Ethical Issues on Accounting Essay

Society is composed of many institutions that have various purpose and position. These institutions whitethorn past have contradicting goals. M whizzy is something people work hard for making it ofttimes(prenominal) a sensitive issue. Disputes regarding capital argon often entangled in heavy disputes and be hard to settle. The account statement is the field that specializes in the job of taking cargon of former(a) peoples money issues. Ironically, the account business has been bombarded by controversies regarding how they do their job and how they settle disputes if at that place are any.Practicing accountants consequently developed an image of being any strictly passe-partout or, at worst, dishonest. Unfortunately for the accounting field, it is considered by many that deterrent example standards of this field are deteriorating. This is where ethics come into play. It is very problematic to weigh issues without a set of conventions to guide them in the finis making. Ethi cs came form the Latin ethos, that means character and customs. Ethics basically deals with how people interact with distributively former(a).Ethics withal sets what is steady-going or bad, right or wrong but definitely such(prenominal) broader than the common nonions of the rightness or wrongness of things (Cornwell University Law School). On the academic terms, ethics pertains to not proficient personal feelings, religion, rightfulnesss. Feelings most of the time leads us to do un respectable acts. Being religious too doesnt necessarily mean that one is being estimable. Of course, religion sets very high honourable standards. But not all people are religious, non-religious people in desire manner have their own honorable standards. Also, being honest doesnt necessarily mean abiding by the rectitude.Most people scenery the law as having the same grounds as ethics. Laws are fabricated to meet estimable standards. But like feelings, the law ignore have certain biase s, therefore fucking be sometimes can be viewed as unethical. Since ethics is basically right or wrong, it proves to be a very important weapon such problematic fields such as accounting. Codes of professional submit Many fields of profession formulate a highly developed detailed set of codes to guide them in their practice. They have allotted a considerable amount of their time and resources just to come up with these codes.These set of codes are to a greater extent commonly regarded as professional codes. In the case of accounting, The American Institute of Certified Public controls or AICPA has Codes of maestro Conduct which serves as ethical reference. Much of these codes were later merged with the reality law. The merging of the codes to the law gave it much more(prenominal) enforceability. Setting aside the technical education, accounting undergraduates were also abandoned ethics courses in the lead they conduct practice in the field. They may have discussed basic e thical. They might have been supplied a lecture of the codes of professional conduct.The generally accepted set of codes for accounting is supplied by the AICPA. One of the primary functions of the AICPA is the major role in the self- pattern of practicing accountants. Majority of the AICPAs resources is devoted to developing the professional codes for CPA practitioners. Aside from the codes of professional conduct, there is also GAAP or the Generally Accepted Accounting Principles. Just like the codes of professional conduct, the GAAP serves as a reminder that accounting practitioners should uphold in mind that they have to follow certain moral guidelines.It also includes rules and the agreed sanctions if these rules were violated. The Codes of Professional Conduct and GAAP both remind accounting practitioners that they must do their function responsibly. Basically, both these sets of moral codes states that accountants should not commit frauds even if the temptation of personal strive is prevalent. The codes and principles also remind them not to violate the set rules for it could mean heavy sanctions like renouncing of licenses. The use of professional codes is one way to resolve ethical deterioration in the accounting profession.On the other hand, it can be viewed as selfish on the part of accountants as it only heeds to their individualistic goals. Also, having a set of ethical codes grants accountants an image of trustworthiness and competence. Accounting is a field that has a very high demand by the commonplace. The public, with all their money, is in need of account statement services so that they could spend their precious time earning more money rather than the grueling task of sorting it. Accounting, as many perceives, is a very technical field, so accountants dedicate themselves to the complex technical aspects of the field leaving out on moral values.Accountant themselves see themselves as professionals that doesnt require moral codes to condu ct practice. Accountants develop an attitude which can be broadly described as lack of incorporating moral judgment on their work. Experts coin this as ethical dissonance. honorable dissonance in accounting pertains to the attitude of accountants to treat their chosen field as tout ensemble morally neutral. As the word suggests, ethical dissonance is very prone to conflicts. Accountants suffering ethical dissonance have a different set of moral codes, or at worst devoid of any, so conflicts with other institutions will be very hard to resolve.The root of this problem is traceable to various issues like self-regulation practiced by the accounting field. Self-regulation Self-regulation of the accounting field basically means that the accounting field itself makes their own set of codes rather than extracting it from the society. Self-regulation can be something good as it can give the field of accountancy more focus on their field. Self-regulation gained popularity as it is regarde d as effective control and the most efficient tool for minimizing errors. Accountants acquire some privileges that other members of the society dont have.This includes the exclusive right to determine who can do the accounting work and how it should be done. These special privileges are granted to them by the state. But their acquired indecorum doesnt come free. As an act of courtesy, the accounting profession now burdens having special public interests responsibilities that they should keep high competence and high ethical standards (Gaa, 1994). Once the regulations are agreed upon, it is formalized by law or by organizations of the same field. The organizations monitor and penalize its members if they abide or violate the agreed regulations.If violations are reported, investigations are done by the government or the organization, where the violator is a member. Also self-regulation allows accountants have more focus as they wouldnt spend time and effort developing professional cod es. Self-regulation can commove conflicts because in the end it will have to adjust to what the public wants. For many accountancy experts, self regulation in accounting cannot work accordingly. If extracted a t autological meaning, they are merely regulating themselves of what they should do and those that they cannot violate.The public and the accountancy field is both divided in this issue. many people tend to go with the conclusiveness to leave their financial affairs to their accountants (Gowthorpe & Blake, 1998, pp. 1-3). They wouldnt question however the accountants will do the job. In this respect, they cognize it that the accountants are the specialists in this field. And so they dont bother in meddling (or arguing) with their accountants. The gray sphere of influence of this point is that it is very prone to malpractice, intended or unintended, that can lead to ethical conflicts between the public and the accounting field.Since the moral code is self-regulated, what m ay be right or wrong for the accountants may be contradicting to those of the public. However, if the state gave the accounting industry autonomy, it means they are given more weight than other institutions. In this sense it is quite unethical for the state have certain biases. Moreover if the accounting industry is given this autonomy, in return they should provide the public quality and honest service with high regards to ethical standards and competence. Ethical dies in accounting I have acquired examples of ethics in action in the accounting field.I will have to not name the particular agencies involved as it is unethical. Perhaps one of the biggest acknowledgements of ethical misconduct in accounting was done by an restitution company by swapping insurance assets to unnaturally increase their growth. This is an example of an end justify the means. The insurance company had only thought of its own good not minding how their action affects others. With their artificially fatte ned network gross, investors are lured to risk their money on a company that has not performed as the unknowingly deceived analysts say. (Flanagan, 2007, pp 38-46)Another ethical lapse in accounting is discrimination. Some insurance companies have gender, racial, and age related biases before they sell their service. This act of discrimination is highly unethical because it contradicts the responsibility of accountants to the public. Researches found out that gender looks to have a great effect on negotiations (Flanagan, 2007, pp. 60-64). (a) Women have the appearance _or_ semblance to be greater in number in terms of financial disputes. During negotiations, women prefer being comprehend as reasonable. Men are treated to have more economic orientation so they can maximize economic income.Women are treated to have lots of self-doubt about their financial capabilities so they would have to settle with smaller financial settlements. Some companies perceive this as risk to their econ omic gain so they unethically reject smaller settlements. Women are allegedly to have lesser successes in negotiations in comparison to men. As gender awareness is increasing popularity these days, this ethical lapse would mean many disputes for the accounting industry. (b) thither is also aversion for elderly people during negotiations. Many companies see clients with old age (65 up) as great investment risk.Elderly people seem to have more difficulty getting auto insurances. They also find it difficult to cash in their insurance as it could just be construe as a scam. Insurance companies convention their clients in to two whereas one group is of the adult (23-60) and the other is either very young or very old. The latter group which has both extremities of the age group is treated much differently as opposed to the prior group. The latter group is perceived as to have a higher frequency of accidents that would lead to higher insurance claims.Also, younger defendants are assed mo re fault than relatively older defendants while all other are treated equally. Again the lapse here is that economic consequences were given more priority than being ethically agreeable. (c) Accounting services seem to have biases in terms of race. Loan default rates are higher for black applicants than bloodless applicants. The lender cannot use race as a qualifier in whether to give out loans or not. There are also variations in insurance terms when race is being considered.Discrimination, the word itself is not obviously ethical. Ladd, 1998, pp. 63-90) Although these acts of discrimination are considered illegal, many practitioners salve commit this unethical practice. If there are variations to insurance terms, the act could meet up with the legal definition of discrimination that could cause the agency legal prohibition. Although if there was a denial in loans due to gender, age, and race, even with the legal laws, it would be difficult to resolve because of the self-regulate d ethical codes that the industry of accounting is equipped. Economic consequences of ethical issuesProbably, one reason why it takes lot of time and discussions before ethical solutions are implemented is because corrections of errors will cause a lot of money for the accounting agencies. Profit maximizing is the priority concern of most businesses, even if they admit it or not. Moreover, maintaining and formulating proper ethical codes would cost companies much money that they would want to put into investment instead. Ruland had identified three philosophical perspectives that addresses the questions of whether accounting regulators should be guided by economic consequence issues. (Ruland 1984)The question of whether ends justify means for the accountants. It is often asked if the desired economic outcome of practicing accountancy justify what ever ethical approach they are taking. We can view this thinking as both negative and positive. On one side, we can view it as the action s should be judged weighed on its moral values. There is also the notion of positive and negative responsibilities. Positive responsibilities hold individuals responsible their own actions. On the other hand, negative responsibilities hold individuals accountable for actions they fail or allow to correctly address.In simpler terms, positive responsibilities hold accountants responsible for their own actions, and contrastingly, negative responsibilities hold accountants responsible for the action of other people. Arguably, positive responsibilities can provide a fair presentation of accounts because the accountants reputation is on the line, as opposed to negative responsibilities whereas the accountants cant be blamed for errors of other people. Many still argue that positive responsibilities should not be replaced by negative responsibilities just to avoid financial consequences.There is also the concept of the distinction of indebtedness to refrain and a duty to act. Many acc ounting firms recall that the pursuit of the best accounting practice is the most important duty of accountants. They are tasked with a duty to refrain by any distractions. They are to focus only on their service, and nothing else, even if it may cause some ethical disputes. An important word here is priority as the duty to act gives more priority to addressing issue rather than refraining. Those who argue that economic consequences issues should be the main focus of regulations are favoring the duty to act.