Analysis Of Accounting Ethics

It is important to have at least a good understanding of what we are talking about in regards to not only ethics in general but ethics in business and for accounting specifically, as this case is focused primarily on accounting practices. The American Institute of Certified Public Accountants or AICPA had developed five divisions of ethical principles that its members were expected to follow. Those principles are “independence, integrity, and objectivity”, “competence and technical standards”, “responsibilities to clients”, “responsibilities to colleagues”, and “other responsibilities and practices” (Sellers, 1981). And even after the recent onslaught of scandals, some of the responsibilities of regulation in public companies have been transferred from them to the government in order to create the Public Accounting Oversight Board or PCAOB, the AICPA does retain a good deal of authority in this area.

Accountants are held to a higher ethical standards and they must performed their duties in compliance with standards or ethical values of honesty, integrity, objectivity, due care, confidentiality, which must be fully committed to. They must put clients or public interest first before their own. They must have and ethical values and maintain those values way beyond what the society or the company’s code of ethic. It is important that accountants’ behavior or ethical values is in conformity with the

As a response to several corporate failures resulting from corporate misconduct and fraud, Congress passed the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act is an accounting and business related law that was put into place to help boost confidence in financial accounting and financial markets (US Sarbanes Oxley Act). Some of its key provisions are that it requires the CEO and CFO to personally sign off on all financial statements, increases penalties for those who violate the act, and it protects whistleblowers (SOX 2002). Clearly, Sarbanes-Oxley can improve ethics in financial reporting and the purpose of this paper is to show how.

Ethics in any industry is important, but for Accounting professionals and those in need of their services, it is a particularly stressed element. Information provided by accountants is used to make major decisions, including investing, downsizing, expanding, etc, so accountants are expected to be competent, reliable, and have a high degree of professional integrity. Because of these high expectations, the professional accountancy industry, like many other professions, has adopted professional codes of ethics (Woelfel, 1986). These ethical codes go above and beyond the requirements for state or federal laws and regulations. There are several professional organizations within the

Businesses, investors, creditors rely on accounting ethics. The accounting profession requires honesty, consistency with industry standards, and compliance with laws and regulations. The ethics increase the responsibility and integrity of accounting professionals, and public trust. The ethical requirements influence the management behavior and decision-making. The financial scandal of Enron and Arthur Anderson demonstrates the failure of fundamental ethical framework, such as off-balance sheet transactions, misrepresentation of financial statements, inaccurate disclosure, manipulations with earnings, etc. The confronted accounting profession and concern for ethics in businesses forced regulators to revise the conceptual framework of accounting processes.

While I was looking for an appropriate topic for research, I found an interesting publication, which fitted best to the subject (ethics in managerial accounting issues) and also included 5 good examples examples of possible problems associated with the field. The method of the study seemed unclear, especially considering the connection between the serial number of a dollar bill and the question to which the respondent had to answer in the end (in my work I will constantly refer back to the text, and in the end there will be a link to the document for review), though the examples given in the text seem to be really appropriate.

Imagine trusting your hard-earned money like your retirement savings to a financial adviser or Certified Public Accountants (CPA) only to lose it all in a fraudulent Ponzi scheme. In today’s world of business many organizations, financial planners and accountants are in the news due to the financial ethical breaches that have affected their customers, employees, and the general public. A CPA has to be responsible for their audits and take any punishments as a result of their mistakes, incompetence or illegal actions. CPAs are expected to have integrity in their work,

As technological advances force globalization and unified standards upon the world of accounting, the understanding of ethical systems and their role on business becomes a necessity. The goal of accounting is to provide users with reliable and accurate information that is independent and complete. However, if accountants around the world are not subscribing to the same ethical standards and theories, then the urgency to unify standards and practices between U.S. GAAP and the IFRS are no longer significant. With ethical theories being extensive in nature they can result in different outcomes and justifications making them the highest priority in accounting. Required education and training on each system is necessary to understand flaws and contradictions

The Enron scandal was one of the most notorious bankruptcies of all time. Many people know about the energy titan’s downfall but less realize that it was also one of the biggest auditing blunders in American corporate history, leading to the dissolution of the Arthur Andersen LLP, which at the time was one of the five largest auditing and accountancy partnerships in the world. The most intriguing aspect of this case is that Andersen was eventually cleared by the United States Supreme Court, yet the company still failed to live on due to its tarnished reputation stemming from its unethical behaviors. The pressure to generate revenue for clients while simultaneously auditing their books became too large a burden for the firm and they eventually resorted to unethical means to achieve their objectives. The demise of the Andersen accounting firm shows the true importance of practicing good ethics and maintaining a good reputation amongst peers; the vitality of the business could depend on sustaining a clean image in the ever-changing business world.

1) The discipline dealing with what is good and bad and with moral duty and obligation

Arthur Andersen was once the eighth largest accounting firms in the United States who conducted auditing tax and consulting services to large corporations. Likewise, Arthur Andersen was also responsible for both Enron and Worldcom auditing processes and transactions during the corporate scandals. Prior to the Enron and Worldcom’s scandals, Arthur Andersen was a firm known for its trust, ethics, and integrity (Squires, 2003). In Andersen’s early years, their reputation gave them a competitive advantage in the market which also help them to attract new clients which resulted in continuously high profits. According to Squires (2003), Andersen leaded the way for accounting professions; he believed in putting the interests of the general public

First, he noted that the field of financial accounting is a very dynamic field and that what is normally taught in class many not reflect what happens in the field. He stresses the fact that the field of financial accounting is very flexible and dynamic and that new norms and codes are often initiated on a constant basis depending on the emerging situations. He gave a number of organizations that have failed despite the fact that there are measures meant to address the issue of financial fraud. He gave an example of a number of companies who have failed despite the fact that there are good accounting principles and good accounting personnel. Homan concluded that financial accountants should always be ready to meet new encounters and respond ethically. In fact Homan spends greater part of its speech in explaining how ethics are crucial in financial accounting or forensic accounting. He emphasizes the fact that ethics are even powerful than the financial theories taught in class. He gave an example of companies where senior management can collude and commit a financial fraud yet they know all the financial principles. In such cases, Homan state that such managers lack the ethical

In light of the recent financial catastrophes, there appears to be an increasing desire for ethical dealings in business. Maxwell suggests that there is currently a trend in the marketplace that seems to be placing more value on integrity, taking a longer view of strategies, and setting more realistic or conservative goals, though the jury is still out regarding the effectiveness of implementation and execution in changing the corporate money-making climate. Despite the Sarbanes-Oxley Act of 2002, which sets the standard for corporate accountability and penalties for wrongdoing, some experts believe the responsibility for maintaining an ethical environment is up to management (Jackson, 2005).

Ethical issues have greatly transformed in our lives since the great Enron, Xerox and other huge corporations proposed big profits showing earnings of billions of dollars and yet in reality facing bankruptcy. These corporations faced great trouble with the federals and state for manipulating financial statements. But not only corporations can be blamed on this, accounting firms were involved in this as much as the corporations were. With the business stand point, ethics comprises of principles and standards that guide behavior. Investors, traders, customers, and legal system determine whether a specific action is ethical or unethical. Ethical issue is a vast subject, but we will look at the niche

The profession of accounting has become spotlighted by the events in recent years including namely Enron. The ethical behavior of businesses is becoming increasingly scrutinized at every turn. Thus it is important to specify the nature of conducting accurate and ethically in accounting and how this can be of subsequent benefit to the company as well as the business world in the long run.