Ethics in the Accounting Profession
Airfare Daily Deals eCigarettes Eyeglasses Hotels Jewelry Online Backup Online Dating Online Printing Online Tickets Skin Care Textbook Rentals Vitamins Web Hosting Weddings
Find thousands of shopping-related forums
SEARCH

Ethics in the Accounting Profession

Ethics is a system of moral principles and their application to particular problems of conduct, especially the ethics of a profession, the rules imposed by a professional body on the behavior of its members. In the accounting profession, rules of professional conduct applying to members of the American Institute of Certified Public Accountants (AICPA).

Robert Sack, a commentator on the subject of accounting ethics, noted that “Based on my experience, new graduates tend to be idealistic…thank goodness for that. Still it is very dangerous to think that you armor is all in place and say to yourself ‘I would have never given in to that.’ The pressures don’t explode on us, they build, and we often don’t recognize them until they have us.”

These observations are particularly appropriate for anyone entering the business world. In accounting, as in other areas of business, ethical dilemmas are encountered frequently. Some of these dilemmas are simple and easy to resolve. Many, however, are complex, and solutions are not obvious. Basic questions such as: “Is this way of communicating financial information good or bad?” “Is it right or wrong?” “What should I do in the circumstance?” Technical competence is not enough when ethical decisions are encountered.

This whole process of ethical sensitivity and selection among alternatives can be complicated by pressures that may take the form of time pressures, job pressures, client pressures, personal pressures, and peer pressures.

Ethics is a system of moral principles and their application to particular problems of conduct, especially the ethics of a profession, the rules imposed by a professional body on the behavior of its members. In the accounting profession, rules of professional conduct applying to members of the American Institute of Certified Public Accountants (AICPA) may be summarized such as:

(1). Members or partnerships whose partners are members, may employ the phrase “Members(s) of the American Institute of Certified Public Accountants” in their reports; (2). A member may not permit another person not a partner or employer to practice in his name; (3). A member must not accept a fee or commission on work secured by another person upon the member’s recommendation, or pay a fee or commission to another upon obtaining professional work; (4) A member engaged in public accounting may not carry on a collateral activity “incompatible or inconsistent” with the profession; (5). In or attached to financial statements audited by a member, there must be a disclosure of every material fact which if omitted might mislead the reader, of any material misstatement, or of a material departure from any generally accepted, applicable accounting principle or audit procedure; and the opinion of a member as to financial statements may not be given on the basis of inadequate information or where his exceptions have the effect of making his opinion meaningless; (6). A member’s signature on an audit report is prohibited where the audit has not been made by the member, an employee, or a licensed accountant; (7). Solicitation of business by circulars and advertisements, or by means of contact not the outgrowth of existing personal relations, is prohibited; and the practice of another member is not to be encroached upon; (8). Employment may not be offered to an employee of another public accountant without first information the employer, unless the employee seeks a change on his own initiative or in response to an advertisement; (9). Contingent fees are permitted in tax cases or in situations where their amounts are fixed by courts or other public authorities, but are forbidden elsewhere; (10). Advertising is prohibited, and professional announcements (of personnel of firm, or of change of address) are restricted in size and content. A paid directory listing may not appear in display type or be otherwise distinctive; (11). Members are not permitted to be connected with a corporation engaging in public-accounting practice; (12). A member may not subscribe to the accuracy of an estimate of future earnings or permit any inference to that effect; (13) A member may not certify to the financial statements of an enterprise-financed by a public distribution of any of its securities in which he or one of his family has an actual or potential interest “substantial either in relation to its (the enterprise’s) capital or to the individual’s personal fortune.” A similar prohibition attaches to the certification of financial statements to be used for credit purposes unless such interest is disclosed in the member’s report; (14). Competitive bids are forbidden where they violate rules laid down by state or other local accounting boards or societies; (15). A member performing services similar to those rendered by public accountants is expected to observe the Institute’s rules of professional conduct; (16). There must be no violation of the confidential relationship between a member and his client. 

See also, related articles:

1.   Internal Control Plays an Important Role in Your Business

2.   Accountant’s Responsibility as an Expert

3.   How to conduct Physical Inventory Counting Successfully

4.   The Environment of Financial Accounting

Need an answer?
Get insightful answers from community-recommended
experts
in Accounting & Finance on Knoji.
Would you recommend this author as an expert in Accounting & Finance?
You have 0 recommendations remaining to grant today.
Comments (1)

Very well presented article on the issue, thank you.

ARTICLE DETAILS
RELATED ARTICLES