The Significance of Ethics in the Accounting Profession
Ethics is a philosophical concept which defines, systematizes and develops the moral power of choosing right and wrong. After causing many recent corporate scandals and damage in the economy and society, the ethical failure has become an alarming issue in the business world. Ethics is accounting is related to the moral choices of financial information’s presentation, preparation and disclosure. Right ethical standard ensures proper reporting mechanisms, fairness of account management, quality audit which will strengthen the customer as well as service providers in financial reporting. Good organizational behavior requires a strong personal and professional ethical code. Australia’s every account body has a code of conduct which decides the organizational ethical codes on professional conduct (Campbell and Houghton 2013).
This article focuses on the development period of an accountant and what role ethics plays in his career. More specifically, how the firm’s ethical climate builds up the early career accountant or ECAs’ professional commitment towards the firm. In the firm, the mentors also play important role in the process of building the organizational ethical climate for the ECAs. The article also studies the effects of OEC on them relating to their pressure in public accounting firms and how they should practice right professional values and avoid the ethical failure. The article refers to a study where, 4000 business employees participated in the survey. 25% employees expressed that they believe the company does not participate in ethical practice and 17% believed their company practiced ethical misconduct to achieve profitability ( McManus and Subramaniam 2013 ). More emphasis on the ethical standard creates stronger professional integrity and greater confidence for the employees in their firm. There is another study in the article, which measured the OCE by conducting a survey based on three topics. The participants expressed their agreement or disagreement on the topics of 1) managers’ unethical behavior, 2) necessity of compromising one’s ethics to succeed and 3) top management not encouraging unethical behavior in their respective companies. The survey clearly shows that organizational ethical climate has positive and influential impact on organizational culture and so on productivity. The result also highlights that ethical climate promotes the employee commitment to the company.
This article focuses on the twenty first century’s plague of organizational failure as a result of ethical misconducts. While referring to ethical failure in the accounting world it refers to the WorldCom and Enron scandals. The leaders of Adelphia, Tyco international also were also involved in unethical practice, which caused great loss for the companies. The article suggests that the companies must motivate the account professionals to be more ethical. The gap between the ethical leadership and effective leadership in accounting profession must be bridged. It establishes that the ethical practice by the accountants increases their potential to become more effective leaders.
The Effect of Organizational Ethical Climate on Early Career Accountants
If the leaders of a firm show fair ethical practice, the subordinates tend to follow them. The article refers to a study conducted on the leaders of a large public accounting firm. The primary study used an ethical leadership survey based on their ranking on the scale of 10. The second stage of study focused on the employees. They were asked to rank their leaders based on their ethical practices. In the next stage an ethical culture scale was developed based on 15 questions. The result demonstrates that for accounting professionals ethical practice is significant in deciding the effective leader.
The firm must ensure development and training of ethical codes for the development of the accountants in order to make them morally strong, consistent and efficient leaders. The mix of strong ethical behavior with traditional leadership behavior can only result in effective accounting leaders.
The failure of ethical practice has affected public confidence in the accounting sector. HIH Royal Commission and The Fitzgerald Commission in Australia investigated the reasons for such epidemics of the scandals (Dellaportas et al. 2014). The results established that ethical failure is one of the major causes. The result effects in increased training curriculum in ethics education in the accounting studies. There has been a dominant trend of developing the moral and ethical standard of accounting students. A study was conducted to examine the teaching of ethics in the Australian accounting curriculum. 39 schools and departments of accounting from top accounting universities of Australia participated in the survey. The survey of 2012 showed that only 29% of them offer a proper ethics course (Dellaportas et al. 2014).. Most of the ethics courses are of optional status and a few numbers of students only opt for them. Also the students preferred the ethics course to be integrated with other major courses rather than as separate courses. The Australian government also set the guideline sin favor of the integrated approach. So, naturally lack of the opportunity or incentives results in teaching personals’ lack of willingness. This results in lack of qualified teachers in ethics in accounting institutions. So in Australia the education system has failed to improve the educational condition of ethics in accounting institutions. The authors have indicated that this study might not express the general view on ethics education. Head of the departments must value the ethics researchers and teaching staff to develop better future accounting professionals.
The Need for Ethical Education for Future Accounting Professionals
The relationship between the stakeholders and the accounting professionals is an important part of corporate governance system. During the information exchange process, the accountants must be faithful and transparent to the stakeholders. This complexity of the accountants’ position highlights the importance accounting ethics practice in the corporate governance.
Accounting ethics ensure an organizational system that encourages rational behavior. The essay refers to the International Federation of Accountants suggested Code of Ethics (Bonaci et al. 2013). The main principles of the code are objectivity, confidentiality, integrity, proficiency and professional behavior. Accountants manage financial reporting, provide necessary information to the investors, which are used in the decision making. The ethical misconduct in this process may cause significant harm. The essay refers to the ethical failure causing financial scandals in IBM-Hitachi, Drexel Burnham Lambert and Barings Bank. Often ethical compromise results in creative accounting and fraud.
The essay suggests accounting education focusing on ethics can be a potential remedy for this ethical crisis. The learning will raise the students’ awareness regarding ethical issues in their future accounting practices.
International Ethics Standards Board for Accountants or IESBA has decided upon few possible ways and fundamental principles have been described thoroughly in this essay (West 2016). To be honest in all professional relationships in an organizational structure in important. While handling a professional situation, there should not be any bias. The account professionals should never disclose any critical information to any third party.
For the future accountants, many circumstances might lead them to the trap of ethical compromising, but their ethics education will save them from the ethical failure. Ethics knowledge being incorporated in the accountant’s philosophy will result in successful future.
This report shades light on various perspectives based on various study. One of them is the uselessness of ethics for accounting students as they work within the legal framework of corporal governance. Another study discussed in the essay represents that ethical education is equally important as the technical training in the accounting course. The essay also differentiated between two types on internalized ethical values (Das 2015). In an experiment who responded in ethical way, even when their identities were hidden, tend to be internally more ethical. On the other hand, the people who act ethically only publicly, are not. A perfect combination of ethics education and ethical practice can result in long lasting ethical practice towards the organization.
Conclusion
Recurring ethical failures have drawn significant attention to the need of ethics in the profession. The scandals shook the accounting professionals and made them look for the solutions. Though the demand has been discussed extensively in theories, not many actions have been taken for the implementation. The report explored various experiments done on the issues and foregrounds the need of the ethics in accounting area. The various results in the surveys exposed an increasing need for the ethical knowledge in the accounting field. The ethical failures in the accounting areas have demonstrated the lack of ethical knowledge to be the significant reason. The accountants must give importance to the ethical practices to develop an effective journey in their accounting field.
References
Bonaci, C.G., Strouhal, J., Müllerová, L. and Roubícková, J., 2013. Corporate Governance Debate on Professional Ethics in Accounting Profession. Central European Business Review, 2(3), p.30.
Copeland, M.K., 2015. The importance of ethics and ethical leadership in the accounting profession. In Research on Professional Responsibility and Ethics in Accounting (pp. 61-98). Emerald Group Publishing Limited.
Das, M., 2015. Need, Relevancy and Impact of Ethics Education on Accounting Profession.
Dellaportas, S., Kanapathippillai, S., Khan, A. and Leung, P., 2014. Ethics education in the Australian accounting curriculum: A longitudinal study examining barriers and enablers. Accounting Education, 23(4), pp.362-382.
Houghton, K. and Campbell, T., 2013. Ethics and auditing (p. 354). ANU Press.
Subramaniam, N., McManus, L. and Cameron, R., 2013. Using a web-based, longitudinal approach for teaching accounting ethics education. Journal of Business Ethics Education, 10, pp.143-167.
West, A., 2016. After Virtue and accounting ethics. Journal of Business Ethics, pp.1-16.
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