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Why Are Ethics Important In The Accounting Profession?
Sheree Fletcher
CE CAPSTONE COURSE FOR THE ASSOCIATES DEGREE
IDS399
September 10, 2006
What does ethics have to do with accounting? Everything, since there have been some
recent financial accounting scandals; a few examples being Xerox, WorldCom, Enron,
which have generated much unwanted and unfavorable publicity for CPA, including those
working as controllers or chief financial officers for organizations.
When you hear the word ethics, what is the first thing that comes to mind? Having to make
the decision of doing what is right versus doing what is wrong. Some idealists say that
decisions of ethics should not be conditional. However, that is not as simple as it may
sound. What constitutes right to one person may be wrong to anther; what clearly
distinguishes the line between right and wrong? What some may look at as being unethical
does not necessarily make it illegal.
In the predicament of David Duncan, the lead audit partner at Arthur Anderson the
Accounting Firm for Enron, underscores the penalty that accountants may face under
professional accountability. Duncan had pleaded guilty to obstruction of justice when he
was involved in the connection with document shredding.
The scandals have made some big implications on the profession as a whole. One being
the decision from the Public Company Accounting Oversight Board (PCAOB), created by
the Sarbanes-Oxley Act (SOA) of 2002, in April 2003 they voted to assume the
responsibility for establishing auditing standards. The Auditing Standards Board of the
American Institute of Certified Public Accountants (AICPA) previously played this role.
The PCAOB has the authorization to provide rules governing the following areas; ethics,
independence, and quality control for any registered accounting firms, supplanting the role
of the AICPA for auditors of SEC registrants. Ethical and professional responsibility issues
represent actual and increasing challenges for CPA and the accounting profession due to
the inclusion of ethics in the mandate and the consequences from ethics violations that
may arise now and in the future.
To define the relationship between Business Ethics and Accounting Ethics are as follows:
Business Ethics has largely to do with the constraints placed on the pursuit of profit and
Accounting Ethics has to do with an ethical ideal inherent in accounting as a profession.
After the demise of Anderson and the collapse of Enron, which shook corporate America,
many stockholders began to make adjustments in their decision-making processes in order
to reflect their concerns over the unethical business practices. The demands for financial
