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Allison Buehler
Thompson
RHET 1302.024
8 December 2015
Research Essay

The Importance of Ethics in the Accounting Profession

Businesses provide a variety of goods and services to the public and thus are crucial to

any and all societies. Every business shares a similar goal: to earn profit. Each spends money to

create or provide its good or service and each receives revenue from selling its product to the

consumers. Accountants’ roles in businesses are to maintain records regarding the output and

input of money. Since accountants handle confidential data, they should be completely

trustworthy to the executives of the companies at which they work and to the general public.

Sometimes, however, accountants decide to compromise their reputations and trustworthiness by

failing to professionally handle such classified information. Therefore, instilling proper ethical

knowledge into people of the accounting profession is important to the accountants, their

businesses, and society. Ethics in the accounting profession increase the confidence that

accountants perform their jobs responsibly and accurately. Failure to abide by these ethics can

cause serious accounting issues, which can result in possibly catastrophic consequences for both

the accountant and the company for which he or she works. Ensuring that all practicing

accountants possess a complete understanding of the ethical standards of their profession allows

for fewer scandals to occur, greater trust of companies by the public, and more effective

businesses throughout all industries.

The general role of accountants is to provide valid information on a person’s or

organization’s economic and financial statuses. In addition, accountants perform other important

jobs including auditing, managerial accounting, tax accounting, financial planning, and
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consulting. Auditing involves determining the consistency and reasonableness of an

organization’s estimates. Managerial accountants provide statements primarily for their own

organizations and occasionally for board members or shareholders. Tax accountants sort through

their organizations’ tax liabilities. Accountants possess high qualifications as financial planners

and consultants due to their knowledge of fields relating to accounting, such as tax law (Duska

20). However, the accountants’ work requires the personal judgments of those accountants,

regardless of their specific jobs. Thus, ethical issues arise when accountants make the decision

to ignore, eliminate, or distort certain information in a statement due to a variety reasons.

Generally, person’s ethics or morals are how he or she decides between what is good and

bad or what is right and wrong based on his or her personal set of moral beliefs. Ethics in the

accounting profession allow accountants to efficiently perform their duties and provide the most

accurate information. In the United States, the American Institute of Certified Public

Accountants (AICPA) provides a professional code of ethics for accountants. The code consists

of two parts. The first part lists the six principles that detail the responsibilities of all people in

the accounting profession:

1. Accountants have a responsibility to society and to other accountants to perform their

jobs professionally and morally;

2. A major obligation of accountants is to serve the public interest;

3. Accountants should perform their professional duties with integrity;

4. Accountants should be objective and independent in their professional work and have no

conflicts of interest;

5. Accountants should constantly strive to provide the most excellent service to the best of

their abilities;
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6. Accountants should be knowledgeable in these principles in order to determine which

services to provide to various customers and clients (Duska 76-90).

The second part explains the rules, based on the principles of the AICPA, that must be followed

by all accountants and consists of five sections. The first section discusses independence,

integrity, and objectivity that must accompany an accountant’s work. The second section

explains general business standards and accounting principles that all accountants are required to

obey. The third section defines the rules of client confidentiality and other relational

responsibilities that are important to maintaining trust between businesses and its clients. The

fourth section discusses accountants’ responsibilities to their colleagues that helps uphold the

reputation of both the accountant and the company. Finally, the fifth section describes other

various accounting responsibilities and practices that do not fall under the other four sections

(Duska 95-105). Together, the principles and the rules of the Code of Professional Conduct of

the American Institute of Certified Public Accountants outline essential aspects of accounting

that must be followed by accountants in order for the profession to be considered both effective

and respectable.

Accountants handle sensitive information on a daily basis, making ethics and morals

imperative to the functionality of an organization. Strong ethics among accountants can reap

multiple benefits for not only organizations but also the public, including strong teamwork and

increased productivity in businesses and greater trust in those businesses among society. A

reliable accountant is “not only competent, but [also] behaves ethically” (Bromell 80). An

accountant may be an exceptional at his or her job, but if the job is performed unethically, he or

she cannot be considered a true accountant. Recent surveys have shown three major facts about

ethical issues in business and accounting: most of the public does not trust that businesses
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provide accurate accounting information, most misconduct involves people in managerial

positions, and many employees fail to report misconduct at their businesses of employment

(Mastracchio 49). These alarming statistics raises questions about the ethical standards of not

only accountants but also businesspeople in general.

In order to guarantee more trustworthy accountants, prospective certified accountants

should be taught the ethical standards of the accounting profession and their importance.

However, teaching ethics to students at colleges and universities is only required in five states:

Texas, California, Illinois, Maryland, and Virginia (Mastracchio 51). Even with this requirement

in effect, integrating ethics into the education for accounting students is challenging. Studies

show that students studying business at universities and colleges tend to cheat more than non-

business students (Mastracchio 49-50). A simple solution to the problem of unethical accounting

practices is difficult to identify because more than one cause of this problem exists. In general,

two major reasons why accounting scandals occur are “a lack of supervision [within businesses]

and policymaking [by the government]” and a “shortage of ethical content of

accounting…courses” (Meymandi 137). Improved supervision and more efficient policymaking

would positively and simultaneously affect multiple accountants across many industries, but

providing sufficient ethical education to all accountants proves challenging because people are

vastly different and thus have different morals. Attempting to educate every accountant about

the importance of ethical codes in the accounting profession appears impossible. However, a

widely accepted understanding is that accountants should be taught general ethics that are “good

for society, workable for the profession, and valuable for [the accountants]” (Bromell 80).

Beginning such ethical instruction during the undergraduate level of education at colleges and
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universities would remarkably improve both the functionality and the reputation of the

accounting profession.

Two of the biggest accounting scandals of the twenty-first century involved the

companies Enron and WorldCom. Enron was an energy, commodities, and service company

based in Houston, Texas and was ranked one of the largest energy companies in the world at its

peak (“Enron Fast Facts”). The collapse of Enron occurred due to a revelation in 2001 that the

company overstated their earnings by about $600 million, resulting in Enron filing for

bankruptcy. At the time, Enron’s bankruptcy was the “[largest] corporate bankruptcy to ever hit

the financial world” (Folger). However, the WorldCom scandal later trumped the Enron scandal

in this category. WorldCom, now known as MCI, Inc. as a result of a merger, was a

telecommunications company and is currently a subsidiary of Verizon Communications. An

overstatement of assets also caused the collapse of WorldCom in 2002 by much more than

Enron: around $12 billion (“WorldCom Definition”). The reasons for the overstatements of the

financial statements of both Enron and WorldCom are unclear, but the involved employees at

each company illustrated a failure to abide by ethical standards in choosing to distort their

company’s information. Their decisions to provide inaccurate data caused catastrophic

consequences for the employees’ careers and their companies. Had they followed the ethical

standards that are set in place for accountants and their work, the ruinous result of bankruptcy

would never have occurred.

Accounting scandals usually occur due to the purposeful ignorance, elimination, or

distortion of information that accountants provide about an organization’s economic and

financial statuses. The important word in this statement is “purposeful.” Saying a false

statement and lying are not identical; saying a false statement is a simple mistake, but lying is
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meant to deceive individuals in order to force the victim to act or think in favor of the liar.

Issues concerned with the financial information provided by accountants become scandals when

that information is knowingly false. The majority of crimes related to accounting arise because

the accountants of a company illustrate different versions of their business to different audiences.

For example, depicting that a business is in a poor financial state to the Internal Revenue Service

(IRS) would result in the business paying fewer taxes. On the other hand, depicting that a

business is in an exceptional financial state to potential investors would result in the investors

placing more money in the business than if they were given legitimate information. Although

accounting fraud appears to develop because those responsible for causing it are working in the

best interest of the company, these seemingly noble interests do not justify the unethical

practices that accompany the scandals.

Every person should possess good ethics and morals because they are what guide him or

her to make significant decisions throughout his or her life. High ethical standards should be

established for accountants because of their connections to an organization’s or a business’s

highly confidential information. Accountants’ lack of proper ethics can result in the

misrepresentation of companies’ vital economic or financial statuses. Providing ethical education

to all accountants allows for a more widespread understanding of the importance of ethics

throughout the profession. Results also include fewer accounting scandals, increased confidence

in and trust of accountants and businesses, and more effective companies for society.
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Works Cited

Bromell, Tony, and Martin Martinoff. “What is the Accountancy Profession For?” CPA

Journal Feb. 2015: 80. Business Source Complete. Web. 16 Nov. 2015.

Duska, Ronald F., and Brenda Shay Duska. Accounting Ethics. Malden: Blackwell, 2003.

Print.

“Enron Fast Facts.” CNN. Cable News Network, n.d. Web. 30 Nov. 2015.

Folger, Jean. “The Enron Collapse: A Look Back.” Investopedia. Investopedia, LLC, 30 Nov.

2011. Web. 30 Nov. 2015.

Mastracchio, Jr., Nicholas J., Carlos Jiménez-Angueira, and Ildiko Toth. “The State of Ethics in

Business and the Accounting Profession.” CPA Journal 85.3 (2015): 48-52. Business

Source Complete. Web. 16 Nov. 2015.

McNamara, Joseph. “Fraud, Accounting Scandals and the Effect on Trade Credit: Part I.”

Business Credit 117.4 (2015): 48-49. Business Source Complete. Web. 18 Nov. 2015.

Meymandi, Azam Roosta, Hossein Rajabdoory, and Ziba Asoodeh. “The Reasons of

Considering Ethics in Accounting Job.” International Journal Of Management,

Accounting & Economics 2.2 (2015): 136-143. Business Source Complete. Web. 16

Nov. 2015.

Wilson, Arlette C., and Kimberly G. Key. “Enron Audit Failures: A Compromise of Ethics?”

Feature Edition 2013.3 (2013): 50-68. Business Source Complete. Web. 16 Nov. 2015.

“WorldCom Definition.” Investopedia. Investopedia, LLC, 11 Aug. 2005. Web. 30 Nov. 2015.