Ethics in Accounting - Assignment Example

? Rough Draft: Ethics in Accounting Introduction The topic that I have selected for my research paperis, Ethics in Accounting. The reason for selecting this topic is my interest in the field of accounting and the importance of ethics in all business related fields. Accounting ethics in the field of accounting refers to the guidelines (consisting of judgments and moral values) that a professional needs to follow while practicing accounting (“Role of Ethics in Accounting,” 2011). There has been corporate problems and increasing disrespect for the profession of accounting due to lack of ethical standards. This has caused businesses to take a step back and consider ethics seriously. Companies rely on auditors and accountants for their financial processes. For this reason, a strict code of ethics should be followed by accounting professionals. Even though it is common to find unethical behavior in accounting professions, ethics in accounting is vital because it is important to ensure a correct and clear financial image of a business, to instill confidence and trust with stakeholders and the public and to prevent fraud, embezzlement or financial scandals. Ethics are the backbone of any business and it is vital that ethics are implemented within the accounting and bookkeeping systems of an organization (Axline, 1990). Like other operating bodies involved in business activities, Accountants also need to focus on ethics set by the company in order to solve the problems and complexity that they will encounter. For example, the capital markets’ need to focus on the broken up profits that may attract an organization’s management authorities to bend or even break accounting rules to inflate reported net income. In these situations, technical competence is not enough to resolve the dilemma (Hoffman, 1996). Qualitative Research The chosen method of qualitative research for conducting research on Ethics in Accounting is literature review, which facilitates the researcher to read and analyze the collected data from various sources and incorporate it in his research. Hypothesis Even though it is common to find unethical behavior in accounting professions, ethics in accounting is vital because it is important to ensure a correct and clear financial image of a business, to instill confidence and trust with stakeholders and the public and to prevent fraud, embezzlement or financial scandals. Literature Review Ethics are said to be an intangible asset of any organization and a key to success as it a system which is led by the moral and fair systems helps distinguishing the wrong or right. Problems in ethical system are, infect, a situation faced by a group of persons or by an individual, and to solve these ethical problem, they need to get complete information (“Role of Ethics in Accounting”, 2011). According to Axline (1990) in his journal about accounting, ethics are the backbone of an organization and play a vital role in the development of the organization. As the importance of ethics is increasing, organizations are becoming more conscious about the ethical system in their book keeping and accountancy. Ethical environment in the accountancy and book keeping is now subject to scrutiny and criticism from the media, regulators, and public interest groups (Axline, 1990). Although accounting is a very helpful record of a business and it is a most valuable sort of knowledge, people who are directly or indirectly related to the firm believes that the accounting records should be same like a pure science and it should be strong enough to solve some problems of the firm. Similar to the medical and legal professions, society is also obligate to give grants to the public accountants some extra and especial rights which help them improving their performance and handle certain activities with more proficiency as they are suppose to get something good in return (Mautz, 1988). Professional practitioners are always on the higher expectations of the public and they are required to be more proficient and closer to the ethics. They are required to act in the best interests of their company as along with the society when resolving issues that arise within the scope of their franchised practice. Most of the times accountants get criticized for each financial fraud happen in the company’s profile and ethical system in accounting gives solution to this problem. The Institutes of Accountants and their members have been subject to increasing public scrutiny following protracted criticisms in many jurisdictions over a substantial period. At the start of 21st century, many big scandals came into the news which shows the major weakness of the industries and companies. It pulls down the issue and media helped a lot in solving this issue and as a result, ethical environment was developed to prevent such cases in the future. In those scandals, companies and their accountants have broken down the integrity of the society and nation (Cheffers & Pakaluk, 2007). High profile corporate collapses and fraud, with which accountants have been associated as auditors, executives and directors, have prompted searching questions to be asked as to the integrity of the professional accountants involved. These scandals shows big failure of the system and all the financial scandals exposed in the early years of the 21st century have been labeled, have brought into sharp focus and over a more concentrated timescale, issues of long-standing debate including: audit and accounting regulation; auditor independence; earnings management; and audit and audit firm quality controls. This is not an issue which can’t get fixed, it is completely improbable and the internal auditing of the company can also be managed with the honest and delegated management team and by professionals within the field. This will help companies to robust criticism from the outside can do damage to the real powers and virtues of economic quantification (Phiddian, 1996). Quantitative Research The chosen method of quantitative research for conducting research on Ethics in Accounting is survey of companies and personal visits to four American companies to gain views about ethical standards followed in the companies. Hypothesis Even though it is common to find unethical behavior in accounting professions, ethics in accounting is vital because it is important to ensure a correct and clear financial image of a business, to instill confidence and trust with stakeholders and the public and to prevent fraud, embezzlement or financial scandals. Surveys: Four companies of USA have been visited to get their views about the Ethics in Accounting and to know either they have developed any ethical system in their accounts department? These four companies are as follow: 1- L’OREAL I did visit to the office of LOREL near my location and was much pleased to see their environment. I talked to one of the member of management who said, “At LOREL, we work with integrity and respect the laws of each country in order to stick to the ethics and good governance”. He more said that at LOREL, we work to maintain the set standards by the company not only in production but also in accounting and reporting so that the shareholders and stakeholders can get to know the ultimate truth, and support the fight against corruption. We deliver long-term, sustained shareholder value by protecting and making the most effective use of company assets. We fight against corruption and maintain high quality work by using company assets. 2- Starbucks My second visited company was Starbucks and the views of Starbucks about ethics in accounting were so clear and understandable. They said that Records must accurately and fairly reflect, within Starbucks normal accounting and reporting systems, all required transactions and other events. And incase anyone has any problem or has found any mistake in the accounts, he can complain to managing authorities about this and quick response will be taken to correct the mistake or prevent the fraudulent act which can loss big in future, if not stopped now. 3- General Electric Co. U.S.A. General Electric has been involved in so many cases of fraud that in the 1990s and these fraud cases of General Electric was exposed with the effort of special investigation officer.GE fined them, so it’s able to pay debts.GE is not only the financer of the WorldCom but also solve the case of biggest bankruptcy in US antiquity. These cases gave a shock to the entire world and they come with more ethical system to handle their accounting system and record keeping. 4- Thomson Reuters Corp The Board has followed a Code of Business Conduct and Ethics to maintain highest ethical standards within the company and to keep the books of records fair and clean. All members of board are strictly moved about it. Any person found guilty of not following the Code for Business Conduct, will be highly fined or executive officers may only be made by the Board or one of its committees and will be disclosed by Thomson Reuters to the extent required by law, regulation or stock exchange rules and requirements. Findings Ethics are the back bone of any organization to get more attraction from the customer’s side and to increase the production and sales. Ethical environment is a key to excel the company’s products and each company has to develop an outstanding lawsuit and ethical model which will help our strategy move smoother. Without ethics, the worth of any company is below average as it is an alarming situation that any fraudulent act can be happen within the company at any time due to less familiarity to the ethics and ethical system. Conclusion Most of the times accountants get criticized for each financial fraud happen in the company’s profile and ethical system in accounting gives solution to this problem. This question is really important in order to scrutinize the importance of ethics in accounting. For accessing the topic and the proposed question in depth, history of ethics, code of ethics for accounting professionals and incidents of ethical dilemmas posed to accounting professionals need to be well-researched at wider scale. References Axline, L. L. (1990). The bottom line on ethics: A fresh Perspective on a Worthwhile subject. Journal of Accountancy, 170 (6). Cheffers, Mark & Pakaluk, Michael. (2007). Understanding Accounting Ethics. New York: Allen David Press. Hoffman, W. Michael. (1996). The Ethics of Accounting and Finance: Trust, Responsibility, and Control. Westport, CT: Quorum Books. Mautz, R.K. (1988). Duties of Junior & Senior Accountants. New York: Taylor & Francis. Phiddian, R. (1996). Political Arithmetick: Accounting for Irony in Swift's. Accounting, Auditing and Accountability, 9, 70-80. Role of ethics in accounting. (2011). Retrieved from http://www.bookkeeping-financial-accountingresources.com/role-of-ethics-in-accounting.html Read More