individual Project to: Dr. wiley from: Celeste detillier subject: Ethics in Accounting date: Ethics are the means by which people judge what is right and wrong. They are a part of everyday personal life, as well as business or work life. Ethics can become a problem if people have different ideas of what is right and what is wrong. Ethics come into play with companies when decisions have to be made and people do not agree on something, which can lead to a dispute. So for the company’s sake, it is important for everyone to be on the same page. Ethics lead to professionalism when applied in the business world. Ethics training is done because accountants have to meet a standard so it is crucial for everyone to understand what is acceptable and what is unacceptable.
Ethics refer to how an individual behaves or interacts with other people in society. It is important in ethics to think about other people in your company, not only yourself. Companies establish a code of professional conduct so that users of the professional services know what to expect when they purchase such services, members of the profession know what behavior is acceptable, and the profession can use the rules to monitor the actions of its members and apply discipline where appropriate (Professional Conduct). Deciding on what everyone in the company thinks is right can be difficult though, because people have different morals and beliefs as to what they think is acceptable and unacceptable. Ethical behavior is something that is expected in all companies, but is hard to teach and regulate. There may be temptation and pressure in any profession to perform unethical acts, but avoiding doing such acts benefits you, the company, and even the whole profession.
In the past decade or so, ethics have become a more critical issue. When companies like Enron and WorldCom filed for bankruptcy, it was due to well-thought out but faulty accounting procedures. What these accountants were doing was wrong and unethical, in that they misrepresented the company’s earnings and balance sheet to be more appealing to its stockholders. The results of these scandals lead to the Sarbanes-Oxley Act, which gave the Public Company Accounting Oversight Board more responsibility. The PCAOB was designated to develop standards for companies when organizing its audit reports. The standards that resulted from the Sarbanes-Oxley Act made a clear distinction between what was allowed and what was unacceptable. Unfortunately, some companies had to fail for this act to come about and regulate this kind of activity, but it was necessary for the auditing and accounting business to be where it is today.
The American Institute of Certified Public Accountants, or AICPA, is a private company that puts out the Code or Professional Conduct which must be followed. The AICPA is primarily responsible for private company audits while the PCAOB is responsible for public company audits. The PCAOB’s Code of Professional Conduct was adopted from the AICPA. The Code of Professional Conduct lays out what is expected from accountants when it comes to ethics and how they should conduct themselves. The Code of Professional Conduct contains 2 parts which are the Principles of Professional Conduct and the Rules of Conduct. The Rules of Conduct can also be very broad, so that can be broken down further into the Interpretations of Rules of Conduct and Rulings by the Professional Ethics Executive Committee (Professional Conduct). Each of these can be explained further.
The Principles of Professional Conduct express ideal attitudes and behaviors which are typically more general and not enforceable. These principles include responsibilities, the public interest, integrity, objectivity and independence, due care, and scope and nature of services. These principles are self-explanatory, but their broadness can cause confusion, so they were expanded on in the Rules of Conduct.
The Rules of Conduct define the minimum
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