In the past there [ ] have been several cases in the business environment related to the practices of accountants and auditors who have violated the trust and confidence of public. A number of researches have been conducted to find the potential factors resulting in unethical, biased or inappropriate decision making and judgments by the professionals. The aim of this paper is to review two academic articles and conclude on the reliability of the claims and assertions made by the authors.
The research paper of Pflugrath, Martinov-Bennie & Chen (2007) aims to analyze the impact of organizational codes of ethics on the accountants’ and auditors’ judgments and professional decisions making skills. The research is conducted on a sample of 112 professional accountants and auditing students and resulted in indicating that the codes of ethics positively influence the judgments of professional accountants but does not affect the students’ judgments. On the other hand, the paper by Shafer, Morrid & Ketchand (2001) is based on the research of the professional auditors and the impact of their personal values on their ethical judgments and behavioral intentions. The study concluded that personal values do not affect the ethical considerations and judgments of professional auditors. However, the knowledge and the understanding of moral intensity have an impact on the judgments abilities of the professional accountants.
Pfflugrath, Martinov-Bennie & Chen (2007) conducted the study basing their discussion on the new International Standard on Quality Controls 1’s (ISQC1) requirements for all organizations and accounting firms to implement policies and regulations which support the ethical and technical independence of the professional accoun...
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...st is dependent on the codes of ethics which are being set and exercised within the business environment and the perceptions of moral intensity which affect the judgments of the auditors. There are other determinants, as discussed by the articles, like clients pressure and personal interest which may affect the quality of judgments and decision making in the fields of accounting and auditing but it is not right to ignore the 2 factors being discussed. Ethical judgment, hence, depends on the exercise of codes of ethics which provide autonomy to the auditors and accountants to work in the best interest of the business and not at the discretion of the client’s orders. Moreover, such codes of ethics, if exercised appropriate may affect the values of auditors and accountants leading to the better and more independent of the financial data of the business under review.
Ethics plays a vital role in developing accurate and high quality financial statements for management, financial institutions, and investors. As management utilizes financial statements to make decisions regarding the operations of the business, it is necessary to review accurate financial statements to make strategic decisions about the future of the organization. Investors and financial institutions require accurate financial statements to make informed decisions upon whether to invest funds into the organization or the wisdom of lending funds to said organization.
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.
First, the Code of Professional Conduct encourages accountants to behave ethically. Encouraging accountants to behavior ethically is a strength because it helps create customer loyalty, positive work environments, and dedicated employees, which helps avoids legal issues. Accounting professionals have to behave ethically just because of the profession they are in. Accountants need to behave ethically because the investors, creditors, and rest of the public rely on an accountant’s professional judgment to make
Throughout the years, the news covered stories of corporate scandals involving accounting unethical practices. These unethical corporate acts had a tremendous negative impact on these company’s stockholders, investors, employees and the whole U.S. economy. Most of these scandals would have been prevented, if the independent audits of these companies were conducted in an ethical manner. With this in mind, two corporate scandals will be the subjects of further review to understand that an auditor might encounter ethical dilemmas, if independence and objectivity are not part of the audit process.
In an organisation ethics are supposed to set standards as to what is the right thing to do in conduct and decision making however this is not always the case. Over the years different scandals have occurred which have shown that companies and in particular the people that run them are not at all ethical and only seek to maximize profits. Economical analysts throughout the years have suggested that the way to avoid such incidents is by either having a code of ethics along with ethics training or through strong ethical leadership.
In today’s business environment it has becomes essential for accountants to have a basic grasp of business ethics. Having the guidelines in places gives accountants a relatively consistent method of addressing ethical situation (based on interpretation). Even simply having a course dedicated to ethics shows accounting students that this is an issue which is an important part of the training and will at least give them a chance to address their own morality. As well as this, teaching morality also gives the company a level of deniability when it comes to any scandals or unethical behaviour.
Carmichael examined the ethical auditing to help companies-clients become more effective. Ionescu used the Carmichael’s research to analyze ethical processes of external auditing. The ethical auditing refers to companies that possess high organizational values and demonstrate their support of stakeholder interests and fair bookkeeping system (p. 122). The author agreed with McAuliff (2002) on ethical functions of external auditing. Ionescu indicated that an external audit should assess the ethical environment of the company-client and develop comprehensive methodologies that improve the ethics
The PCAOB has the authorization to provide rules governing the following areas; ethics, independence, and quality control for any registered accounting firm...
Deontological and utilitarianism are the two type of ethics system which characterizes ethical decision-making with respect to organizational culture and the accounting profession (Pointe Cast Presentation, n.d.). The paper presents in the following section the diverse approaches provided on the two ethical systems.
Ethics plays an essential and integral part in the accountancy profession. Professional conduct plays an important role in establishing public trust in financial reporting and business practise. Yet this can and has come under threat when clients and employees are exposed to the risk of fraud when accounting ethics are not adhered to. Codes of ethics are adopted to ensure the reliability, comparability and integrity of financial statements. Ethical standards exist to safeguard the fundamental principles of accountancy and recognize threats to these principles so judgement can be made to resolve ethical dilemmas. However an accountant frequently faces ethical issues due to their work and not always stays vigilant to the manipulating influences on their judgement.
The Code of Ethics of the professional accounting bodies in Australia and its fundamental principles ………………………………………………………………………….…………3
Future accountants and auditors should not try to be convinced to act in an ethical manner through the education but rather be more aware with regard to ethical issues in the accounting practices and taught what is the correct manner in addressing the challenge is in the profession. The ethics of the accounting concepts are morally correct if followed thus an emphasis on the principles of honesty and integrity and the duty of the accountants and auditors to their society must be introduced in the tertiary education in order to ensure that these principles are instilled in the students and thus demonstrated in
It significantly affects the mentoring process, relationships with the client, and create a foundation for discrepancies between the firm’s leaders and accounting professionals (Bobek, Hageman, & Radtke, 2015). Bobek, Hageman, and Radtke (2015) used the descriptive statistics to measure the responses of accounting professionals and correlation analysis to evaluate the ethical environment. The research demonstrated that the participation of accountants in shaping the ethical norms increases the mentoring relationships, values, and outcomes (pp. 127-129). The sensitivity analysis demonstrated significant differences in perceptions of the ethical environment between the partners and non-leaders of the accounting firm. The differences do not allow maintaining a strong ethical atmosphere, decreasing the degree of organizational fit, and weakening the ethical perceptions of firms’ members (p.
Abdolmohammadi, M., Fedorowicz, J. and Davis, O. (2009) findings indicate that despite the attention in recent years to the importance of ethics and social responsibility in the accounting curriculum and the profession, the ethical reasoning scores of those attracted to public accounting seems to have actually deteriorated over the past 15 years. This outcome suggests that there is a need for improved training and education of public accountants in ethical reasoning and decision making. The report concluded that ethical reasoning increases with age and education, but education is the primary factor in this relationship.
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.