case, an individual who had joined the firm in the recent times from the oversight company received information from a former colleague at the firm on the planned audit sections and disclosed the information to the rest of the team at KPMG. Consequently, the information undermined the integrity of the oversight body and its process of auditing accounting firms. The individuals involved in the access of information within the KPMG firm were guilty of gaining access o an audit plan which would prevent full disclosure of information essential to the oversight body.

On the other hand, the employee in the monitoring firm involved himself in an unethical act of disclosing confidential information to an individual who had left the firm to work for another accounting company. The action amounts to an ethical dilemma as it jeopardizes the ability of the oversight firm to perform optimum in the intended audit activity. On the other hand, the new employee at KPMG acted unethically by receiving such information most probably due to the relationship he had with the previous company and thus breached the ethical conduct regarding employees to treat information with confidentiality. In the first case, he was not supposed to disclose the information to the rest of the team as it would limit the potential of the firm to remain accountable to the team.

In this respect, exposing the information led to a breach of the ethical conducts in accounting where information from one firm is not supposed to be carried by a third party whatsoever. Despite the opportunity the firm had to utilize the information, it was unethical to gain financial information up for an audit before the actual exercise as it creates a disparity in providing a clear training by the oversight firm. The firm stood faced the threat of tainted image due to the ethical issues raised that could lead to mistrust and close of business with prominent partners. The act would limit the profitability of the company since most businesses would disassociate themselves from doing business with the firm thus leading to financial losses. Therefore, it is unethical to disclose information or receive information on an audit before the actual exercise as it prevents a free and fair audit which results in a false report.

In providing solutions to the firm and clearing the bad name created by the employees, the firm could suspend the mentioned individuals and set them on a due legal process. The legal step would cater for the breach of the ethical codes in accounting concerning secrecy of information and gaining of financial information on audit before an actual audit. Moreover, it should have taken a step to seek for possible reputation damage to the company occasioned by the access to information by its members from the oversight audit firm. The act is dangerous to the operations of the firm as it lowers the trust level and the fairground under which accounting firms are supposed to operate. Afterward, it would be fair enough to lay off the individuals involved in the unethical practice and hand them over to the legal processes that might be done thereafter and as well disassociate itself from the activity and the perpetrators to the act.

In recommending, the act by the employees could have positive effects on the firm but then place the company in danger should the information be disclosed to the oversight body. Therefore, it was essential for action on firing to take place on both ends beginning with the employees from the Oversight body that disclosed to the former colleague with the full knowledge of the effect it might have to the firm of present employment. Fair practice is essential in accounting where people have to act ethically at personal levels. The firm can improve its performance and image by airing the issue and retracting from the expected audit.

By so doing, the firm ought to inform the oversight audit firm of the breach on the audit information to have them prepare a separate audit procedure that would be different from the existing one. Redeeming of the image is essential for KMPG as a known and trusted firm globally. Therefore, it would be fair enough to treat the matter with the urgency it deserved to quickly disassociate itself from the act and brand the persons involved as the sole perpetrators of the act that contravenes the organization’s ethical codes.

Indeed, the case presents several lessons on the dangers of having employees that fail to consider the secrecy standards expected in a financial institution. Leaking and receiving leaked information whose access gives one an upper hand in a certain matter is detrimental to the overall performance of business. In this case, it is important for firms to establish critical steps that allow information secrecy. At the same time, it is essential to gauge the ethical standards of individuals to avoid damages on the image of a company. Also, it is wise for a company to come clean and reject such unethical information despite the benefits it may deliver to a firm during an audit evaluation. Damage to a company image can bring dire consequences to the market performance due to reduced trust and image distortion.

The present firm needs to engage in serious ethical training on its employees to highlight the dangers involved in involving oneself in such acts. Besides, employees must understand the dangers it poses to a firm and the consequences of the same towards a sustainable career. For instance, persons reported in the case lose their personal reputation and might not be absorbed easily by other firms thus a career distortion. The boards of directors need to recheck its ethical guidelines and ensure all aspects adhere to the international code of ethics to make the firm relevant and updated on the lines that lead to success and brand image promotion.

Reference List

Blake J, C. Gowthorpe editors. Ethical issues in accounting. Routledge; 2005 .

Henderson S, G. Peirson, K. Herbohn, B. Howieson. Issues in financial accounting. Pearson Higher Education AU; 2015

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

Hartman LP, JR, DesJardins, C, MacDonald, LP, Hartman. Business ethics: Decision making for personal integrity and social responsibility. New York: McGraw-Hill; 2014.

Collier PM. Accounting for managers: Interpreting accounting information for decision making. John Wiley & Sons; 2015

Gao X, W Zhong, S Mei. Security investment and information sharing under an alternative security breach probability function. Information Systems Frontiers. 2015

Maroun W, J. Atkins. Section 45 of the Auditing Profession Act: Blowing the whistle for audit quality?. The British Accounting Review. 2014.

Chad, B. KPMG Fires 6 Over Ethics Breach on Audit Warnings.2017. Retrieved from

How to cite this essay: