Professional ethics for accountants
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Why are ethics important to accountants?
This section of the learning module focuses on the general responsibilities of members of the accounting profession.
It includes an introduction to the concept of public interest and provides some examples of the impact of unethical behaviour by accountants.
There are two main professional accounting bodies in Australia - Chartered Accountants Australia and New Zealand (CAANZ) and CPA Australia (CPAA). Members of both of these accounting bodies, and members of their international equivalents have a duty to observe the highest standards of conduct and integrity and uphold the good standing and reputation of the profession. Members are required to ensure that they adhere to the requirements of the Code and apply it at all times in their working lives. The Code outlines the behaviours and conduct that is expected of members.
The following short (2:15 min) video shows a number of ACCA members (the UK professional accounting body) explaining what ethics means to them.
Ethics is often used interchangeably with the term morals. But there is a difference. Whilst both are concerned with what is the right thing to do in a situation, morals may resolve problems with reference to an individual's personal belief system about what might be right or wrong.
Unethical behaviour has consequences and may affect the accountant, personal and organisational reputation, financial viability and the overall business efficacy of an organisation. Accountants need to consider ethical implications in order to provide the basis for decision making.
Watch the following short video (5:56 min) to see an example of how ethical issues can affect a variety of stakeholders in an organisation.
Unethical behaviour has consequences and may affect the accountant, personal and organisational reputation, financial viability and the overall business efficacy of an organisation. Accountants need to consider ethical implications in order to provide the basis for decision making.
Watch the following short video (5:56 min) to see an example of how ethical issues can affect a variety of stakeholders in an organisation.
For the following activity you are required to access a virtual "wall" that has been created in Padlet. Each student is required to make a short post to the wall (maximum of 100 words) answering the following question. Your post may be in bullet point form, a list of key words or a few short sentences.
Activity 1:
What determines the standards by which society at large assesses the behaviour of professional accountants? Click here to access the Padlet wall.
"A distinguishing mark of the accountancy profession is its acceptance of the responsibility to act in the public interest."
The Code
‘Public Interest’ is generally understood to refer to the ‘common well-being’ or ‘general welfare’ of the public. A growing number of corporate scandals have made it clear that unethical business practice does not work in the long term. The past few years have highlighted the costs of acting unethically, with a spate of business failures, high public distrust and now, increasingly, public protest against corporate and government wrong doing.
Examples of high profile business failures resulting from accounting fraud include:
Another high profile failure was that of WorldCom. You should now move to the next tab "WorldCom - a Case Study"
Examples of high profile business failures resulting from accounting fraud include:
- Enron. Enron was a US energy, commodities, and services company. Before its bankruptcy in 2001, Enron employed approximately 20,000 staff and was one of the world's major electricity, natural gas, communications and pulp and paper companies, with claimed revenues of nearly $111 billion. At the end of 2001, it was revealed that its reported financial condition was sustained by an institutionalized, systematic, and creatively planned accounting fraud. The scandal brought into question the accounting practices and activities of many corporations in the US and was a factor in the enactment of the Sarbanes-Oxley Act. The scandal also caused the dissolution of the Arthur Andersen accounting firm.
- Lehmann Brothers. Lehman Brothers was the fourth-largest US investment bank at the time of its collapse in 2008, with 25,000 employees worldwide. With $639 billion in assets and $619 billion in debt, Lehman Brother's bankruptcy filing was the largest in history. Lehman's demise, caused by fraudulent accounting treatments adopted by management whereby liabilities were kept 'off balance-sheet' made it the largest victim of the sub-prime mortgage crisis . Their collapse greatly intensified the GFC and contributed to the erosion of close to $10 trillion from global equity markets in October 2008, the biggest monthly decline on record at the time.
Another high profile failure was that of WorldCom. You should now move to the next tab "WorldCom - a Case Study"