Wk 5 Paper (Analysis & Recommendation)

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Running head: ETHICS IN ACCOUNTING 1

ETHICS IN ACCOUNTING 2

Ethics in Accounting

Literature Review

Bobek, D., Hageman, A., & Radtke, R. (2015). The Effects of Professional Role, Decision Context, and Gender on the Ethical Decision Making of Public Accounting Professionals. Behavioral Research In Accounting, 27(1), 55-78. doi: 10.2308/bria-51090

In this article, the applied study investigates the scale to which professional roles, decision perspectives, and gender affect ethical decision making of governmental accountants. Considering they are in the same profession as other financiers and accountants; the outcomes of the study can still be implemented in the paper. Nevertheless, the study consisted of over 130 public accountants and concluded that the accountants had a lower probability of conceding with clients in an antagonistic situation. Moreover, they were also less likely to recommend yielding when they were auditing as compared to calculating taxes. It was also identified that, in the context of auditing, public accountants were less likely to yield to clients. When the data was broken down to their basic gender-based analysis, women seemed to demonstrate better decision-making abilities. Overall, the study was designed to estimate the likelihood of public accountants compromising their ethics and conducting activities that can be deemed illegal. By understanding the dynamics that result in unethical behaviors, policies could be developed to curb the probability of unethical professional conduct taking place.

When evaluating the ethical framework or the ethical training needs in the accounting department, managers should break down the entire process in terms of; the professional role of the accountants, the different contexts in which the accountant’s practice and type of gender involved in the accounting situations. Secondly, the management should consider whether the accountant is either an auditor or a tax professional, male or female and whether they operate in the audit or tax environment.

Burcham, J. (2015, August 06). Business Ethics From the Top Down Can Prevent Fraud. Retrieved from http://www.fightingidentitycrimes.com/business-ethics-from-the-top-down-can-prevent-fraud/

This article will provide information on why some individuals turn to fraud. It will provide insight on how certain situations push other employees to fraudulent activities. This reference revolves around the idea of “Tone at the Top”. Burcham’s article suggests that fraud can be caused by the actions of the higher executives in a company. The way executives portray ethical behavior manifests how the rest of the employees behave. Understandably, most people would agree on the importance of a job and career. Individuals work hard to keep their position once they are hired in position, they feel is suitable. When the executives are doing unethical tasks, it ends up trickling down to the rest of the employees as they are afraid to do something about it, for fear of losing their jobs. Everyone fears the thought of standing up to the CFO or even trying to tell someone about what is happening. The article goes on to list what steps should be taken in a workplace to create an ethical environment.

Crutchley, C., Jensen, M., & Marshall, B. (2007). Climate for Scandal: Corporate Environments that Contribute to Accounting Fraud. The Financial Review, 42(1), 53-73. doi: 10.1111/j.1540-6288.2007.00161.x

The authors of this article examined multiple factors in 97 firms that were under investigation for corporate accounting scandals, to determine the characteristics of the corporate environment that is most likely to support accounting fraud. The firms selected for this research had active investigations ongoing for accounting scandals. The authors found that in most cases, the corporate environment that supports fraud is characterized by speedy growth where extreme earnings appear to be smoothing. In addition, the firms are likely to have very few outsiders on the audit committee while there is some degree of over-commitment by outside directors.

The findings of this study suggest that firms that have a good ethical rating on their accounting practices have a definable corporate environment. This means that by monitoring the environment, managers can predict the likelihood of whether their accountants will engage in corporate fraud. These characteristics can be used as indicators of fraud and could therefore be useful in ensuring that accounting ethics are observed.

Kirsch, L. C. (2018). Why Good People Do Bad Things: How Fraud Can Happen to Any of Us. Benefits Magazine, 55(2), 24. Retrieved from http://proxy.devry.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&AuthType=url,cookie,ip,uid&db=f5h&AN=127638556&site=eds-live

In this article, Leslie Kirsch does an excellent job of explaining everything accountants and business leaders need to know about fraud. This article includes statistics of fraud and it goes into detail of why people commit fraud. The topic of fraud prevention is covered as well. Leslie Kirsch makes you understand that there is not one perfect way to prevent fraud. On the other hand, it is crucial to prevent fraud and take the proper steps in the direction of fraud prevention. Leslie Kirsch’s article provides insight geared to answering how ethical standards and other preventative measures reduce fraud. Kirsch’s article will lead us to an answer or several resolutions to the statement we have at hand.

Melé, D., Rosanas, J., & Fontrodona, J. (2016). Ethics in Finance and Accounting: Editorial Introduction. Journal Of Business Ethics, 140(4), 609-613. doi: 10.1007/s10551-016-3328-y

The author of the article evaluates the recent financial crisis the nation, as well as the globe experienced in 2007-2008 and states that it is vital for the relationship between finance and accounting to be reflected upon as well as their ethics and efficiencies. Moreover, in order to apply proper ethics and efficiencies, they have to both motivate and empower practitioners in the financial industry. As a result, the practitioners will commit their activities to adhere to the law, fairness, and enhancement of understanding and improvement of personal veracity. The author of the article further introduces works that can be used by various financial and accounting companies to control and measure ethical behaviors and misconduct in the financial sector and overall professional. This is without excluding ethical investments and coverage. This article performs an analysis on the essentials of ethics and partisanship in the financial sector and demonstrates, through examples, how those factors can affect the domestic fiscal environment as well as external economies. Ethics is a necessity when it comes to professional conduct, such as the handling of monetary assets. By understanding how professional conduct and other dependent systems relate, the article identifies the importance of ethics in accounting and finance.

In order to enhance ethics in the contemporary accounting environment, the technical aspects of accounting and finance should be integrated into the actual business activity. This implies that ethics should not only be limited to the accounting rules but also extend to an interdependent system of values that ought to be observed. The accounting and finance departments must promote the ethical values that define the practice of accounting to discourage fraud.

Metzger, L. (2011). The Keys to Integrity and a Sense of Well-being for Accounting Professionals. CPA Journal, 81(3), 10–12. Retrieved from http://search.ebscohost.com.proxy.devry.edu:5050/login.aspx?direct=true&db=bth&AN=65030829&site=ehost-live

In the article, Keys to Integrity and a Sense of Well-being for Accounting Professionals, the author defines integrity and discusses briefly the barriers and stumbling blocks that place an accountant’s independence, objectivity and integrity in danger. More importantly, the author defines integrity and observes that a person who chooses to act with integrity, in situations which demands a choice, will create a “sense” of well-being. This sense of well-being is instrumental to an accountant’s professional conduct and overall sense of satisfaction in oneself and one’s profession. The key ingredient, of course, is integrity and the key areas of professional wellness are: sense of agency, sense of the appropriate, sense of wholeness, sense of positive influence, sense of creativity, sense of purpose, sense of character, sense of trust, sense of self and sense of happiness. The intent of this reference is to examine how a deeper understanding of personal and professional integrity will influence and guide the accounting professional through critical ethical decisions they may encounter. Furthermore, the author reiterates that integrity is doing what it is right, even if it results in “negative consequences” and acts of omission are just as unethical as acts of commission. This is important when discerning whether to investigate or report suspected fraud or whether to willfully participate or ignore fraud. More importantly, personal and professional integrity contributes to the sustainability of the elite reputation the accounting profession has strived to foster.

Shawver, T., & Miller, W. (2015). Moral Intensity Revisited: Measuring the Benefit of Accounting Ethics Interventions. Journal Of Business Ethics, 141(3), 587-603. doi: 10.1007/s10551-015-2711-4

The authors of this study were determined to understand whether accounting students’ acuity of moral strength could be improved with the aid of ethical interventions in one of their advanced classes. This article plays a critical role in the overall understanding of ethics in accounting as it determines if students from school can perceive ethics and its importance. Nonetheless, from the study, it was identified that ethical decision-making is influenced heavily by the moral strength problem. The controlled experiment measured the change in perception of moral intensity utilizing pre and post-testing instruments. The authors also appreciated the results of other studies stating that they identified moral intensity determined ethics, but the class experiment noted additional data. Depending on the ethical content being presented to the students, it affected their acuity of moral intensity. This information is important as it could be utilized to create a trace to the source of unethical conduct. In general, the study was set to determine if unethical behaviors can be limited through school education thereby having the overall effect of limited unethical behaviors in the financial sector. The data from the study provided the students with a learning opportunity to understand how education can impact ethical professional conduct.

The article suggests that an educational process that follows an advanced accounting course can be used to enhance moral intensity or ethical awareness. In contemporary organizations, professional training can be modeled using such a course. Accountants can be subjected to seminars and workshops where the knowledge gained from the courses is used to solve accounting case studies. This will improve decision making in the context of accounting ethics.

Snyder, H. (2011). Client Confidentiality and Fraud. Fraud Magazine. Retrieved from https://www.fraud-magazine.com/article.aspx?id=4294968847

Client Confidentiality and Fraud” written by Herbert Snyder is an article about confidentiality and the potential conflict posed when fraud is detected. The article explored whether the public interest take precedence over confidentiality and looked at instances of other professions which require confidentiality such as lawyers, and doctors. According to AICPA Code of Ethics 1.700.001, Confidential Client Information Rule prohibits the disclosure of any client information without the expressed consent of the client (Accountants, 2016). The exceptions which allow disclosure of the client’s information are for peer review, summons, subpoena and inquiry by AICPA or State Board of Accountancy.

During an audit engagement we should provide great care to protect the client confidential information from being exposed or easily accessed. According to Scott Hillson an audit engagement is independent. The Auditor relationship with the client to render an opinion on the financial statement is not privileged. However, if fraud is discovered the client may want to take steps to protect certain information from being divulge during court proceeding. “A fraud examiner should consider ways in which attorney-client privilege can be protected” (Hillson, 2007).

· Not allowing attendance of a third person to a meeting.

· Not recording information which can destroy confidentiality.

· Limit copies of documents and mark do not duplicate

· Label documents – Privilege and Confidential

According to Snyder a conflict between following a professional obligation to not divulge information or report the fraud when discovered due to ethical values. Just as there is a conflict between professional obligation and ethical values there is also a delicate balance between client confidentiality and the public’s trust. The balance should be on the side of the public’s trust. The nature of accountant-client relationships and the grievous harm when financial misconduct is allowed to occurred makes it difficult to support the professional claim of confidentiality in the face of fraud” (Snyder, 2011).

Stephens, W., Vance, C. A., & Pettegrew, L. S. (2012). Embracing Ethics And Morality. CPA Journal, 82(1), 16–21. Retrieved from http://search.ebscohost.com.proxy.devry.edu:5050/login.aspx?direct=true&db=bth&AN=73784983&site=ehost-live

In the article, Embracing Ethics and Morality; An Analytic Essay for the Accounting Profession, the author looks beyond the standards, principles and laws that were undoubtedly disregarded in accounting scandals of yesterday; such as Enron, WorldCom, AOL and Lehman Brothers and evaluates the failed morality of the accounting profession and society as a whole. In particular, it delves into the ethical behavior and ethical readiness of the present and next generation of accounting professionals. The author searches for reasons that explain why moral values have declined and asserts the purpose of ethical training should be about conduct and decision-making that seeks the good of others and doing what is right because it is right. He contrasts the decision for right behavior based on values and virtue against morals that imposed by rules and behavior modification based on fear of punishment of breaking said rules. Accordingly, the article explores high-school students’ tendency toward cheating, lying, and stealing, which paints a bleak picture for the future of accounting professionals. More specifically, it suggests that students believe there are not absolute standards for moral and ethics, and have a disregard for personal responsibility and accountability. It further gives negative outlook on the effects of ethical education and standards, as “most ethicists agree that an individual’s value system is fully developed by the time he reaches college and that further education can do little to change that” (Stephens, 2012). As such, the author analyzes the six stages of moral reasoning and explains that most people fail to reach the last two stages. Thus, the article exposes the desperate need for a professional class of accountants that will exhibit a higher level of integrity and higher moral reasoning, that moves beyond being ethical because it’s the rule, regulation or law. The intent of this reference is to further our underlying theory that integrity and the careful development of said virtue is the cornerstone of ethical accounting. Honesty, trustworthiness and decision to do what is right are the super powers to win the battle against fraud.

Tormo-Carbó, G., Seguí-Mas, E., & Oltra, V. (2014). Accounting Ethics in Unfriendly Environments: The Educational Challenge. Journal of Business Ethics, 135(1), 161-175. doi: 10.1007/s10551-014-2455-6

The authors engaged 551 students at a Spanish University to investigate the significance of accounting ethics. They investigated how the students viewed the goals of accounting ethics education in unfriendly environments. They also investigated the role of gender, previous business ethics courses and age in determining the students’ views and perceptions about ethics’ courses. The authors found that Students who had undertook previous business ethics courses were more interested in introducing accounting ethics to the curriculum. Additionally, female students and older ones were found to be more inclined towards ethical courses.

Based on the results of this study, organizations may desire to screen for previous enrollment in ethics courses when introducing advanced accounting course. Accountants with previous experience should be identified as advocates for the new course. Similarly, female and older accountants may be preferred to lead teams that are involved in ethics related training.

References

Accountants, A.I. (2016). AICPA Code of Professional Conduct. AICPA.

Bobek, D., Hageman, A., & Radtke, R. (2015). The Effects of Professional Role, Decision Context, and Gender on the Ethical Decision Making of Public Accounting Professionals. Behavioral Research In Accounting, 27(1), 55-78. doi: 10.2308/bria-51090

Burcham, John. “Business Ethics From the Top Down Can Prevent Fraud.” Fighting Identity Crimes Powered by EZShield, 6 Aug. 2015, www.fightingidentitycrimes.com/business-ethics-from-the-top-down-can-prevent-fraud/.

Crutchley, C., Jensen, M., & Marshall, B. (2007). Climate for Scandal: Corporate Environments that Contribute to Accounting Fraud. The Financial Review, 42(1), 53-73. doi: 10.1111/j.1540-6288.2007.00161.x

Hillson, Scott P., J.D. MBA, C. (2007). Protecting Priveldge in Fraud Examination. ACFE. Retrieved 03 15, 2019, from https://www.acfe.com/article.aspx?id=511

Kirsch, L. C. (2018). Why Good People Do Bad Things: How Fraud Can Happen to Any of Us. Benefits Magazine, 55(2), 24. Retrieved from http://proxy.devry.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&AuthType=url,cookie,ip,uid&db=f5h&AN=127638556&site=eds-live

Melé, D., Rosanas, J., & Fontrodona, J. (2016). Ethics in Finance and Accounting: Editorial Introduction. Journal Of Business Ethics, 140(4), 609-613. doi: 10.1007/s10551-016-3328-y

Metzger, L. (2011). The Keys to Integrity and a Sense of Well-being for Accounting Professionals. CPA Journal, 81(3), 10–12. Retrieved from http://search.ebscohost.com.proxy.devry.edu:5050/login.aspx?direct=true&db=bth&AN=65030829&site=ehost-live

Shawver, T., & Miller, W. (2015). Moral Intensity Revisited: Measuring the Benefit of Accounting Ethics Interventions. Journal Of Business Ethics, 141(3), 587-603. doi: 10.1007/s10551-015-2711-4

Snyder, H. (2011). Client Confidentiality and Fraud. Fraud Magazine. Retrieved from https://www.fraud-magazine.com/article.aspx?id=4294968847

Stephens, W., Vance, C. A., & Pettegrew, L. S. (2012). Embracing Ethics and Morality; An Analytic Essay for the Accounting Profession. CPA Journal, 82(1), 16–21. Retrieved from http://search.ebscohost.com.proxy.devry.edu:5050/login.aspx?direct=true&db=bth&AN=73784983&site=ehost-live

Tormo-Carbó, G., Seguí-Mas, E., & Oltra, V. (2014). Accounting Ethics in Unfriendly Environments: The Educational Challenge. Journal of Business Ethics, 135(1), 161-175. doi: 10.1007/s10551-014-2455-6