Ethical Values In Accounting

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Ethical Values In Accounting
My major is business administration with concentration in accounting. It makes me sad to realize that in the last couple years this discipline that has been so useful and respected has been under pressure and looked down upon, due to multiple behaviors by big companies that have resorted to accounting fraud in order to report greater earnings for their own purpose as well as to fool investors. Prominent companies and CEOs have been authors of such fraud which has weakened the business industry. Companies like Enron, Tyco, WorldCom and others have been an example of how high profile unethical behavior has become. It has been increasingly visible that ethics were overlooked for the sake of profits. Some will argue that given that the goal of a firm is to maximize profits for shareholders, ethics should take a backseat to profits; however in this paper I will try to show that good business ethics in accounting are increasingly important and that it should be the norm for every firm.

I am a firm believer of strong ethics in accounting because I believe ethics provide the foundation on which a civilized society can exist. More people will benefit from transparent accountability. Without strong ethical behavior this very old discipline will collapse. More than just a concern for firms, individuals who intend to make a living in this discipline must make efforts to conduct themselves in a good way, in their quest for wealth fame and knowledge. Integrity in this case has to come first.

It has often be said that in business it is good to be greedy, because it is this greed that makes one move on and achieve greater profits. Thus whenever we instill to many moral codes, we will take away the motivation for individual to excel, thus making the firm weaker. However I think such belief is extremely shortsighted; I think people can get motivated even if they have other values that are much higher than just getting profits. I think people shouldn’t do everything for profit, especially engaging in unethical behavior. The goal of firms and the people who work in it should focus on getting owners wealth not just profit, and wealth requires more than just making money, but also having trust from the organization, the society and everyone who can be directly or indirectly affected by the way an accounting firm conducts its business.

It is sad that accounting has suffered from such bad reputation in the last years, however a bigger question is how can accounting as a profession move out of such dark times and regain the confidence of every body by going back to its roots and mission which is to conduct audits and book keeping using moral rules and correct business practices. The solutions I believe are with government intervention and high punitive measures against those who break the rules as well as educational institutions and firms telling future accounts that moral integrity should come first. The government can only do so much, after all this is a capitalistic market, thus a greater responsibility lays on individuals themselves and the supporting institutions. Moral integrity should be rewarded, as gaining profits has been up to date.
In considering the impact of ethical values on a society, Chuck Colson made the following observation:(1)

Societies are tragically vulnerable when the men and women who compose them lack character. A nation or a culture cannot endure for long unless it is under girded by common values such as valor, public-spiritedness, respect for others and for the law; it cannot stand unless it is populated by people who will act on motives superior to their own immediate interest. Keeping the law, respecting human life and property, loving one's family, fighting to defend national goals, helping the unfortunate, paying taxes--all these depend on the individual virtues of courage, loyalty, charity, compassion, civility, and duty.

In 2002, the accounting profession was under attack with the fall of Enron/Andersen and WorldCom. The government was forced to intervene and help curb such problems that seemed to widespread.

The government has made efforts in punishing unethical behavior in accounting. We can see the fate of firms and individuals who have been unethical up to date: “Jurors on Wednesday convicted one of the former executives from Enron's defunct broadband unit to be retried after his original case ended in a hung jury last year.

The verdict came six days after another jury convicted Enron founder Ken Lay and former Enron CEO Jeff Skilling of fraud, conspiracy and other charges in one of the biggest business scandals in U.S. history.”(2)

The biggest contribution the government has made is the creation of the Sarbanes-Oxley act, which intends to take away unethical behavior from firms by putting all auditing into very strict rules:

"An Act to protect investors by improving the accuracy and reliability of corporate disclosure.”

There are two ways in which the act helps a move back to the values and principles of Guardian morality. The first is fairly obvious: The restrictions in section 201 on the provision of any non-audit services to audit clients that the Public company Accounting Oversight Board (PCAOB) determines to be impermissible, drastically reduce the potential rewards of following Commercial norms.

The second way in which Sarbanes-Oxley encourages movement back toward the traditional professional values of Guardian morality is perhaps less obvious. The establishment of the PCAOB brings with it a separation of Guardian and Commercial considerations at the institutional level. The act gives the PCAOB the authority to set the following (for the audits of public companies):

- Auditing standards
- Quality control standards
- Ethics standards, and
- Independence standards.

Furthermore, the PCAOB shall conduct inspections of registered firms, conduct investigations, and discipline firms.(3)

The universities are being a big part of the movement by having greater number of classes that teach ethics and good decision-making. School are teaching that the purpose of ethics in business is to help man and human to follow a common business code of conduct, and help them with their decision making, after all there will be thousand chances that they the young professionals may find in which they may choose an unethical behavior. After all most unethical behavior in the past couple of years is result of wrong interpretation of existing accounting rules: When PCAOB board member Charles D. Niemeier spoke at the AICPA Annual SEC and PCAOB Conference in December 2004, he said: “The most disturbing aspect of Enron and similar scandals was not that what was done was wrong, but that what was done was right. Enron did not ignore the rules and regulations, but instead took them and used them to achieve results that were never intended.”(4)

After Universities, ethical behaviors is pushed along by the AICPA which maintains and enforces a code of professional conduct for public accountants. The Institute of Management Accountants (IMA) and the Institute of Internal Auditors (IIA) also maintain a code of ethics. This is an important movement since we see accounting organizations recognizing that profits are not the only purpose of accounting but getting it in an ethical way is.

It was scary the direction that accounting was taking, when firms over and over again, used bad accounting for their benefits. It became important for ethical values to gain importance once again, and to put into the minds of young accountants that profit was not the only goal, and greed is not the way to assure success, instead increasing wealth by following ethical standards was.

Work Cited

Flegm, Eugene H.. "Accounting at a Crossroad." The CPA journal December 2005 27 June 2006 http://acct.tamu.edu/smith/ethics/EthicsPowerPoint.ppt

Smith, Murphy L.. "Presentation on Ethics in Business and Society." 27 June 2006 http://acct.tamu.edu/smith/ethics/EthicsPowerPoint.ppt

Gaa, James C. . "How Can Professional Values Be Saved?." The CPA journal 4 August 2003. 27 June 2006 http://www.nysscpa.org/cpajournal/2004/304/infocus/p28.htm

GREENAWALT, MARY BRADY. Ethics in Accounting." 27 June 2006. http://www.bookrags.com/other/business/ethics-in-accounting-ebf-01.html

C. Colson, Against the Night, Ann Arbor, MI: Servant Publications, 1989, p. 67.
USAToday- 5/31/2006

Disclaimer
The above essay was written by a college student and merely states opinions of a college student. However, if you feel strong about responding to the opinions stated, please write to articles@directorym.com and express your concerns.


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