1 CHAPTER 1
INTRODUCTION
1.1 Introduction
Almost all professions are demanded by a society to be ethical, especially the accounting profession. The accounting profession was founded on the notion that proper ethical behaviour is the cornerstone of providing professional services to clients. The collapse of Enron, the largest energy-trading company in the US had jolted the profession out of its complacency and serves a warning that all is not well with the profession. Ethics had aroused significant interest amongst practitioners and academics alike. The message is clear that it is under scrutiny, if accountants want to be relevant, they have to be more diligent and ethical. In recent years, there are many financial scandals in some very big corporations in Malaysia. According to the former Malaysian Institute of Accountants (MIA) President, Abdul Rahim Abdul Hamid, the responsibility of any wrongdoing in any company is on the shoulders of the directors, senior management team as well as the auditors, among others (MIA, 2007). As a result, litigations taken against auditors are increasing in number. For example, there are many financial scandals which include Perwaja Steel, Oilcorp Berhad, Transmile Group Berhad, Megan Media Holdings, Southern Bank and Technology Resources Industries Berhad.
Hence, these financial scandals had caused a high level of accusation and criticism by outsiders that auditors are unethical in their judgments (Lee et al., 2008). It is noted that individual will be more receptive and will be more likely to copy behaviours of their peers and group members. Valentine et al. (2011) found that corporate ethical values were associated with decreased turnover intention in a survey of administrative employees and...
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...rch proposes that to expect ethical behavior of colleagues and ethical behavior of successful accounting professionals have a significant impact on organizational commitment of employees in accounting firms. It is important to note that while these two variables have been shown to have a significant impact on ethical behavior of employees, their impact on organizational commitment of employees in accounting firms has not yet been studied by business ethics researchers.
Previous research has shown a strong relationship between various facets of job satisfaction and organizational commitment (Meyer et al., 2002). Azeem (2010) found that supervision satisfaction and pay satisfaction were significant predictors of organizational commitment through a sample of 128 employees from service industry. Tang and Chiu (2003) report that pay satisfaction was positively related to
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.
Now more than ever it is important to know what IFRS is and what AICPA and IMA are, especially pertaining to their ethical standards. IFRS or the International Accounting Standards Board is a group of highly experienced professionals in the accounting field. They deal with the setting of standards, as well as preparing, auditing or using financial reports, and educating future accountants. The AICPA or the American Institute Of Certified Public Accountants is a non-profit organization of American Certified Public Accountants (CPA) who create
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.
Employees of companies must consider their actions before making decisions and remember they have an ethical responsibility to the organization and use high moral standards to influence their decisions. Ethical responsibility is crucial and goes beyond personal values, it takes into account which actions provide the greatest benefit for the greatest number and produces the least amount of harm. Not all decisions are black and white, many fall into gray areas. When individuals make unethical decisions it can damage the name of the organization. In the business world the reputation of an organization is based on its integrity. A company must acquire and maintain customers to survive and grow in today’s competitive global market. Rational
...urvey of ethical behavior in the accounting profession. Journal of Accounting Research, 9 (2), pp. 287-306.
Verschoor, C. C. (2012). New survey of workplace ethics shows surprising results. Strategic Finance, 93(10), 13-15. Retrieved from http://eds.a.ebscohost.com/eds/pdfviewer/pdfviewer?vid=12&sid=dac69b8f-b6d7-4136-8b8f-5d852423bdf6%40sessionmgr4005&hid=4103
When examining the effect of open marketing on the profession of accounting it is important to view it from three perspectives: the client's, the profession's, and society's. Additionally, two key areas that are affected by marketing must be addressed,
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.
I discovered how sticking to one’s morals should be the topmost priority for everyone involved in business, whether personal or professional. Regardless of what the consequences may be, the intensity of the problem, and the complexities it may bring, sacrificing one’s integrity should never be an option, as integrity goes hand-in-hand with the morals of an individual (Duggan & Woodhouse, 2011). They further go on to say that having individuals take part in building a code of ethics that supports employee integrity, they will act ethically. Also, I believe that companies should place more emphasis on the moral behavior of their employees, and clear-cut policies should be set regarding such ethical situations. Furthermore, I realized how serving justice while making decisions really helps in the long run, and that opting to go for the ideal rather than they deserved is not always the best option, and could hurt a company in more than one
Over the years many companies have decided abandon ethical practices is lieu of higher profits. Because of the high value placed on profits in America, many companies have taken extreme measures to increase profits and increase payouts for shareholders. Arthur Andersen LLP is a prime example of how business executives have been willing to make unethical business decisions in order to please clients and gain an edge on competition. In the short run, these unethical decisions may have seemed beneficial, but in the long run, the extensive consequences of this behavior was not worth any anticipated gain. Arthur Andersen made many unethical business decisions in lieu of higher profits that had drastic consequences that extended father than any executive
Ethics is derived from the greek word ‘ethos’, which means character and the latin word ‘moras’, which means customs. Thus ethics is defined as the personal and professional behaviour with regards to the values, customs, behaviour, principles and morals of society (Senarante, 2011). Professional ethics can be defined as the personal and corporate standards of conduct that is carried out by members of a particular profession. For example, medicine, accounting and engineering. Professional ethics or business ethics cover larger areas than the law, and although an issue may not be illegal, it can be considered as an ethical issue (ATT Ethics, 2013). Business ethics can be defined as the policies and principles that act as operational guidelines
Stead, W. E., Worrell, D. L., & Stead, J. G. (1990). An integrative model for understanding and managing ethical behavior in business organizations. Journal of Business Ethics, 9(3), 233-242. Doi: 10.1007/BF00382649
Ethics is the responsibility of each individual person, but starts with the CEO and the Board of Directors, setting the right tone at the top and moves down through the organization, including setting the tone in the middle. A company’s culture and ethic standards start at the top, not from the bottom. Employees will almost always behave in the manner that they think management expects them, and it is foolish for management to pretend otherwise (Scudder). One of the CEO’s most important jobs is to create, foster, and communicate the culture of the organization. Wrongdoings or improper behavior rarely occurs in a void, leaders typically know when someone is compromising the company
This paper discusses the role of ethics in corporate governance. I seek to show the application of moral and ethical principles in corporate governance. Ethics is a topic that has generated a lot of interest in the last decade especially after high profile scandals. The failures of prominent companies such as WorldCom, Enron, Merrill lynch and Martha Stewart portrays the lack of corporate ethics. The failure of such business has seen an increased pressure to incorporate ethics in corporate governance. The result of corporate scandals has been eroding investor and public confidence. The entire economic system has experienced some form of stress from loss of capital, a falling stock market and business failures.
The complete destruction of companies including Arthur Andersen, HealthSouth, and Enron, revealed a significant weakness in the United States audit system. The significant weakness is the failure to deliver true independence between the auditors and their clients. In each of these companies there was deviation from professional rules of conduct resulting from the pressures of clients placed upon their auditors (Goldman, and Barlev 857-859). Over the years, client and auditor relationships were intertwined tightly putting aside the unbiased function of auditors. Auditor careers depended on the success of their client (Kaplan 363-383). Auditors found themselves in situations that put their profession in a questionable time driving them to compromise their ethics, professionalism, objectivity, and their independence from the company. A vital trust relationship role for independent auditors has been woven in society and this role is essential for the effective functioning of the financial economic system (Guiral, Rogers, Ruiz, and Gonzalo 155-166). However, the financial world has lost confidence in the trustworthiness of auditor firms. There are three potential threats to auditor independence: executives hiring and firing auditors, auditors taking positions the client instead of the unbiased place, and auditors providing non audit services to clients (Moore, Tetlock, Tanlu, and Bazerman 10-29).