Ethics in Accounting

ADS Ethics in Accounting
Ethics is a term that refers to a code or moral system that provides criteria for evaluating right and wrong. An ethical dilemma is a situation in which an individual or group is faced with a decision that tests this code. Many of these dilemmas are simple to recognize and resolve. For example, have you ever been tempted to call your professor and ask for an extension on the due date of an assignment by claiming a pretended illness? Temptation like this will test your personal ethics. Accountants, like others in the business world, are faced with many ethical dilemmas, some of which are complex and difficult to resolve. For instance, the capital markets’ focus on near-term profits may tempt a company’s management to bend or even break accounting rules to inflate reported net income. In these situations, technical competence is not enough to resolve the dilemma

ETHICS AND PROFESSIONALISM.
 One characteristic that distinguishes a profession from other occupations is the acceptance by its members of a responsibility for the interests of those it serves. Ethical behavior is expected of those engaged in a profession. That expectation often is articulated in a code of ethics. For example, law and medicine are  professions that have their own codes of professional ethics. These codes provide guidance and rules to members in the performance of their professional responsibilities. Public accounting has achieved widespread recognition as a profession. The AICPA, the national organization of certified public accountants, has its own Code of Professional Conduct that prescribes the ethical conduct members should strive to achieve. Similarly, the Institute of Management Accountants (IMA) the primary national organization of accountants working in industry and government has its own code of ethics, as does the Institute of Internal Auditors the national organization of accountants providing internal auditing services for their own organizations

ANALYTICAL MODEL FOR ETHICAL DECISIONS.
 Ethical codes are informative and helpful, but the motivation to behave ethically must come from within oneself and not just from the fear of penalties for violating professional codes. Presented below is a sequence of steps that provide a framework for analyzing ethical issues. These steps can help you apply your own sense of right and wrong to ethical dilemmas: 32 Step 1. Determine the facts of the situation. This involves determining the who, what, where, when, and how.

Step 2. Identify the ethical issue and the stakeholders. Stakeholders may include shareholders, creditors, management, employees, and the community.

Step 3. Identify the values related to the situation. For example, in some situations confidentiality may be an important value that might conflict with the right to know.

Step 4. Specify the alternative courses of action.

Step 5. Evaluate the courses of action specified in step 4 in terms of their consistency with the values identified in step 3. This step may or may not lead to a suggested course of action

Step 6. Identify the consequences of each possible course of action. If step 5 does not provide a course of action, assess the consequences of each possible course of action for all of the stakeholders involved.

Step 7. Make your decision and take any indicated action.

Ethical dilemmas are presented throughout the text. These dilemmas are designed to raise your awareness of accounting issues with ethical ramifications. The analytical steps outlined above provide a framework you can use to evaluate these situations. In addition, your instructor may assign end-of-chapter ethics cases for further discussion and application. ADS