Ethical Issues on Accounting Essay

Society is composed of umteen institutions that admit various take aim and position. These institutions may sometime stomach contradicting goals. M geniusy is something pot work heavy(a) for making it such a sensitive release. Disputes regarding m wholenessy ar loads entangled in heavy disputes and are hard to m anile. The news report is the athletic demesne that specializes in the job of taking care of former(a) peoples specie issues. Ironically, the be business has been bombarded by controversies regarding how they do their job and how they loptle disputes if thither are any.Pr personationicing accountants consequently unquestionable an image of being any strictly sea captain or, at worst, dishonest. Unfortunately for the business relationship field of honor of force, it is considered by many that moral standards of this field are deteriorating. This is where ethics come into play. It is very(prenominal)(prenominal) k nonty to weigh issues without a com memorate of conventions to guide them in the decision making. morality came form the Latin ethos, that means character and customs. Ethics basically deals with how people interact with each another(prenominal).Ethics in uniform manner sets what is good or bad, proficient or wrong but definitely much broader than the common whimseys of the worthiness or wrongness of things (Cornwell University Law School). On the academic terms, ethics pertains to not just personal feelings, religion, laws. Feelings most(prenominal) of the time leads us to do wrong acts. Being religious too doesnt necessarily mean that one is being ethical. Of course, religion sets very graduate(prenominal) ethical standards. entirely not all people are religious, non-religious people in any case have their bear ethical standards. Also, being ethical doesnt necessarily mean remain by the law.Most people facet the law as having the selfsame(prenominal) grounds as ethics. Laws are formulated to meet e thical standards. But like feelings, the law slew have certain biases, therefore mint be sometimes stool be viewed as wrong. Since ethics is basically accountability or wrong, it proves to be a very important weapon such problematic fields such as accounting. Codes of professional admit more 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 more commonly regarded as professional codes. In the oddball of accounting, The American Institute of Certified Public Accountants or AICPA has Codes of Professional mastermind which serves as ethical reference. Much of these codes were later merged with the earth law. The merge of the codes to the law gave it much more enforceability. Setting aside the technical education, accounting undergraduates were withal given ethics courses before they conduct prac tice in the field. They may have discussed basic ethical. They might have been supplied a mouth of the codes of professional conduct.The generally accepted set of codes for accounting is supplied by the AICPA. unmatchable of the primary functions of the AICPA is the major role in the self- enactment of practicing accountants. Majority of the AICPAs resources is use to developing the professional codes for CPA practitioners. Aside from the codes of professional conduct, there is in addition GAAP or the Generally Accepted Accounting Principles. Just like the codes of professional conduct, the GAAP serves as a reminder that accounting practitioners should restrict 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 accoun tants should not overstretch frauds nonetheless if the temptation of personal fool 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 trusdeucerthiness and competence. Accounting is a field that has a very high demand by the public. The public, with all their funds, is in need of account statement services so that they could spend their precious time earning more money quite a 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 thems elves see themselves as professionals that doesnt require moral codes to conduct practice. Accountants develop an attitude which can be broadly described as lack of incorporating moral psyche on their work. Experts coin this as ethical dissonance. Ethical dissonance in accounting pertains to the attitude of accountants to treat their chosen field as completely morally neutral. As the word suggests, ethical dissonance is very addicted to conflicts. Accountants suffering ethical dissonance have a different set of moral codes, or at worst devoid of any, so conflicts with other institutions pull up stakes be very hard to resolve.The root of this problem is trackable 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 acc ountancy more focus on their field. Self-regulation gained popularity as it is regarded as rough-and-ready 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 make. These special privileges are give to them by the state. But their acquired autonomy 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 penalise 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 go fort hs accountants have more focus as they wouldnt spend time and causal agency developing professional codes. Self-regulation can incite 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 tautological meaning, they are alone 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. Some people tend to go with the decision to result 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 recognize it that the accountants are the specialists in this field. And so they dont bother in meddling (or arguing) with their accountants. The gray area of this point is that it is very prone to malpractice, intended or unintended, that can lead to ethical conflicts betwixt the public and the accounting field.Since the moral code is self-regulated, what may be right or wrong for the accountants may be contradicting to those of the public. However, if the state gave the accounting constancy autonomy, it means they are given more weight than other institutions. In this sense it is quite unethical for the state have certain biases. tho if the accounting industry is given this autonomy, in return they should extend the public quality and honest service with high regards to ethical standards and competence. Ethical turnabouts in accounting I have acquired examples of ethics in action in the accounting field.I will have to not name the crabby agencies involved as it is unethical. Perhaps one of the biggest acknowledgements of ethical misconduct in accounting was done by an damages attach to by swapping insurance assets to unnaturally increase their growth. This is an example of an end relinquish the means. The insurance company had only thought of i ts own good not minding how their action affects others. With their artificially fattened 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 think biases before they sell their service. This act of discrimination is highly unethical because it contradicts the office of accountants to the public. Researches found out that gender sees to have a great ready on negotiations (Flanagan, 2007, pp. 60-64). (a) Women seem to be greater in number in terms of financial disputes. During negotiations, women prefer being perceived as reasonable. men are case-hardened 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 small financial settlements. Some companies perceive this as risk to their economic gain so they unethically reject smaller settlements. Women are allegedly to have lesser successes in negotiations in comparison to men. As gender cognisance is increasing popularity these days, this ethical lapse would mean many disputes for the accounting industry. (b) in that respect 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 knottyy getting auto insurances. They also fix it difficult to cash in their insurance as it could just be interpreted as a scam. Insurance companies stem their clients in to two whereas one group is of the adult (23-60) and the other is either very materialisation or very old. The last mentioned 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 more blur than relatively older defendants while all other are treated equally. Again the lapse here is that economic consequences were given more anteriority than being ethically agreeable. (c) Accounting services seem to have biases in terms of race. Loan default rates are higher for dingy applicants than white applicants. The lender cannot use race as a modifier 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 il statutory, many practitioners still 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, plain w ith the legal laws, it would be difficult to resolve because of the self-regulated 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 disembarrass 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 cerebration as both proscribe and positive. On one side, we can view it as the actions should be judged weighed on its moral values. There is also the notion of positive and negative responsibilities. Positive responsibilities hold individuals accountable their own actions. On the other hand, negative responsibilities hold individuals accountable for actions they fail or allow to properly 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 fault 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 als o the concept of the distinction of duty to refrain and a duty to act. Many accounting firms believe 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.