Professional Ethics Accounting

Summary

Dr. Trussell introduces professional ethics in accounting, emphasizing the importance of moral principles and societal expectations for accountants. The lecture outlines the AICPA's Code of Professional Conduct, which includes principles like trustworthiness, integrity, and objectivity. It highlights the ethical dilemmas accountants face and provides a six-step approach to resolving them. This method includes gathering relevant facts, identifying affected parties, considering alternatives, and evaluating consequences before deciding on the most ethical course of action. A case study involving time reporting in a CPA firm is used to demonstrate these steps.

Takeaways

• 📚 Ethics in accounting involves a set of moral principles and values, which professionals must navigate alongside society's higher expectations for ethical behavior.
• 🔑 Accountants play a vital role as gatekeepers of financial information, ensuring the integrity of the data they handle.
• 📖 The Josephson Institute outlines key ethical principles such as trustworthiness, responsibility, and fairness that can guide behavior, though these are not specific to business.
• ⚖️ CPAs are held to enforceable ethical standards, and non-compliance can lead to legal penalties or the loss of the right to practice.
• 🔍 Auditors must adhere to specific guidelines such as generally accepted auditing standards (GAAS) and are subject to peer review to ensure quality control.
• 🛡️ The AICPA’s Code of Professional Conduct includes broad ethical principles that are not enforceable but serve as guiding ideals, along with specific, enforceable rules.
• 💡 An ethical dilemma in accounting occurs when one must decide between conflicting principles, often involving personal and professional consequences.
• 🚫 Rationalizing unethical behavior (e.g., 'everyone does it' or 'it’s legal, so it must be ethical') is discouraged; professionals should always aim to do what is right.
• 📝 The six-step approach to resolving ethical dilemmas includes gathering facts, identifying affected parties, considering alternatives, and choosing an appropriate course of action.
• ⚙️ The case example provided illustrates the common ethical dilemma of being asked to work unpaid overtime and how this might affect evaluations, firm policy, and personal integrity.

Q & A

What are ethics in the context of accounting?

Ethics in accounting refers to a set of moral principles or values that guide accountants in handling ethical dilemmas. Society has high expectations for accountants due to their role as gatekeepers of financial information, and they are expected to maintain high levels of integrity and ethical behavior.

Why are ethical standards higher for accountants compared to other professions?

Accountants hold a crucial role as gatekeepers for financial information. External parties rely on accountants for accurate and reliable financial data, which is why they are held to a higher standard to ensure integrity and public trust.

What is the significance of the CPA exam in relation to ethics?

The CPA exam includes questions related to ethics, ensuring that individuals seeking to become Certified Public Accountants understand the ethical standards they must follow. This reinforces the importance of ethical behavior in the profession.

What are the broad ethical principles mentioned by the Josephson Institute?

The Josephson Institute mentions ethical principles such as trustworthiness, responsibility, caring, respect, fairness, and citizenship. Although not specific to accounting, these principles offer a general framework for ethical behavior.

What are the main components of the AICPA’s Code of Professional Conduct?

The AICPA’s Code of Professional Conduct consists of principles, rules of conduct, interpretations of the rules, and ethical rulings. Principles are broad ideals, while rules of conduct are enforceable standards. Interpretations and rulings provide guidance but are not directly enforceable unless violations are justified.

What are the key ethical principles accountants are expected to follow according to the AICPA?

Key ethical principles include exercising sensitive and moral judgments, acting in the public interest, maintaining integrity, being objective and independent, exercising due professional care, and adhering to the scope and nature of services outlined in the Code of Professional Conduct.

What is an ethical dilemma in the context of accounting?

An ethical dilemma in accounting occurs when an accountant faces a situation where they must make a decision about the appropriate course of action, often involving conflicts between personal values and professional obligations.

What are some common rationalizations for unethical behavior?

Common rationalizations include believing that 'everyone does it,' thinking that if something is legal, it must be ethical, or assuming that the likelihood of getting caught is low and the consequences are minimal.

What is the six-step approach to resolving ethical dilemmas?

The six-step approach includes: 1) Obtaining all relevant facts, 2) Identifying the ethical dilemma, 3) Identifying who is affected by the outcome and how, 4) Identifying the alternatives available to resolve the dilemma, 5) Identifying the likely consequences of each alternative, and 6) Deciding upon the appropriate action.

In the example case of Brian Longwood, what is the ethical dilemma he faces?

Brian Longwood is asked by his supervisor, Charles Dickerson, to work extra hours without recording them, which violates the firm's policy. Brian must decide whether to comply and potentially benefit in the short term or adhere to ethical guidelines and risk negative consequences in terms of evaluations and career progression.