Ethics in Accounting Issues in Financial Accounting

Ethics in Accounting Issues in Financial Accounting for Businesses The most important purpose of financial accounting for businesses is to represent the company and its assets as accurately as possible. This is important for the businesses to be able to have better control of their finances, for forecasting, and for many other purposes. Financial accounting is important for stakeholders so that they can understand the risks and possible future returns of their investment.

Customers also demand to have accurate information about the company so that they can decide if there are a company with whom they wish to do business. Many different entities depend on the accuracy of financial accounting to make decisions about the business. This research will discuss key ethical, legal, and technological concerns that have arisen regarding financial accounting for businesses. Business Ethics Today Providing an accurate and honest representation of the company is the only concern of the accountant.

Many entities depend on the accuracy and dependability of their data. Faulty data needs to faulty decisions and if the error was intentional in order to produce a certain image, the data can be a source of mistrust. It is important for accountants to maintain the trust of the entities for whom they work, stakeholders, and also to maintain public trust. Inaccuracy in accounting statements harms the overall image of the company. The company must be able to trust the integrity of the data that is presented by its accountants.

The highly publicized Enron case, which led to the conviction of its executives, changed the decision-making behavior of management, and created a major shift in what is considered ethical behavior within corporations (Bolt-Lee, 2010). According to the author of the study, the Enron case created a sense of heightened awareness of ethical issues regarding accounting. In response to the Enron case, many companies developed their own ethics training programs. However, the results of these programs have been mixed.

In a recent study, the least effective programs were found to be those that utilize coercive control mechanisms and focus on punitive measures for enforcement. These programs dictate ethical behavior, but they do not develop employees skills in addressing issues that arise in ambiguous situations (Bolt-Lee, 2010). The problem lies in differences in individual judgment. Everyone agrees that it is wrong to lie about the numbers in the financial report. However, not every situation fits neatly into what is considered legal in the accounting profession.

For instance, valuation of assets is one of the areas where accountants must often use their own judgment in regards to how they are reported. This is one of the most difficult areas in the development of standard ethical practices among financial accounts. Another similar area is how to report intangible assets. Many times the core issues are more of a matter of differences in judgment. This makes resolving ethical issues in financial accounting for businesses difficult.

Rebuiling Trust After Enron After Enron, businesses needed to rebuild the trust of the public, their stake holders, and others along their supply chain. National and international governments, along with the assistance of major corporations, instituted programs and adopted new laws to ensure higher standards within the field of accounting. The need for tighter control and standardization in the accounting profession led to the development of many new technologies to help achieve these goals. One of the greatest changes in the accounting profession is transparency.

Auditing standards were tightened and accountants are held to higher levels of accountability than they were in the past. Technological and legal changes were designed to rebuild trust in the accounting profession. Organizations as well as institutes of higher learning emphasize moral decision making as much as they emphasize accounting principles. Standards for accounting are tighter and there are many more rules that add clarity where there was ambiguity in the past, in terms of reporting.

However, the development of tighter standards did not resolve all of the ethical issues that arise in the accounting profession. There are still many areas that come down to personal judgment. These issues make the task difficult for researchers and teachers of accounting ethics (Pava, 2010). Ethical questions continue to plague accountants as they make judgments in the course of their daily activities. There are faced with hundreds decisions that force them to interpret and apply the laws and guidelines imposed upon them by the FASB and other national governmental entities.

Teaching students how to think ethically is a problem that continues to plague teachers of accounting ethics. Moral judgment and ethics are subjective and require the development of a certain type of mindset (Pava, 2010). Currently, teachers of ethics in accounting struggle to devise a means for developing an ethical mindset among students. Furthermore, teachers struggle to find a way to test the development of an ethical mindset. The most commonly used tool is the use of vignettes that forces the student to make an ethical decision (Pava, 2010).

The student's choice of actions can then be discussed among a group of peers and professionals. Conclusion High profile cases regarding ethical in the accounting profession have garnered global attention. In response, standards for financial reporting were tightened and new technologies were developed to help provide better monitoring and greater transparency of the accounting processes.

However, many issues that require judgment of the accountant continue to pose challenges for those who wish to study ethics in accounting and for those who wish to teach ethics and moral judgment to future accounts. Ethical issues in accounting have led to dramatic changes in state of the art among accounting professionals. The issues that still remain suggest that the adoption of rules, laws, and new technologies are not the sole solution to every ethical issue that arises in accounting.

This has led to a paradigm shift in the way accounts think about ethical issues that arise in their daily practice. This new way.