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Acct525Week 4 Code Ethics

In: Business and Management

Submitted By wilfridneptune
Words 938
Pages 4
Assignment Week 4
Code of Ethics
Name
Devry University
Accounting 525
Veliota Drakopoulou, PhD

01/30/2016
Abstract
The American Institute of Certified Public Accountants (AICPA) has made a Code of Professional Conduct that establish an ethical standard for public accountants in the US. The Generally Accepted Accounting Principles (US. GAAP) wants to collaborate with IFAC in order to resettle the principle accounting standards, but the rules and the ethics for professional and the financial reporting statements make a big difference.

According to the article “It's Time for Principles-Based Accounting Ethics”, the American Institute of certified public accountants (AICPA) established standards that public accountants in the United States need to follow. The article argues for this code of conduct to be replaced with a code of ethics, which the authors believe to be superior to the rules-based standards currently in place, and attempts to present a solution by centering the AICPA code rules around different virtues such as objectivity, integrity, inquisitiveness, loyalty, and trustworthiness and analyzing the rules-based standards. This paper will argue whether the authors are correct in stating that a code of ethics should do more than establish minimum acceptable standards; describe the five cardinal virtues of professional accountants; differentiate between the rules-based and principles-based accounting standards; and finally compare and contrast the AICPA’s code of Professional Conduct with the IFAC Code of Ethics for Professional Accountants.

The Need for a More Comprehensive Code of Ethics

Business accounting has not being doing well because the rules that accountants need to follow are sometimes too complex and the principle of financial statements disorganized (Spalding). This is the main reason behind the AICPA’s establishment of the set of principles and rules, which members are required by law to follow. Focus must be on principles because they are usually more broad while rules are more direct. The AICPA is a member of the worldwide Professional Accountants of the International Federation of Accountants (IFAC) that control many accounting Entities around the world and encourage international accounting standards members to work together.The professional accountants create a code of ethics that help conceptual framework for accountatns to track on internal controls and ensure compliance. However, all professional accountants must recognize the IFAC principles’ threats and assure that these principles are not resolute, but, consider instead as basic ethics for accountants.

The Five Cardinal Virtues of Professional Accountants

The five cardial virtues of professional accountants are integrity, objectivity, Professional Completence & Due Care, Confidentiality and Professional Behavior (Spalding). All the five Cardinal Virtues of Professional Accountants are important for Professional Accountants because they should be honest to provide the right information to the customers and have the courage to do it as part of the integrity value. They should maintain objectivity on their job. Professional Completence & Due Care, they must do their job ethically and avoid conflicts of interests (Spalding). As part of Confidentiality must protect clients’ information and they should not disclose personnel information as required by laws. Professional behavior, accountant professional suppose to give the exact information to customers and must be loyal or faithful to commitments in order to maintain confidenciality. Professional Accountants Services in AICPA should be independent in doing their job in a professional manners.

Rules-based vs Principles based Approach

The article highlights the differences between principles-based standards and rules-based standards of the AICPA. While the priciples serve as an ethical reference for accountants by showing them how to be professional in their jobs and when dealing with clients, how to make eithical and moral decisions and judgments, and how to interact with those of the same profession; the principles outlined in the documents are nonbinding (Spalding). Rules-based approach, on the other hand, appear to be even more lenient than the principles-based approach according to the article. The main objective of a rule-based code of conduct is to avoid the non-compliance and have a disciplinary style for people to follow. It is a way for accountant to be obedient to the fundamental principles like circumstances or habits; however, the article highlights a different story of the nature of the rules. For example, those presented in the AICPA code are open to interpretations (Spalding). This is not ideal because acccountants can distort the meaning of these rules to justify unethical actions. Furthermore, the article mentions that the rules are not very detailed-another characteristic that makes them open to interpretations by accountants (Spalding). These inadequacies show a need for a more comprehensive code of ethics. The AICPA and the IFAC AICPA’s objective is to develop and apply their ethics standards the same way as IFAC

because they want to follow the principles but not the rules. However, they need to establish the

professional accountant ethics and follow the requirement process, in order to be more effective

and relevant to deal with all society in U.S. All professional accountants under IFAC must

identify the threats to these principle-based rules. Therefore, AICPA, a member of IFAC, aren’t

excluded from abiding to the regulations stated within the IFAC code.

References
Spalding, A., & Oddo, A. (2011). It's Time for Principles-Based Accounting Ethics. Journal Of
Business Ethics. 9949-59. doi:10.1007/s10551-011-1166-5 (Spalding, Albert & Oddo, A)

Spalding, A., & Oddo, A. (2011). Journal of Business Ethics. , Vol. 99, p49-59. 11p. 2 Diagrams,
1 Chart. DOI: 10.1007/s10551-011-1166-5. UNITED States; AMERICAN Institute of
Certified Public Accountants; ACCOUNTANTS -- Moral & ethical aspects; ACCOUNTINGstandards -- United States; INTERNATIONAL accounting standards; INTERNATIONAL Federation of Accountants (Spalding, A., & Oddo, A.)…...

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