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Accounting Ethics Analysis

Ethics in an organization is observed when the rules and regulations that govern the operations of the organization are effectively followed. The accounting profession should adhere to ethics because people rely on that information to make decisions on whether to invest in the company or not and therefore reports should be free from any bias and errors. Decision makers should possess the following qualities when carrying out their activities: competence, reliability and objectivity. Accounting refers to the process where a user of accounting information identifies, measures and communicates economic information so as to make informed judgments and decisions for an organization.

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In the past, the accounting professionals did not show desirable results to the users of the accounting information. For instance in the year 2006, the profession was affected by the Enron WorldCom and Global crossing scandals that adversely affected the economy. People began to doubt the integrity of accountants who had been employed to undertake the accounting work within the country. The other problem that was observed was failure in audit work and accounting fraud that led to losses to the shareholders and companies. Books of accounts that were being audited showed conflicting and biased information to the users of the accounting information.

There were cases where auditors were being given incentives in order to conceal some information from the books of accounts such that they portrayed a true and fair view in auditor’s report which was not a true representatitive of performance of the organization. It was also reported that the auditors’ independence was also jeopardized since clients influenced the audit of the financial statements that were being conducted which led to giving out of unqualified audit report as it lacked the necessary material information.

The measures the accounting profession is taking now and in the future to maintain and improve public trust

The Security Exchange Commission (SEC) report is addressing and working on the pertinent issues that are affecting the profession. This report has been revealing auditing improprieties such as: ineffective auditors’ independence since auditor clients have been influencing auditing work and that auditors scope of work had not been properly stipulated within the auditing guidelines. The management of the Accounting profession has been seeking ways of dealing with the financial scandals that are leading to lower investor confidence.

The accounting profession has been seeking advice from the Financial Accounting Standards Board ( FASB), Generally Accepted Accounting Principles (GAAP) and the liability –limiting legislation that can provide them with guidelines on how to conduct the accounting and auditing activities.Other reforms being enacted are those of offering different types of consulting and other non audit services for the audit clients through allowing lead audit partners to carry out different audit activities after every five years in order to avoid reporting of conflicting information within an organization(Michael, 2007, pp. 171-189).

The other reform strategy is that of ensuring that the Chief Executive Officers, Chief Accounting Officer, and all the persons employed within the company stay in office for less than one year so that they may not manipulate the financial statements.It has been noted that employees who stay in office for a long period of time can easily manipulate accounting information that would adversely affect the performance of a company.

Employment of qualified Certified Public Accountants to hold various positions within the organizations is contributing to drastic changes within an organization since they have the skills and knowledge to undertake various tasks assigned to them. They are being employed in major corporations, starting entrepreneurial businesses where they are developing private practices that handle the tax returns due to their high analytical skills which are proving to be useful for the growth and development in organizations. The accountants are also assisting entrepreneurs to create and to develop financial plans that ensure their companies are successful in future. They are also venturing in various sectors of the economy such as agriculture, education and engineering since all these sectors keep books of accounts that show how they generate their income and spend it within a stipulated period of time.

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The quality of auditing practices is being improved through setting up better standards for the organization, improving governance, allowing public oversight and also enhancing enforcement of discipline within the community. The elements being implemented so as to improve on the performance within an organization include: setting up an effective financial reporting infrastructure that’s effective, independent and of high quality standards. The other useful elements involve implementing high quality accounting and auditing standard setters, effective quality controls in the auditing firms, quality assurance in the profession wide areas and active regulatory oversight strategies that can bring about change (Michael, 2007, pp. 171-189).

International auditing profession is restructuring different auditing and accounting components so as to boost the investor confidence and ensure that the activities are carried out in the right manner. The restructuring process is being undertaken through creating a global oversight body that monitors and reports activities of the self-regulatory organizations. The goal of the oversight body is to ensure that international accounting standards are comprehensive and specific so that activities of the organization can be performed appropriately. The quality controls are being enforced and consistently reviewed so that auditing and accounting practices can be undertaken in the right manner in order to overcome inconsistency while interpreting accounting information for the users.

The other goal of global oversight organization is undertaking is that of ensuring that transparency takes place as per the global auditing profession function that indicates the interests of the investors when performing their tasks within an organization. Implementation of auditing methodologies commensurate with financial statements has been assisting an organization in pointing out any mistakes existing within an organization. It has been noted that organizations install proper accounting and auditing measures to generate greater returns that lead to improvement, boosting and maintaining of public trust in the accounting profession.

In conclusion accounting profession plays vital role in ensuring that organization run their operations according to the goals and objectives that have been stipulated within the Company’s Act. All organization should ensure that they employ qualified personnel to carry out tasks in accounting so as to ensure that profitability and stability of a company can be established.

References

  1. Kapustin, M. (2004). “Business Codes of Multinational Firms: What Do They Say?” Journal of Business Ethics. 50: 13-31.
  2. Norman B.E. and Werhane, H. P. (2005). Management ethics. Malden, MA: Blackwell Publishing.
  3. Michael, D. (2007).”Eighteen Rules for Writing a Code of Ethics.” Science and Engineering Ethics, Vol 13, No. 2. 171-189 (Michael, 2007, pp. 171-189)
  4. Steven M. M. (1997). Cases in Accounting Ethics and Professionalism. New York: McGraw-Hill Companies.

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