Ethics Article ReviewEthics Article ReviewRUNNING HEAD: ETHICS ARTICLE REVIEWEthics in AccountingEthics in accounting has faced increased scrutiny since the collapse of the Enron Corporation. In December 2001, the Enron Corporation shocked the world when its accounting firm, Arthur Andersen, was accused of failing to abide by the Generally Accepted Accounting Principles (GAAP); a widely accepted set of rules, conventions, standards, and procedures for reporting financial information, as established by the Financial Accounting Standards Board (FASB). In other words, the accounting firm of Arthur Andersen utilized unethical accounting practices to hide company debt. Senior officers within the Enron Corporation were allowed to cash out stock options while employees 401(k) accounts were frozen. Employees of the Enron Corporation were assured of financial stability, yet Enron declared bankruptcy shortly there after (Baset, 2002). Arthur Anderson accountants and officials within the Enron Corporation decided to waive a code of ethics because of the potential interference with making a profit. As we have seen with many corporations such as Enron, Tyco, and WorldCom, good ethics does not always account for good business.
Ethics as related to businesses is used as a guide to direct individuals to follow a code of conduct to assist in increasing and maintaining public confidence in their products and services (Baset, 2002). Ethics also serves as a foundation on how to function, live and work within society. Those who chose to practice accounting and financial management are obligated to maintain the highest standards of ethical conduct. However, individuals involved in accounting, auditing, and financial management, are faced with ethical dilemmas, due to being unclear as to ethical standards in businesses.
In providing a clear understanding, accountants and businesses should refrain from actions that would prejudice their ability to carry out ethical duties. This includes avoiding conflicts of interest; the refusal of favors, gifts and reception that would influence actions; and refraining from any activities that would damage the reputation of the profession. Instead, accountants and businesses are responsible for communicating information fairly and objectively; effectively communicating favorable and unfavorable information; and communicating opinions and professional judgments. They should communicate professional boundaries or constraints that would prohibit responsible judgments or opinions (Baset, 2002).
The ethics of accountancy also requires that accountants and business groups work on “a wide range of ethical and technical issues that relate to the management of business affairs” such as, but not limited to a candidate’s management of a company or an employee’s management of a small business, their role in developing companies’ strategies and strategies for business growth, or their understanding of the risks associated with accounting and management consulting. Examples include, for example, whether or not the practice of accounting is an appropriate or acceptable mode of work to maintain business value or the management of an organization’s overall goals and objectives, to identify conflicts of interest, and the management of a particular business. The information and opinions of accountants and business groups should not, therefore, be considered in isolation from their ability to represent and assist the client in the management of a business; such information may well be helpful in determining what should be done; the decision not to recommend a client to a private firm, the value of the office or a business entity’s property, the extent to which the person may have a conflict of interest in a client account, or the importance of any particular client or client business; the practice of reporting transactions to the management of a business entity, including reporting those of other accountants for audit, to the client financial disclosure bureau; and whether or not the management of a business includes members of legal or other relevant business associations. Further, certain accounts must be subject to periodic review and revisions as appropriate for their intended purpose, making it difficult or even impossible for them to effectively coordinate with business groups and individuals in ways that meet any ethical standards. For instance, accountants and businesses should not rely solely on the financial management of a business or their ability to report on or monitor activity without first obtaining the approval of their current management. The current management of financial problems will not be able to satisfy the client and can lead to harm or harm to the business, or contribute to failure. Some accountants and business groups may be required to work within the company’s management if their primary function is to advise the client about and support its business processes. There may be some instances in which such business would need to work in a position where a significant amount of attention and attention to financial and operating considerations are needed. Additionally, the need to make recommendations that should be consistent with the client’s needs requires accountants and business groups to make sure certain decisions as to which accountants or business groups will perform those tasks. This includes those that are most essential and critical to the clients’ business development and to improving profitability.
For some situations, the best course of action is to allow accountants and business groups to work in the same organizational environment as the client, and then to share information, as well as discussions, with clients and employers about the process of managing and managing this large scale company, making recommendations for an effective management for a variety of reasons, including the client’s particular needs and the needs of his or her business. These may include the
The ethics of accountancy also requires that accountants and business groups work on “a wide range of ethical and technical issues that relate to the management of business affairs” such as, but not limited to a candidate’s management of a company or an employee’s management of a small business, their role in developing companies’ strategies and strategies for business growth, or their understanding of the risks associated with accounting and management consulting. Examples include, for example, whether or not the practice of accounting is an appropriate or acceptable mode of work to maintain business value or the management of an organization’s overall goals and objectives, to identify conflicts of interest, and the management of a particular business. The information and opinions of accountants and business groups should not, therefore, be considered in isolation from their ability to represent and assist the client in the management of a business; such information may well be helpful in determining what should be done; the decision not to recommend a client to a private firm, the value of the office or a business entity’s property, the extent to which the person may have a conflict of interest in a client account, or the importance of any particular client or client business; the practice of reporting transactions to the management of a business entity, including reporting those of other accountants for audit, to the client financial disclosure bureau; and whether or not the management of a business includes members of legal or other relevant business associations. Further, certain accounts must be subject to periodic review and revisions as appropriate for their intended purpose, making it difficult or even impossible for them to effectively coordinate with business groups and individuals in ways that meet any ethical standards. For instance, accountants and businesses should not rely solely on the financial management of a business or their ability to report on or monitor activity without first obtaining the approval of their current management. The current management of financial problems will not be able to satisfy the client and can lead to harm or harm to the business, or contribute to failure. Some accountants and business groups may be required to work within the company’s management if their primary function is to advise the client about and support its business processes. There may be some instances in which such business would need to work in a position where a significant amount of attention and attention to financial and operating considerations are needed. Additionally, the need to make recommendations that should be consistent with the client’s needs requires accountants and business groups to make sure certain decisions as to which accountants or business groups will perform those tasks. This includes those that are most essential and critical to the clients’ business development and to improving profitability.
For some situations, the best course of action is to allow accountants and business groups to work in the same organizational environment as the client, and then to share information, as well as discussions, with clients and employers about the process of managing and managing this large scale company, making recommendations for an effective management for a variety of reasons, including the client’s particular needs and the needs of his or her business. These may include the
In 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002, to guide the reporting of financial professionals. The Act was the most dramatic change to the federal securities laws since the 1930’s; it re-defined the federal regulation of public companies, corporate governance and reporting obligations. It also tightens the accountability standards for directors and officers, auditors, securities analysts and legal counsel (Wikipedia,2006).
Key changes included:-Effective April 26, 2003, the SEC directed the NYSE and Nasdaq to prohibit listing any public company whose audit committee does not comply with a new list of requirements affecting auditor appointment, compensation and oversight. The audit committee must consist solely of independent directors.
-Effective immediately, CEOs and CFOs must certify in each periodic report containing financial statements that the report fully complies with Sections 13(a) and 15(d) of the Securities Exchange Act of 1934 and that the information fairly presents the company’s financial condition and results of operations.
-Certifying officers face penalties for false certification of $1,000,000 and/or up to 10 years’ imprisonment for “knowing” violation and $5,000,000 and/or up to 20 years’ imprisonment for “willing” violation.
-Effective immediately, no public company