As an accounting and finance student, with an ambition to qualify as a chartered accountant in the future, I feel it is appropriate for me to analyse the ethical issues faced by the Accounting Profession. The Accounting Profession is one which has come under a lot of scrutiny in recent years, as scandals such as Enron and Anglo emerged. A series of unethical decisions led to the closure of one of the ‘big five’ accounting firms when the Enron scandal came to light. In Ireland today Ernst and Young are facing a court appearance in relation to their involvement as auditors of Anglo Irish Bank, needless to say they also made some unethical decisions while working with the bank. In this literature review I endeavour to assess the code of ethics held by accountants and provide examples of when accountants have not adhered to this code of ethics. The International Federation of Accountants (IFAC) is a global body that sets professional standards for the accounting profession. IFAC has an Ethics Committee which released a new code of ethics, effective from June 2006 (George, 2005), and updated this code, effective from January 2011. There are five fundamental principles in this code of ethics, objectivity, integrity, professional competence and due care, confidentiality and professional behaviour. Objectivity implies that an accountant should not allow bias, conflict of interest or undue influence of others to override professional or business judgements (George, 2005). Accountants must be honest, straightforward and act with integrity in all business relationships. The principle of professional competence and due care requires accountants to act diligently and in accordance with current technical, professional and legislative requiremen... ... middle of paper ... ... was revised. This standard assigns sufficient partners and staff with appropriate time and skill irrespective of the audit fee to be charged, bans contingent fees, limits total fees receivable for audit and non-audit services of listed and unlisted companies and finally it prohibits all those involved in an audit from accepting client gifts unless they have an insignificant value (The Auditing Practices Board, 2010).Finally, ES5 which was updated in 2011, relates to non-audit services provided to audited entities and requires that the audit firm establish policies and procedures that require others within the firm, when considering whether to accept a proposed engagement to provide a non-audit service to an audited entity or any of its affiliates, to communicate details of the proposed engagement to the audit engagement partner (The Auditing Practices Board, 2011).
The principles of the AICPA Code of Conduct should guide the work that Jose and Emily do as auditors. The principles that specifically apply to this situation are Responsibilities, The Public Interest, and Due Care. CPAs have the responsibility to “exercise sensitive professional and moral judgments in all activities.” (Mintz, p. 19)
This organization has been setting ethical standards and publishing the Code of Professional Conduct for the profession since the early 1900s. A Code of Professional Conduct is necessary for any profession to help maintain strict ethical standards. This organization is the basis of ethical reasoning in the accounting profession because of what the Code of Professional Conduct covers. The code is comprised of a preamble and six articles. The preamble and the six articles serve as a foundation to provide guidance and guidelines for accountants to overcome any emerging ethical issues with ease on a daily basis. The six articles’ purpose is to protect the public, investors, and creditors. The AICPA Code of Professional Conduct consists of: Responsibility, Public Interest, Integrity, Objectivity and Independence, Due Care, and Scope and Nature of
Rittenberg, Larry, Bradley Schwieger, and Karla Johnstone. Auditing. 6th ed. Mason: Thomas South-Western, 2005. 10-40.
What does ethics have to do with accounting? Everything, since there have been some recent financial accounting scandals; a few examples being Xerox, WorldCom, Enron, which have generated much unwanted and unfavorable publicity for CPA's, including those working as controllers or chief financial officers for organizations.
The AICPA Code of Professional Conduct defines independence as consisting of independence of mind and independence in appearance. According to the AICPA Code of Conduct, Section 55 Article IV, An accountant member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities. Moreover, a member who practices their accounting work in a public firm should be independent in fact and appearance when providing auditing and other attestation services (aicpa.org). According to the case study What Lies Beneath, I think that Betty did not show her professional skepticism since she built trust on her client, which she could not have as an auditor. As an auditor,
Many companies are now looking into their business practices and how it benefits society. Corporate responsibility continues to be impacted as consumer awareness to global issues grows. For example, a small locally owned grocery store located in a metropolitan area just closed the doors to two stores located in high-crime-rated areas of the city due to no financial gains. The store just added a health conscious section for consumers that requested a need for it in the store, even though the cost and marginal is higher than most options in the store. With all of that going on the owner of the store was approached by a local food bank for one day old products that can be donated to them to help the community. The owner declined to help by citing that he feels by help he is opening a chance for loss of revenues due to employees not being honest. He thinks that his employees will just say that products are being donated when they are stealing.
...urvey of ethical behavior in the accounting profession. Journal of Accounting Research, 9 (2), pp. 287-306.
With every business activity come opportunities for fraudulent behavior which leads to a greater demand for auditors with unscathed ethics. Nowadays, auditors are faced with a multitude of ethical issues, and it is even more problematic when the auditors fail to adhere to the standards of professional conducts as prescribed by the American Institute of Certified Public Accountants (AICPA). The objective of this paper is to analyze the auditors’ compliance with the code of professional conduct in the way it relates to the effectiveness of their audits.
The ethical dilemma in this case is one that Daniel Potter is faced with. Daniel is a staff
In Module 1, Kindred Todd faced quite a few ethical dilemmas that included her values and technical ineptness. The first predicament was tested her personal morals and ethics. According to, Cumming and Worley, OD practitioners are dealing more and more with value conflicts with powerful outside groups (Cummings & Worley, 2008). Kindred was immediately faced with the issue of knowing what was ethically correct but being told the unethical approach was the best in order to benefit the client and her job security. Although compromising is one of the many skills of organization developers there are still morals that should be followed on each assignment. Kindred, know that deceiving the clients was unethical, took the first step to working on behalf of the client and immediately involved her superior, Larry, to resolve a potential conflict In the project. While her actions went in vain when she told her boss to remove her from the project and provide the client with a more qualified resource, Kindred did what she thought to be the best approach.
creating situations where ethical issues such as independence and integrity are questioned making it imperative that the AICPA create guidelines from which the evolving profession must base itself. In the age of deregulation accounting jumped on the boa t, now it is becoming increasingly fashionable to re-regulate, accounting, as a profession must not miss that boat, lest they drown in the result-- government intervention.
Ethics and morale behavior is the topic of concern for many professions. “Ethical principles are universal standards of right and wrong prescribing the kind of behavior an ethical company or person should and should not engage in.” (Institute Nov 2013) Management and Accounting practices are not unlike most although in this study it is highlighted the varied opinions and practices conducted by many of these professionals as to what is within the bounds of ethical behavior. These professionals are held to several profession standards of practice, laws, and regulations created to assist them in making the right decision. Mary Guy (1990) stated that “Ethics can be a particular problem with financial reports. Accepted accounting principles leave ample room for arriving at different results in the short run. Highly subjective estimates can substantially influence earnings.” In an analysis of the survey there were several instantiations of management practices dangerous to ethical practice.
When faced with major problems and dilemmas in management accounting and financial management, practitioners look to the 'standards of ethical conduct' for practitioners of management accounting and financial management. While looking at ethical standards one has to look at four different areas they are competence, confidentiality, integrity, and objectivity. These four areas are the backbone of what management accounting and financial management are made. When faced with a possible violation within this backbone of the ethical standards one should ask themselves two questions, "Will my actions be fair and just to all parties affected?" and "Would I be pleased to have my closest friends learn of my actions?" (Weygandt D-1) practitioners of management accounting and financial management have an obligation to the public, organization, and themselves to adhere by the ethical standards both domestically and internationally.
As with other professional disciplines, understanding and upholding ethics is very important in the accounting field. Small-business investors and leaders consistently rely on the ethical collection and delivery of financial information, and are sometimes placed at risk if accounting ethics are not preserved. For a small-business owner, investor or manager, learning the basics of accounting ethics and their function is a good way to avoid legal and financial trouble. The professional accounting organizations establish codes of ethics and integrity standards that their me...
The evolution of auditing is a complicated history that has always been changing through historical events. Auditing always changed to meet the needs of the business environment of that day. Auditing has been around since the beginning of human civilization, focusing mainly, at first, on finding efraud. As the United States grew, the business world grew, and auditing began to play more important roles. In the late 1800’s and early 1900’s, people began to invest money into large corporations. The Stock Market crash of 1929 and various scandals made auditors realize that their roles in society were very important. Scandals and stock market crashes made auditors aware of deficiencies in auditing, and the auditing community was always quick to fix those deficiencies. The auditors’ job became more difficult as the accounting principles changed, and became easier with the use of internal controls. These controls introduced the need for testing; not an in-depth detailed audit. Auditing jobs would have to change to meet the changing business world. The invention of computers impacted the auditors’ world by making their job at times easier and at times making their job more difficult. Finally, the auditors’ job of certifying and testing companies’ financial statements is the backbone of the business world.