...Surrounding the Professionalism of Accounting | | 3.0 Literature Review | | 4.0 Presentation of the main Idea about the Professionalism of Accounting | | 5.0 Analysis and discussion | | 6.0 Conclusion | | 7.0 Reference | | 1.0 INTRODUCTION 2.0 ISSUES SURROUNDING THE PROFESSIONALISM OF ACCOUNTING Twenty years ago, Briloff (1986) alerted the profession to the crisis of credibility being faced because society perceived accountants to have lost their commitment to public service. The credibility of the profession is threatened when the ideals of integrity, independence, public service and ethical standards come under suspicion. Well-known scandals of one of the major leading accounting firms in the United States Arthur Andersen coupled with alleged unethical acts committed by Enron have arouse the conscious of the public and stakeholders as to the moral decline and unethical posture of public accountants unveiled a decline in moral reasoning and ethical standards of public accountants (Dellaportas, 2006; Esmond-Kiger, 2004). Over the last few years, the accounting profession has been beaten up badly in the media, somewhat justifiably. The forces at work were numerous and complex and a variety of phenomena created the entire profession had its reputation tarnished. Some forces were not new: delivering services that acted to impair independence; becoming too cozy with clients, active participation in finding ways to circumvent accounting standards, and even simple...
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...Ethics Ethics at its simplest form is a set of principles of right conduct to be followed in an organisation.[1] If the principles are not followed, there are repercussions to the person who fails to follow the rules. Personally, the word which describes ethics best is trust. When a profession follows a set of ethics, clients are more willing to trust the profession to do there job to the highest standard. This is because the profession gains a good reputation of being on the whole an honest profession. This is particularly important in the accounting profession where ethics have been brought into the spot light over past few years. Accounting Ethics Auditors are not paid by those whose interest they are supposed to represent-those third parties who rely on our reports. Robert H. Montgomery emphasises this point: “accountants and the accountancy profession exist as a means of public service; the distinction which separates a profession from a mere means of livelihood is that the profession is accountable to standards of the public interest, and beyond the compensation paid by clients.”[2] Basically, he is saying that accountants can not be expected just to do what they are paid for without considering the implications of what they are doing and reporting. They must ensure that the users of the information are protected so as the risk of wrong information is minimum. Accounting Scandals Ethics in accounting has been highlighted by the reports of several high profile...
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...Abstract Over the past ten years, public trust in the accounting profession has been diminished due to financial scandals brought on by poor decision making, dishonesty and a move away from morals, values, and ethics. With the perception of accounting at an all-time low, there is a need to reinvent the profession. The following pages of this research paper will examine the Model of Organizational Trust, and its three elements of ability, benevolence, and integrity. The three elements will be defined and explained using support from peer-reviewed articles. The report will also discuss the ways in which the elements are incorporated in the AICPA’s Code of Professional Conduct. The elements will be examined to learn the ways in which they help to promote trust in the accounting profession and finally, suggestions will be proposed to help improve public trust in the accounting profession. Introduction An essential component every profession must possess in order to garner satisfaction and commitment from clients and customers is trust. Trust cannot be gained quickly; it is developed over time through interactions, observations, and an understanding of another’s beliefs and values (Mayer, Davis, Schoorman, 1995). However, a person’s stated beliefs do not often dictate their behavior. In pursuit of professional goals, individuals often set aside what they know to be right and act in a manner that benefits them either financially, with recognition, or in some other manner (Six...
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...It’s Time For Principles-Based Accounting Ethics More than Establish Minimum Acceptable Standards Professionals often face grey areas in life that have no clearly defined right or wrong answer, where there is no obvious choice. The manner is deciding what choice one should make in such a circumstance is frequently guided by ethics, which help to decide what the correct moral path should be. Although doing the right thing is desirable, figuring out exactly what that should be has been a philosophical question that has perplexed some of the world’s foremost thinkers. In the field of accounting, a shift from an emphasis on rules to one based on the principles is a noble step in improving the profession. A reading of It’s Time for Principals-Based Accounting Ethics by Spalding raises several questions that should be answered before implementing this new conceptualization. I believe principles based accounting ethics is overdue and I agree with the authors. One of the reasons I believe principles based accounting ethics is overdue is fairly straightforward, any organization, group, society or profession is only as good as the people in it. One of the foremost barometers of a group’s success is the level of integrity, ethics and ability to perpetuate correct behavior at all times. An institution that is corrupt, as exemplified by a multitude of businesses over the last century will eventually fail as people lose faith in the lack of a moral compass being practiced. As such having...
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...Ethical risks and threats in the accounting profession Accounting ethics is primarily the study of moral values and judgments as they apply to accountancy. Accounting ethics were first introduced by Luca Pacioli in 1494 in his book “Summa de arithmetica, geometria, proportioni, et proportinalita”, and later expanded by government bodies, professional organizations and independent companies (Humphrey 2005). Throughout 2001 and 2002, the financial scandals in in the USA and some other countries, such as Australia, dramatically demonstrated how the efficiency of financial markets is based on assumptions of trust and ethical behavior of corporate managers (McPhail 2001). The collapse of companies such as Enron, WorldCom and Global Crossing in the USA, HIH Insurance and OneTel in Australia, and Parmalat in Italy, has led to a loss of confidence by the investing public in the system of financial reporting and accountability. The globalization and diversification of accounting services, combined with market competition and high profile corporate collapses has drawn attention to the accounting profession and its perceived ethical standards. (Cooper 2007) Ethical values provide the foundation on which a civilized society exists. Without the foundation, civilization collapses. On a personal level, the answer to the question of the highest aspiration might be wealth, fame, knowledge, popularity, or integrity. But if integrity is secondary to any of the alternatives, it will be sacrificed...
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...Affect Being in the accounting profession for close to eight years, I have seen how large of a role ethics plays. While I have never done or been asked to do anything that could be considered unethical, I have come to realize that in accounting there is a lot of gray area. Many principles are left for interpretation and in some cases little guidance is given. In these cases ethics becomes of the upmost importance. Early in the chapter, Mark Cheffers and Micael Pakulauk raise the question of why ethics has become a part of the CPE program. This question might suggest that the accounting profession is inherently unethical or dishonest. This, of course, is not the case. Instead, ethics, or ethical behavior, is the solution to navigating through a complex and changing profession. Out of all the business disciplines, accounting must be the one that keeps all others in check. I have always felt that the role of an accountant is to safeguard the company and to provide an accurate picture of the health of a company. In order to provide this level of service, an accountant has to do it using intrinsic motivation instead of having to be compelled. Because of all the recent scandals involving accountants, it has become ever more important to have a foundation based on sound ethical practices. When confronted with a gray area in accounting and interpretation is needed, if you are bound by ethics and honesty, the outcome will be for the greater good instead of satisfying...
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...Accounting Ethics This paper will discuss the public perception of CPAs in today's society, pitfalls that they may encounter, methods to prevent some of these negative behaviors and consequences they may face should they fall short. Most "Who Do You Trust?" surveys rank politicians, lawyers and used car salesmen at the bottom and certified public accountants at the top. That is because the CPA profession has a squeaky clean image--anal-retentive little wimps who wear thick glasses and cannot get a date. CPAs are known and respected for their honesty. The profession that goes out of its way to project that image, and there is a certain amount of truth to it. Not all accountants are anal-retentive little wimps who cannot get a date. Many of them are quite articulate. Some are quite lovely. In some schools, more than half of the accounting majors are women. Also, not all CPAs are squeaky clean and respected for their honesty. Some are quite dishonest and are putting a black mark on the image of the entire profession. There is one area where the CPA profession has fallen short of protecting the public interest. The general duty that accountants owe to their clients and the other persons who are affected by their actions is to "exercise the skill and care of the ordinarily prudent accountant" in the same circumstances. Two elements compose the general duty of performance: skill and care. Another element and responsibility is owed to clients and other persons, that...
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...practices and Haslam (2007) reported that teachers are being pressured to help students cheat to help meet league table grades. Ethics is becoming increasingly important in business practice as well as academic and professional education. The accounting scandals in the past which involved the former energy company, Enron and former “big five” accounting firm, Andersen (Comunale et al, 2006); have led to the need to develop ethical standards in students which could then be transferred to their employment life. There is a need for ethical awareness and education for current and future accountants, as there can be serious consequences for unethical behaviour in business (Pollara 2008). The accounting scandals in the past have been a major setback for the accounting profession and confidence in the profession has been lost. Ethical behaviour is seen as a way to improve the negative perception of the profession and the information provided. Some writers have advocated the inclusion of an ethical module in academic degree programmes. According to Bampton and Maclagan (2005, p. 298) “universities should aim to produce graduates who are ethically aware and capable of making ‘right’ decisions. Thus it is essential that ethics is included in university courses including accounting and business.” It is no surprise that many universities are now offering an ethics module as part of their degree programmes. The Association of Certified Chartered Accountants (ACCA) has...
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...Accounting and Ethics DO ETHICAL STANDARDS EXIST IN ACCOUNTING DEPARTMENTS? Purpose: This analytical report is a required assignment in Kimmerly Brady’s Business 205 course. Due to time constraints the primary data (survey) required for the report were gathered in a limited fashion. A survey was developed, an a procedure was considered; however, the responses are the results of only ten collected surveys. The responses are only included to demostrate a n understanding of primary data usage. The purpose of this report is to convey the message that ethics are the foundation of the accounting profession. In order to maintain discipline & order in the professional realm, rules of ethics are not satisfactory enough to ensure the integrity of Accountants. Education and training in ethical matters should be mandatory for Accountants; evaluation and monitoring of their adherence to these rules is climacteric for maintaining standards. Ethical codes of conduct and compliance of these codes should be required in today’s accounting firms for honorability to exist. CPA’s are licensed practitioners, who as Accountants express opinions about financial statements. The globalization of business operations and technological advances have radically changed how accountants work. New ethical issues have been raised by this ...
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...Abstract It is fairly easy for a top executive to reduce the price of his or her company's stock. Due to information asymmetry. The executive can accelerate accounting of expected expenses, delay accounting of expected revenue, engage in off balance sheet transactions to make the company's profitability appear temporarily poorer, or simply promote and report severely conservative estimates of future earnings. And this phenomenon of accounting scandal exist in contemporary society. The integrity of the accounting profession and the credibility of financial information provided by businesses have been undermined by scandals. Accounting and business education should pay more attention to the ethical to prevent accounting scandals. And they should not be focused on the teaching of accounting techniques. Neoliberal ideology is a political movement beginning in the 1960s that blends traditional liberal concerns for social justice with an emphasis on economic growth. And it is similar to globalization. Globalization includes three elements that are difficult decreasing, quick response to alterations, and multilateral trade liberalization. And accounting professional contains individual professional judgment and professional self-regulation. Globalisation brings many benefits but also a number of problems, for instance, low price labour used by multinationals that Increasing wages for highly-skilled workers and reducing wages for less-skilled workers obviously leads to greater inequality...
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...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. When you hear the word "ethics," what is the first thing that comes to mind? Having to make the decision of doing what is right versus doing what is wrong. Some idealists say that decisions of ethics should not be conditional. However, that is not as simple as it may sound. What constitutes "right" to one person may be "wrong" to anther; what clearly distinguishes the line between right and wrong? What some may look at as being unethical does not necessarily make it illegal. In the predicament of David Duncan, the lead audit partner at Arthur Anderson the Accounting Firm for Enron, underscores the penalty that accountants may face under professional accountability. Duncan had pleaded guilty to obstruction of justice when he was involved in the connection with document shredding. The scandals have made some big implications on the profession as a whole. One being the decision from the Public Company Accounting Oversight Board (PCAOB), created by the Sarbanes-Oxley Act (SOA) of 2002, in April 2003 they voted to assume the responsibility for establishing auditing standards. The Auditing Standards Board of the American Institute of Certified Public Accountants...
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...But, business sustainability depends on its financial performance and the people governing the business. And to measure whether companies are capable of handling potentially unexpected corporate risks, companies’ accounting transactions are reported through financial statements. These financial statements are the masterpieces of accountants who analyze the transactions and measure the financial stability of the company if they are sustainable enough to defray any business risks. However, in presenting these statements, some accountants may mislead owners or decision makers through financial mistatements which affect the business itself. Because of this accounting malpractice, it may cause to a major problem that will put CPAs into grave misconduct such as allegation of fraud and engangement in corporate accounting scandals. Accounting malpractice are affecting the businesses globally. It decays the economy of the country and slowly creeps into different industry until they are no longer outlive in the business world. In fact, the Report to the Nations on Occupational Fraud and Abuse in Asia-Pacific Region led by Wells (2010) found out that the Asia Pacific median has a loss that was significantly higher than the global median loss of $160,000 because of accounting malpractices. This report also added that 338 fraud cases that has been found on that Asia-pacific region wherein China has the most number of fraud cases and followed by India, Australia, Indonesia and United Arab...
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...4 Importance of Transparency 7 What Regulation Typically Covers 7 Regulatory Agencies 8 Accounting Reform 10 Conclusion 13 References 15 Abstract Within the accounting profession there are many complex ethical issues that must be dealt with quite often. It is important that the people working within the industry provide high quality financial statements and always pay close attention to ethical concerns that may arise. Since ethics is such a major concern in the accounting industry, a rules based system is in place for enforcing ethical concerns. There are many regulating bodies that exist that enforce many highly detailed regulations that people within the industry must follow at all times. Throughout history there have been several major accounting scandals that have been followed by new regulation to ensure that these problems do not come up again. CLERP 9 and the Sarbanes-Oxley Act are just a couple of acts that have caused significant changes to the accounting world in recent times. This paper will look at some of the different issues that accountants face as well as some of the regulations that seek to end unethical behavior. Ethical Standards in Accounting Introduction The accounting industry is an always changing and constantly growing industry. Accounting plays a vital role in society and business and up until recently accounting was considered to have some of the highest standards for ethical and moral conduct in business...
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...Accounting ethics is primarily a field of applied ethics and is part ofbusiness ethics and human ethics, the study of moral values and judgments as they apply to accountancy. It is an example of professional ethics. Accounting introduced by Luca Pacioli, and later expanded by government groups, professional organizations, and independent companies. Ethics are taught in accounting courses at higher education institutions as well as by companies training accountants and auditors. Due to the diverse range of accounting services and recent corporate collapses, attention has been drawn to ethical standards accepted within the accounting profession.[2] These collapses have resulted in a widespread disregard for the reputation of the accounting profession.[3] To combat the criticism and prevent fraudulent accounting, various accounting organizations and governments have developed regulations and remedies for improved ethics among the accounting profession. ------------------------------------------------- Importance of ethics The nature of the work carried out by accountants and auditors requires a high level of ethics. Shareholders, potential shareholders, and other users of the financial statements rely heavily on the yearly financial statements of a company as they can use this information to make an informed decision about investment.[4] They rely on the opinion of the accountants who prepared the statements, as well as the auditors that verified it, to present a true and fair...
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...Enron Corporation case study • The Enron debacle created what one public official reported was a "crisis of confidence" on the part of the public in the accounting profession. Lists the parties who you believe are most responsible for the crisis. Briefly justify each of your choices. The debacle of Enron, a US firm is looked upon as the worst debacle and fall out in the history of US bankruptcy filed cases. There are many parties involved when it concern to Enron debacle, which was accorded to accounting instability and the compromising factor of accounting profession itself. Out of the many parties in the league and the major force behind the debacle of Enron concern Andersen's, the accounting and auditing firm that once deserved name in the industry for its conscience in accounting professional services and auditing. As the case relates to, accounting audit for Enron is attended by Andersen's since long enough. However, the interesting feature is that some compromise in the profession of accounting services by Andersen's was notable, given that there are noteworthy feature of stock manipulation, especially in financial statements of Enron attended and audited by Andersen's. The statement and restatement of Enron also gives some probable indication for manipulation of accounting, where debate and counter debate in that regard from the prying eye of the media was a common feature. Thus, the involvement of Andersen's in Enron consultancy and professional auditing makes it...
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