Gazprom – a Privately Owned Gas Industry
Essay Preview: Gazprom – a Privately Owned Gas Industry
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Gazprom was a privately owned gas industry; and after the collapse of the Soviet Union it “was one of the first publicly owned firms created by Russias privatization program.” (Knapp, 2011, p. 468). Chernomyrdin and Vyakhirev worked together for many years in Gazprom; and they had a huge influence and impact in the decision of the company. The firm was involved in major scandals because Chernomyrdin was accused for using “his political power to grant large tax concessions and other economic benefits to Gazprom” (Knapp, 2011, p. 470). Also, the company PwC, who was an important CPA firm, was related in the scandals too because it performed the audit of Gazprom.
This case illustrates the different challenges that a major accounting firm faces when it establishes its first practice office in a foreign country. First of all, the firm has to deal with the competence of the local accountants whose probably have a better understanding of the laws and regulations of the country; so, accounting firms should get a clear understating of the regulations of a country before performing accounting services. Also, the firms have to face with some resistance by the owners of companies because they trust their actual accountants and companies will not change them so easily. In addition, another challenge that acounting firms have to deal is with the situation that happened in Russia in the past that companies fear that new firms “would not be as cooperative or compliant as pocket auditors” (Knapp, 2011, p. 474).
Moreover, accountants have to consider that probably some of the practices that are considered illegal or unethical in some countries are totally accepted in others. In these particular situations, accountants have to deal with conflicts of interest and they should analyze if that situation has moral and ethical obligations. I think in these cases the firms have to be consistent with the principles of professional conduct and the ethical standards. The reputation of the firm can be affected if they decide to accept a job in a foreign country where they have to deal with activities that are illegal in their countries of origin; and consequently they can lose some clients.
Also, accounting professionals have responsibilities with every person who relies in their jobs; so, accountants have an obligation to the following parties: “the companys management, investors, creditors, outside regulatory bodies, and the integrity of the financial markets.” Although an accountant is hired by a company, he or she has a responsibility that goes beyond of the interest of the company. As a result, the firm PwC had the responsibility to provide reliable and accurate information to Gazproms minority investors.
In the case related with the company Gazprom and the accounting firm PwC, I do not think that the accounting firm should accept the performance of the “special audit” of Itera transactions because it was obvious that these translations were related party transactions; and these types of transactions may “creates potential conflicts of interest which can result in actions which benefit the people involved as opposed to the shareholders” and I believe this definition totally describes the situation of Itera transactions.