Wait a second!
More handpicked essays just for you.
More handpicked essays just for you.
Professionalism, ethics, and morals
Professionalism versus ethics
Professionalism versus ethics
Don’t take our word for it - see why 10 million students trust us with their essay needs.
Recommended: Professionalism, ethics, and morals
So, Why Hide the Truth?
Two ethical dilemmas where the auditor may fail to report correctly and their respective consequences and motives are as follows (George E. Nogler 2008):
• Scenario 1: Not declaring going concern uncertainty for an entity that exhibits signs of future collapse in financial reports
- One motivator for this scenario is the company’s fear of being sued by its creditors; since going concern uncertainty directly implies not being able to repay debts to creditors in a timely manner. The ethical breach is concealing failure to avoid rightful legal action by creditors.
- Since one of an accountant’s basic duties is to report the financial standing of a company whether it was doing well or not; refraining from producing a report that exposes the company in a negative light is considered not fulfilling the job responsibilities of being an accountant which is ethically unsound.
• Scenario 2: Declaring going concern uncertainty for a company that exhibits healthy financial reports.
- An auditor is likely to issue a going concern opinion in order to protect himself/herself and strengthen their defensive position should the client company become bankrupt in the future and file a lawsuit against the auditor. The ethical issue here is the auditing party disregarding the client’s image in favor of its own possible legal protection.
- Declaring going concern uncertainty for a company that exhibits healthy financial reports is likely to result in the auditing firm losing this company as a client, but is justifiable by the explanation in the abovementioned point.
Both scenarios above would lead to the auditing firm losing its credibility as a third party in the eyes of stakeholders for failure of correct and hones...
... middle of paper ...
...at a key method to maintaining a culture of ethics in accounting and in financial decision making within the organization is keeping all accounting staff, auditing staff, CFOs, and financial controllers aware as well as alert at all times towards ethical issues relating to financial information that they have access to managing and producing. This is possible through the establishment of organizational codes of ethics, and creating a general environment of honesty and integrity displayed by top management leading their companies by example of strong ethical standards and good citizenship.
Shaub, M, Collins, F, Holzmann, O, & Lowensohn, S (2005) recommend hiring and promoting individuals with a high sense of ethics that match the company’s ethical conduct standards. In addition, they recommend rewarding employees who show high ethics and punishing those who do not.
Andrea may decide not to inform the limited partners about the misrepresentation of Skyline Views’s financial statements; to avoid conflict, this decision permits Ed to deceive the company and limited partners. In addition, by deciding not to inform the limited partners of Ed’s deceit, Andrea would be disregarding the American Institute of Certified Public Accountants Code of Professional Conduct in her being unreliable, dishonest and deceitful. Andrea has the responsibility of protecting her client, which involves encouraging the correction of financial statements in order to prevent suspicion during audits that could lead to fines and imprisonment. Andrea’s second option is to inform the limited partners about how misrepresentations of Skyline Views’s financial statements are permitting Ed to claim a higher management fee; this decision will fulfill her due diligence obligation to the limited partners while maintaining her integrity as a certified public accountant in supporting the American Institute of Certified Public Accountants Code of Professional Conduct.
Ethics plays a vital role in developing accurate and high quality financial statements for management, financial institutions, and investors. As management utilizes financial statements to make decisions regarding the operations of the business, it is necessary to review accurate financial statements to make strategic decisions about the future of the organization. Investors and financial institutions require accurate financial statements to make informed decisions upon whether to invest funds into the organization or the wisdom of lending funds to said organization.
Auditors do not provide audit opinions for different levels of assurance. Therefore, auditors consider providing more or less assurance when modifying evidence for engagement risk to be unnecessary. However, auditors should be professionally responsible to accumulate additional evidence, assign more experienced personnel, and review the audit more thoroughly, particularly when a client poses a higher than normal degree of engagement risk. The auditor should also modify evidence for engagement risk when high legal exposure and other potential actions affecting the auditor
First, the Code of Professional Conduct encourages accountants to behave ethically. Encouraging accountants to behavior ethically is a strength because it helps create customer loyalty, positive work environments, and dedicated employees, which helps avoids legal issues. Accounting professionals have to behave ethically just because of the profession they are in. Accountants need to behave ethically because the investors, creditors, and rest of the public rely on an accountant’s professional judgment to make
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.
The importance of having a code of ethics is to define acceptable behaviors and promote higher standards of practice within a company. The code should provide a benchmark for...
The leaders in an organization use ethics to manage employees. The code of ethics determines discipline procedures and the acceptable behavior. When there is a high ethical standards it encourages employees in the company to meet the same standard. Ethical leadership not only enriches a company’s financial market and the integrity in the community, it also helps to improve the business.
Introduction Within the current crisis of confidence in the public accounting profession after the Enron debacle and series of high profile failures of financial services firms, the issue of ‘audit expectation gap’ has never been more important. Though it would take an enormous amount of effort to address these issues, I will argue that tremendous amounts could be done in order to close the gap. In this essay, I will discuss some of these issues and in particular the strategies to reduce the gap. Definitions Various definitions have been proposed for the audit expectation gap.
An auditor should keep objectivity at all times. Maire Loughran, a Certified Public Accountant and University Professor, explains “objectivity means the ability to look at facts the client presents, and reviews them with no preconceived notions or prejudices” (52). In other words an auditor has to exercise his ability to review information in a no subjective manner, and perform auditing work free of conflicts of interest. Many instances have occurred when objectivity was not present while performing audits, for instance the case of Bernard Madoff’s auditor, David G. Friehling, from the firm of Friehling & Horowitz, illustrates it well. On 2009, William K. Rashbaum and Diana B. Henriques, both reporters at The New York Times, inform in the online version of their newspaper:
The investigation revealed that the company had improved its position compared to previous years. The profitability of the company was significantly better whilst the liquidity had remained reasonably steady. The solvency of the company had declined however, which affected the long-term obligations of the business.
Accounting ethics has been difficult to control as accountants and auditors must keep in mind the interest of the public while that they remain employed by the company they are auditing. The accountants should take into account how to best apply accounting standards when company faces issues related financial loss. The role of accountant is crucial to society. They serve as financial reporters to owe their primary constraint to public interest. The information provided is critical in aiding managers, investors and others in making crucial economic decisions. An accountant is responsible for any fraudulent financial reporting. Some examples of fraudulent reporting are:
A qualified financial statement contains fair representations of an organization 's financial result, condition, and cash flow which is structured to ensure the organization is in compliance with GAAP . In the standard format, an organization should follow accounting principles to comply with internal accounting systems, disclosure rules, auditor oversight, and ethics, in the event, the above-mentioned principle does not meet, an audit failure may occur. An auditor failure may result as the request of clients and senior partners did not stand firm to refuse an unethical request from the clients. I will discuss a case of audit failure due to incompliance in the internal accounting system 's disclosure rule and firms ' right to refuse risky clients
Professional accountants require an ethical code as they hold positions of trust because of which people put their faith on them. The accountability to act in the public interest is the distinguished mark of this profession.
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
Somers, M. (2001) found that a growing interest in codes of ethics is evident in organizations over the past few decades. In his article, Somers outlines the influence of codes on employee behaviour in organizations. He states the effects of the growing adoption of codes of ethics in organizations is not being addressed as unethical perceptions and behaviour continue.