Effective Code of Ethics for Professional Accountants

Cite this

It is an important facet of any professional body, irrespective of how large or small, to put in place mechanisms that will deliver an effective code of conduct. This is especially so because practically all aspects of work done by professionals have an ethical dimension. But while only a few can question the rationale and authenticity of having these rules, principles, and values that serves to regulate professional conduct, economic meltdown and stiff competition are forcing many professionals to ignore the code of ethics set by their respective professional bodies in the misplaced hope of staying on top of other market competitors (Orin, 2008; Duska & Duska, 2003). The accounting profession has not been spared the pandemonium. Indeed, according to Flanagan & Clarke (2007), there is no doubt that the application of code of ethics to the practice of accounting is fast becoming a topic that confronts the revered profession on daily basis. Leibowitz & Reinstein (2009) argue that the ineptness of the code of ethics has become a wider social concern that potentially threatens the reputation of the accounting profession globally. It is against this backdrop that this paper looks into how an effective code of ethics for professional accountants can be made.

On-Time Delivery!
Get your customized and 100% plagiarism-free paper done in as little as 3 hours
Let’s start
322 specialists online

Accountants offer valuable services and many consider them to be the fountain of information and advice to both public and private enterprises. Many firms put their trust on accountants to provide critical and often confidential services such as taxation, bookkeeping, auditing, and attestation (Ibrahim, 2002; Merz, 1981). As such, accountants must always be honest, technically competent, and fair, not mentioning the fact that they must exercise highest ethical standards. This can only be achieved by adhering to a strict code of ethics. However, according to Orin (2008), some of the codes governing this profession have loopholes that expose them to abuse. Below, some of the measures that must be included in designing an effective code of ethics for professional accountants are discussed.

First, an effective code of ethics must lay great emphasis on the development and actualization of principles such as independence, integrity, objectivity, and competence among the accounting professionals rather than emphasizing the numerous rules that have come to be associated with many codes of professional conduct governing accountants in various fields after years of interpretations (Orin 2010; Werner, 2009). The AICPA1 Code of Professional Conduct, for instance, is made up of six “articles” which serves as the foundational principles of the code. After years of interpretations, however, the code is now distilled into numerous rules which are supposed to govern the professional behaviour required of an accountant. According to Love (2010), “… principles state the overriding behavioural conduct required to serve the public, deliver high quality professional services, and gain and retain public trust” ( p. 64).

On the contrary, rules by themselves cannot apply to all circumstances surrounding ethical conduct, not mentioning the fact that they cannot satisfactorily set the parameters to evaluate an accountant’s state of mind in any given situation (Love, 2010; Merz, 1981). As such, consulting the numerous rules found in a particular code of ethics for professional accountants to support a decision often leads to inappropriate application of the code, and can also be distorted to justify a predetermined decision of unethical behaviour.

For example, a lapse in the rules governing professional conduct for accountants and unethical corporate culture offered Enron’s chief auditor, Arthur Andersen, a chance to collude with the energy giant’s management in releasing non-transparent financial statements leading to one of the biggest audit failures in America’s history (Sterling, 2002). This could not have happened if the accountants chose to abide by the core principles of independence, integrity, and objectivity since principles oblige more than minimal devotion to the “…spirit of the personal characteristics and behavioural traits expected to support ethical behaviour…They require the highest level of ethical behaviour, both in fact and appearance” (Love, 2010 p. 64).

Second, an effective code of ethics for professional accountants must, in scope and nature, be able to empower the professionals to resolve ethical challenges in a manner that is in line with own professional values and societal expectations (Flanagan & Clarke, 2007). Systematic studies, according to the authors, demonstrate that most existing code of ethics do not guide or direct the accountants towards recognizing and stating the values that inarguably influence their choices. This exposes the profession to a lot of suspicion and scrutiny from all stakeholders. According to Flanagan & Clarke (2007), “…evidence of this may be found in the glowing external controls placed on accountants by governments and regulatory bodies throughout the world” (p. 489). Consequently, it is prudent to argue that an effective code of ethics for professional accountants must include provisions that will empower the accountants to resolve their ethical dilemmas in a way that is consistent with their core professional values and the expectations set by the community, thus improving their public perception and image. This way, some public oversight bodies formed to regulate the independence of accountants such as the U.S. Public Company Accounting Oversight Board would not have seen the light of the day.

Third, an effective code of ethics for professional accountants must provide the context for programs, seminars, and conferences designed to improve the competence and performance of accountants (Leibowitz & Reinstein, 2009). This includes requiring accountants to occasionally attend training sessions (Codija, 2010). Indeed, the 21st century’s technological trends and emerging techniques and standards of accounting necessitate accountants to constantly attend such programs and seminars to keep abreast with current affairs. Consequently, a code of ethics that makes it impossible for accountants to continually attend refresher courses and engage in other programs has outlived its purpose by virtue of its inability to cope with modern complex corporate scandals in addition to making use of modern and often shifting accounting standards.

Yes, we can!
Our experts can deliver a custom Effective Code of Ethics for Professional Accountants paper for only $13.00 $11/page
Learn More
322 specialists online

Lastly, an effective code of ethics for professional accountants must have the capacity to assist accountants in complying or adhering to “…regulatory guidelines, professional standards and practices applicable to the industry in which a company operates” (Codija, 2010). This is especially important since the accounting practice operates under stringent code of ethical behaviour formulated and controlled by various accounting bodies and associations such as AICPA, IFAC2, ACCA3, and ACB4, among others. The regulatory guidelines affecting a company operating in the banking industry may be inarguably different from a company doing business in the mining sector. Consequently, it is only through an effective code of ethics that accountants can be aided to adhere to regulatory guidelines and professional practices associated with the two sectors.

From the above discussion, it is clear that an effective code of ethics must be laid on a firm foundation of principles rather than rules. Indeed, according to Duska & Duska (2003), principles such as independence, objectivity, competence, and professionalism forms the groundwork for other ingredients and facets of an effective code of ethics for professional accountants such as the ones mentioned above. The onus therefore lies in developing mechanisms that will facilitate a firm foundation and entrenchment of the principles into the code of ethics and the rest will routinely follow.

List of References

Codija, M (2010). Code of Ethics and Auditing Standards. Web.

Duska, R.F., & Duska, B.S (2003). Accounting Ethics. Oxford: Blackwell Publishing.

Flanagan, J., & Clarke, K (2007). Beyond a Code of Professional Ethics: A holistic Model of Ethical Decision-Making for Accountants. Abacus, Vol. 43, Issue 4, pp 488-518.

Ibrahim, B.M (2002). Accounting Codes of Conduct, Violations and Disciplinary. Web.

Leibowitz, M.A., & Reinstein, A (2009). Help for Solving CPA’s Ethical Dilemmas. Journal of Accountancy, Vol. 207, Issue 4, pp 30-34.

Cut 15% OFF your first order
We’ll deliver a custom Accounting paper tailored to your requirements with a good discount
Use discount
322 specialists online

Love, V.J (2010). When Rules May Weaken Principles. CPA Journal, Vol. 80, Issue 3.

Merz, C.M (1981). Toward a Code of Ethics for Management Accountants. London: Institute of Management Accountants.

Orin, R.M (2008). Ethical Guidance and Constraint under the Sarbanes-Oxley Act of 2002. Journal of Accountancy, Auditing and Finance, Vol. 23, Issue 1, pp 141-171.

Sterling, T.F (2002). The Enron Scandal. New York: Nova Science Publishers.

Werner, C (2009). Accountant Confidentiality. CPA Journal, Vol. 79, Issue 6, pp 62-67.

Footnotes

  1. The American Institute of Certified Public Accountants.
  2. International Federation of Accountants.
  3. Association of Chartered Certified Accountants.
  4. Association of Certified Bookkeepers.

Cite this paper

Select style

Reference

BusinessEssay. (2022, February 22). Effective Code of Ethics for Professional Accountants. Retrieved from https://business-essay.com/effective-code-of-ethics-for-professional-accountants/

Reference

BusinessEssay. (2022, February 22). Effective Code of Ethics for Professional Accountants. https://business-essay.com/effective-code-of-ethics-for-professional-accountants/

Work Cited

"Effective Code of Ethics for Professional Accountants." BusinessEssay, 22 Feb. 2022, business-essay.com/effective-code-of-ethics-for-professional-accountants/.

References

BusinessEssay. (2022) 'Effective Code of Ethics for Professional Accountants'. 22 February.

References

BusinessEssay. 2022. "Effective Code of Ethics for Professional Accountants." February 22, 2022. https://business-essay.com/effective-code-of-ethics-for-professional-accountants/.

1. BusinessEssay. "Effective Code of Ethics for Professional Accountants." February 22, 2022. https://business-essay.com/effective-code-of-ethics-for-professional-accountants/.


Bibliography


BusinessEssay. "Effective Code of Ethics for Professional Accountants." February 22, 2022. https://business-essay.com/effective-code-of-ethics-for-professional-accountants/.