Review of Accounting Ethics

Review of Accounting Ethics

Introduction

The purpose of this study is to expand the boundaries of our knowledge by exploring some relevant information relating to the analysis of Accounting Ethics. Professional ethics is recognized as normative science that studies the duties and rights of the professionals in the performance of their professional activities. Professional ethics deals with the study and treated with the duties and professional behavior in the performance of their professional and personal activities. Ethics therefore, is the set of ethical rules that a given profession and its members must respect. Ethics refers to the science of duty or duties. Professional ethics can be defined as a set of ethical principles voluntarily assumed by those who profess a particular profession and implies a commitment to identity with the role they play in society (Sterling, 2002).

The purpose of the accountant standards, i.e. GAAP and IFRS, is to promote the professional and ethical accounting environment. It aims to convince that the principles of professional practice should serve for the good of society and the individual users of accounting. Ethics is based on a traditional framework that tends to set a balance between three types of "property", the common good, the good of the client and the good of professional himself. These three types of goods may lead to potential conflict of interests and dilemmas. According to Aristotle, there are two fundamental virtues, the first is the exercise of reason which is called intellectual or rational virtue, and the other is the domain of reason over sensitive impulses that determines morality and called moral virtue. The main ethical virtue is justice, in the most general sense, i.e. practice in accordance with the laws (Markham, 2005).

Many organizations have been in the news over the past few years due to accounting ethical breaches that have affected their customers, employees, or the general public. In this paper, the author will depict an accounting ethical breach and related it with the principles of ethics in Accounting.

Discussion

Given the corporate ethical breaches in recent times, the role of current business and regulatory standards in mitigating ethical dilemmas is doubtful. Recent cases of accounting breaches such as Enron and Satyam scandal raise concerns regarding the effectiveness of Accounting Standards and create doubts in the mind whether these standards are conducive to ethical behavior. IFRS are more recently established and are somewhat less developed than U.S. GAAP. IFRS have been written in the spirit of becoming general principles to guide users on a true reflection of the various accounting transactions. The U.S. GAAP, although born in order to be guiding principles, have become a very extensive set of rules that give a very precise guidance to users (Ashbaugh, 2001). For this reason, there are much more prescriptive, barely contain options that increase the comparability of financial statements. In general, there are now more than 200 significant differences between IFRS and US GAAP (Gray, 2005).

The preparation of financial statements in conformity with GAAP requires the use of ...