Accounting Ethics : Accounting Principles And Guidelines

This $490 million came from the netting manipulation when they offset their expenses with unrelated gains on the sale of assets. The geography manipulation allowed them to move millions of dollars to different sections of the income statement to “make the financials look the way we want to show them” said James Koenig, one of the primary forces behind the scandal. However, none of the fraudulent activities would have gone unknown for so long without the aid of the auditors, Arthur Anderson LLP, involved with Waste Management.

The Waste Management scandal from the late 1990’s was described as “One of the most egregious accounting frauds we have seen," said Thomas C. Newkirk, associate director of the SEC's Division of Enforcement. (Cottrell, 2009) The majority of the fraud was centered around the fact that earnings were not growing as fast as projected so earnings were inflated. Waste Management executives avoided recording write offs which overstated their income statement by failing to record abandoned projects. They also capitalized items that should have been left on the income statement to increase their value on the asset side. It is documented that Waste Management’s auditor Arthur Andersen LLP (Anderson) entered into an agreement with Waste Management to help cover up such fraud in

Limited access to records and assets can really make it hard for someone in an organization to commit fraud. If the accounting department never has access to the actual money and the people in charge of the money have no access to the accounting of the organization other than sending them the info over that the

In the wake of accounting malpractices across several companies in the United States such as Enrol Corporation, Tyco International and WorldCom, there has been a lot of attention with regards to the accounting practices in the corporate sector. Specifically, the Sarbanes – Oxley Act (SOX) which was passed by congress in 2002, was aimed at addressing the situation by regulating fraudulent accounting practices such as bribery and wrong entries in books (Williams & Elson, 2010). While regulation has its own limits, it is hoped that ethical principles can go a long way in keeping accountants in check. To this end, a number of institutions formulated within the accounting professions such as the AICPA have come up with codes of conduct to guide the action of members and ensure that they act in a way that is morally right and in line with the profession.

As technological advances force globalization and unified standards upon the world of accounting, the understanding of ethical systems and their role on business becomes a necessity. The goal of accounting is to provide users with reliable and accurate information that is independent and complete. However, if accountants around the world are not subscribing to the same ethical standards and theories, then the urgency to unify standards and practices between U.S. GAAP and the IFRS are no longer significant. With ethical theories being extensive in nature they can result in different outcomes and justifications making them the highest priority in accounting. Required education and training on each system is necessary to understand flaws and contradictions

In this paper, I will explain if I believe whether a code of ethics should do more than the establish minimum acceptable standards. I will also describe the 5 cardinal virtues of professional accountings, whether there should be rules-based ethics standards. Lastly, I will compare and contrast the AICPA’s Code of Professional Conduct and the IFAC Code of Ethics for professional accountants.

The WMI accounting fraud case described a financial fraud committed by senior management of WMI, with the help of Arthur Andersen the external auditors. The case depicts the effort of several years to inflate profits at WMI, employing aggressive accounting practices which enabled the WMI to conceal $1.7 billion in form of expenses (Riley and Rezaee, 12). By eliminating or deferring expenses, WMI managed to meet earnings targets and improve

Ethics is a decision one makes in knowing the right thing to do and actually doing the right thing. They are the rules of behavior based on one’s belief of what is morally good and bad. A person may hear the word ethics and immediately think of government or the law. Not only does ethics have a role in government, it also plays a major role in business, including accounting. Schroeder, Clark & Cathey (2014) state that the “reason for a high level of ethical conduct is the need for public confidence in the quality of services provided by the profession” (pg. 624). Ethical conduct not only encourages a high standard of performance; it also encourages a high quality of professional

According to the principles of accounting course, master budgets are a set of budgeted financial statements and supporting schedules for an entire organization that includes three types of budgets: the operating budget, the capital expenditure budget, and the financial budget. Managers of an organization use this financial plan to coordinate business activity. Whether large or small, financial decisions require planning and failure to formalize plans often result in failure to achieve financial goals. There are multiple employees who gather this information and it is crucial they understand the importance of remaining ethical in their planning. According to my accounting course, they define ethics as “a code of conduct or set of beliefs that dictate what is right, wrong, fair, and unfair” (Ethics - Definition | Meaning | Example, n.d.). It is important for businesses to implement ethical standards when dealing

The textbook assigned for this course highlighted many important lessons that will guide me in my future as a professional. This course allowed me to learn about many companies who were affected due to the lack of ethicality in their culture and employees that will eventually lead the company to misstate its financial statements. Given that the name of the course is “Ethics in Financial Reporting and Accounting,” I think this book gave an excellent overview of how to avoid financial troubles when working for a public company or a professional services firm. While I think every chapter provided important ethical concepts to be taken into consideration when working in a professional career, some moral lessons caught my eye as I learned about them while I read the textbook. These five lessons include identifying ethical blind spots, avoiding motivated blindness, tone at the top and independence, ethical conduct and its effect on financial statement fraud, and the importance of ethical standards and cultural values when engaging in global business. I think these five lessons are the most valuable ethics lesson that will live on with me forever into my professional career.

In 1997, while being interviewed by a Fortune Magazine reported, Bernie Ebbers stated, “Our goal is not to capture market share or be global. Our goal is to be the No. 1 stock on Wall Street” (Charan, Useem and Harrington 3) As a result of its CEO’s ambition, WorldCom employees felt pressure from their “powerful leader” to perform up to Ebbers’ ambitious goals and not wanting to disappoint. As the flooded telecommunications industry started to suffer,so did WorldCom. Pressure began to mount for its CEO as Bernie Ebbers had not only a professional stake in the company but an enormous personal financial stake as well. As the industry put pressure on Ebbers, the CEO put pressure on the top executives of the company.

Ethics is an essential in the running of any business, but it is more than ever critical when transacting accounting decisions. When dealing with ethics in the business world, management must remember what is ethically right

In the field of accounting, it is really hard to say that any particular ethical system is used more often than others. According to Katherine Y. Masten, “ The most common ethical systems used in accounting are deontology and utilitarianism”. She also mentions “A specific ethical dilemma that arises within accounting tends to be the utilitarian conflict. Since the greater good is accomplished in this system, personal responsibility and ethics lose importance” (Ethics in Accounting 2012). However, it is not very common nowadays to see people who do auditing that believe only those two systems. Additionally, every company or firm that deal with accounting and auditing required have own Code of Conduct after Sarbanes- Oxley act. And, most common principles that used in Code of Conduct for accountants are integrity, objectivity, and professional behavior (Appendix).

A code of ethics is necessary for the success of any type of business whether it be a professional service organization such as a law firm or an accounting firm, a manufacturing company such as Chrysler, Toyota, Apple or Microsoft, or a retail company such as Walmart or Target. Within each type of organization lie various types of services that are governed or controlled by a specific set of standards and code of ethics. Each set of standards and code of ethics is designed by a specific governing body. Management accounting is one such branch of service that is regulated by the Institute of Management Accountants (IMA) of the United States. As the regulating authority, the IMA has “adopted an ethical code called the Statement of Ethical Professional Practice that describes in some detail the ethical responsibilities of management accountants” (Garrison, Noreen, and Brewer, 2015, p.9). “The IMA Committee on Ethics encourages organizations and individuals to adopt, promote, and execute business practices consistent with high ethical standards, by providing valuable insight in response to our changing profession. The Committee upholds IMA’s Statement of Ethical Professional Practice and provides subject-matter expertise to members of IMA for resolution of ethical conflicts” (IMA Committee on Ethics).

Accounting fraud is common but is not as trivial as the common cold; a typical organization loses annual revenues of nearly 5 percent to fraud. In addition, almost one-quarter of reported fraud is exceeding $1 million dollars. The accounting industry is constantly growing and changing. Consequently, difficult decisions have to be made every day. While accountants follow a simple code of conduct; nevertheless, due to the infamous scandal of Enron, the Sarbanes-Oxley Act of 2002 was constructed to reestablish confidence in the public marketplace.