Ethics and Business Law

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An ethics code is a self-discipline assumption that goes beyond the provisions of the law. Different experts have a code of ethics that governs the actions of their members. AICPA regulates the accounting profession and outline the moral obligations of its members. The American Institute of Certified Public Accountants (AICPA). The code of ethics also specifies the criteria to be taken into account by professionals. The ethics code is drawn up and updated every year. In this report, an AICPA Code of Ethics is summarised. Reasons for Choosing AICPA The choice was arrived at after a clear consideration of the career path that I would like to be an accountant, whereby I will be performing tasks such as audits. For me to be a certified practitioner, I will have to be a member of the AICPA and will, therefore, have to adhere to the organization’s code of ethics. Choosing to base this study on the organization, therefore, gives me the chance to start familiarizing with the organization, a practice that is required for me to understand the code of ethics, (Fogarty et al., 24).

I would like to be a profession in the field of accounting. Being a profession not only means having the right educational background, but it also means having the ability to develop good manners pertaining to the area of specialization. This entails having the ability to make right choices and judgments. This study will, therefore, give me the ability to make choices and et al. under the influence of the code of conduct that governs my profession, even before I become a member.

A Summary of the Code of Professional Ethics By AICPA

The code of professional ethics was formulated to assure the public that its members serve in a disciplined way and serve the public interest. When people and organizations seek an accountant, they seek someone whom they can trust to do the job in the right direction. The professional code of ethics contains different categories, (Brown et al., 37-39).

The first category outlines guideline on how the professional should carry out their day to day activities. The main sections of the code of ethics are independence, integrity, objectivity, due care, professionals’ responsibilities to clients and colleagues, therefore, remains to be the most fundamental out of the mentioned categories, not only to the accounting profession but also to others.

Integrity

Integrity is a fundamental element to accountants, which requires them to be honest and candid in all their dealings with a client’s information. This aspect also requires the professionals to restrict themselves from personal gain using clients’’ information. The formulators recognize the possibility of errors occurring during the computing process. However, this element requires the practitioners to refrain from intentional manipulation of financial information. This aspect ensures that accountants behave in a consistent manner, whereby they are not expected to deceive clients, (Melancon, .26). The practitioners therefore consistently review their actions to ensure that they are acting by the set principles.

Objectivity and Independence

These elements require the accountants to remain free from conflict of interest and other personal disturbances when conducting their business. Subjectivity and failure to remain independent may hinder an accountant’s ability to provide a client with honest information pertaining their financial situation. The accounting industry normally monitors and limits the number of jobs that a client can give to an accountant. The accounting jobs include auditing, general accounting, tax, and management advisory services. The accounting industry believes that an accountant who engages in more than one of the jobs as mentioned above is likely to compromise his or her objectivity and independence. For instance, an accountant who performs the general accounting jobs of a firm and is asked to audit it will only be reviewing his or her work, whereby he or she will not be expecting to find mistakes to be corrected. In case of the realization of negative financial information, the accountant may opt to hide it from the firm. It is therefore advisable for the professionals to engage in one job for each client that they serve.

Due Care

Due care is an element which requires all professionals to observe all ethical standards that pertain to accounting religiously. They are therefore supposed to review generally acceptable accounting principles (GAAP) and apply the information in all their tasks. Due care raises the need for accountants to display competence in their work, (Zhang et al,.207). Competence comes as a result of continuous experience in the industry and improved educational standards. This raises the need for senior accountants to supervise and guide those who have less experience in the profession.

The Most Important Ethics

The most important ethics are integrity and objectivity. This is because, without the two, one can compromise on all the others. A person of integrity will always go out of his or her way to ensure that he or she performs the required tasks with utmost god faith and honesty. By so doing, the accounting profession would not suffer from intentionally made mistakes which cost forms and individuals a lot. However, out of all the ethics, the only one that is capable of robbing professionals of their integrity is objectivity. Considering a case where one is faced with a conflict of interest, for instance, where one is working for a family firm and is asked to compute the tax. Whereby the amount that is supposed to be paid out as cash can be manipulated so as the firm will eventually pay less tax, and allow the stakeholders to have a larger share of profits. The accountant is likely to bleach his or her integrity at times through manipulation of figures.

Violation of the Code of Ethics

Case One

This study will consider an allegation made against an accountant who was working for Deloitte, Arnold McClellan and his wife, Annabel, who was an ex-Deloitte worker. The two were sued for passing confidential information about Deloitte’s planned acquisition to Annabel’s sister. The family made $23 million out of the confidential information. Annabel was willing to pay $1 million as a fine to settle the SEC lawsuit. However, she was not supposed to have access to the confidential information, since she had stopped working for Deloitte. Her husband was charged with the offense of sharing the information with two people, Annabel, and her sister. In the quest for Mr. McClellan to get a lighter sentence, Annabel claimed that she overheard her husband and her sister talking. The court could not prove her wrong but at the same time didn’t drop the charges against Mr. McClellan since he allowed the sharing of private information to be overheard by a private party. It is unethical to even entrust private information to a family member (William et al, 37).

Case Two

This is a case which involved the conflict of interest and a claim of malpractice against a CPA which was presented in the supreme court of Montana. The case involved a sister and a brother who has jointly inherited a ranch from their father. The two had equally owned, the ranch but after some time they experienced a falling out. The case was presented in a court, and in the process, the brother issued a subpoena to the CPA who was working for his father about thirteen years ago. During the process, the brother found out that there was a correspondence between the CPA and his sister concerning his father’s initial will for the brother to solely inherit the ranch. The father had informed the CPA about his will, and the CPA had advised him not to sign the deed legally since the formation of a trust would have adverse effects on the tax, (Chottiner et al, 310-311).

It was after the CPA’s advice that the father finally signed a will that granted the two siblings equal ownership of the ranch. The sister had asked the CPA not to inform her brother about her father’s initial wish. However, when the brother realized his father’s initial wish, he sued the CPA claiming a breach of duty. The brother claimed that the CPA had denied him a chance to have persuaded his father to legally sign the trust despite the tax charges through honoring his sister’s request.

The ruling was made against the CPA, which showed that he owed a fiduciary duty to have shared the information with the brother, although he only offered the service of filing annual tax returns for the family-owned ranch. By doing so, the court rejected the fact that sharing the father’s confidential information with the brother would have also been a breached his professional duty. The court, therefore, expressed the need for the CPA to have applied ethical issues with flexibility, depending on the situation. He ought to have made that choice with his subject moral compass.

Conclusion

The accounting profession provides essential services to both the private and the public sectors. The practitioners, therefore, need to be qualified and their actions regulated to ensure that they perform their duties with the highest level of integrity and transparency. The code of ethics combined with the state laws play a significant role in ensuring that the accounting services are provided in the right way.

Works Cited

Brown, Phil A., Morris H. Stocks, and W. Mark Wilder. "Ethical exemplification and the AICPA Code of Professional Conduct: An empirical investigation of auditor and public perceptions." Journal of Business Ethics 71.1 (2007): 39-71.

Chottiner, Sherman, and Allan Young. "A test of the AICPA differentiation between stock dividends and stock splits." Journal of accounting research (1971): 367-374.

Fogarty, Timothy J., Vaughan S. Radcliffe, and David R. Campbell. "Accountancy before the fall: The AICPA vision project and related professional enterprises." Accounting, Organizations and Society 31.1 (2006): 1-25.

Melancon, B. "Testimony of Barry Melnacon, President and CEO, AICPA, before the Capital Markets, Insurance and Government Sponsored Enterprises Subcommittee of the House Committee on Financial Services Concerning Fostering Accuracy and Transparency in Financial Reporting, 2006.

William Jr, Messier, Steven Glover, and Douglas Prawitt. Auditing and assurance services: A systematic approach. McGraw-Hill Education, 2016.

Zhang, Li, et al. "The AICPA assurance services executive committee emerging assurance technologies task force: The audit data standards (ADS) initiative." Journal of Information Systems 26.1 (2012): 199-205.

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