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Introduction:
Ethics is first of all, the quest for, and the understanding of, the good life living well, a life
worth living. It is largely a matter of perspective: puffing every activity and goal in its
place knowing what is worth doing and what is not worth doing, knowing what is worth
wanting and having and knowing what is not worth wanting and having.
The purpose of ethics in business is to direct business man and women to abide by a code
of conduct that facilitates, if not encourages, public confidence in their products and
services. In the public minds the work of an accountant must be faultless in execution and
principle. Throughout its history, accounting has been a moral discourse partially reflecting
the moral order of the world in which it was practiced (Verschoor 2002, 28).
Relationship among the FASB, SEC, and PCAOB:
The financial health and economic welfare of global corporations is at stake when it comes
to accurate financial reporting. Investors wont stand for a repeat of Enron, Tyco or recent
allegations in reporting improprieties by Fannie Mae. In order to establish regulations and
statutory liability for accountants Government established or sponsored several regulatory
body in early 1900s such as,
1. Institute of Accountants and Bookkeepers (IAB)
2. American association of Public Accountants
3. SEC established in 1930s
4. Committee on Accounting Procedures (CAP) in 1939
5. Accounting Principles Board in 1959
6. Financial Accounting Standard Board (FASB)
7. Public Company Accounting Oversight Board (PCAOB)
Presently following three regulatory bodies control and regulate ethics, principles, and
rules. They collectively work together to regulate those policies.
SEC mission is to protect investors and maintain the integrity of the Securities markets. It
requires public companies to disclose meaningful financial and other information to the
public, which provides a common pool of knowledge for all investors to use to judge for
themselves if a companys securities are a good investment.
FASB mission is to establish and improve standards of financial accounting and reporting
for the guidance and education of the public, including issuers, auditors, and users of
financial information. It was created in 1973, replacing the Accounting Principles Board
and the Committee on Accounting Procedure of the American Institute of Certified Public
Accountants before it.
PCAOB is a private-sector non-profit Corporation, created by the Sarbanes-Oxley Act of
2002, to oversee the auditors of Public companies in order to protect the interestsof
investors. The PCAOB is also charged with promulgating auditing and related attestation
and ethics standards for audits and reviews of public companies.
