Ethics Issue Affecting Accountants in the United States

Ethical Issues Affecting Accountants The need for ethical standards within the corporate accounting field is urgent, and this paper delves into ethical issues. Given the fact that rules can be bent and manipulated, this paper also points to potential ways in which ethics can become as important as rules.

While there has apparently been a "shift in the ethical behavior of management" -- which is related to the corruption and convictions of accountant-related individuals with Enron and Author Anderson -- the literature indicates that there are still ethical issues to be addressed within the industry (Bolt-Lee, et al., 2010, p. 38).

Research presented in the peer-reviewed Journal of Accountancy shows that subsequent to the Enron and other scandals, there is a movement toward a "…more heightened state of ethical awareness" that is apparently due to "…the greater likelihood of punitive consequences" (Bolt-Lee, 38). In the Bolt-Lee article, the authors allude to a pair of studies (by author Shane Premeaux) given to marketing managers -- that supervise accountants -- in order to gauge ethical attitudes.

The first questionnaire was sent to 1,000 managers (with a 40% response rate) in 2003 after the Enron bankruptcy became news but prior to the prosecution of its accountants and other executives. The results showed that those 400 accountants and other business practitioners "…relied on a combination of 'act and rule utilitarian ethical philosophy'" (Bolt-Lee, 38).

In other words, the best decision to be made is the one that offers "the greatest good, regardless of laws or socially acceptable behavior" -- and that justice and fairness and the direct spirit of the law can be put aside so that the greatest good can come to the company (Bolt-Lee, 38). In 2006, after the convictions of the Enron executives -- the scandal also hit Author Anderson very hard (Anderson's auditing work with WorldCom was also corrupt) -- Shane Premeaux sent out a second questionnaire.

The results revealed a "…change in philosophies," Bolt-Lee explains (39). The second questionnaire (using some of the exact same questions as the first survey) reflected a "greater respect for the law ad a belief that actions are moral when they are fair, just, and respect the rights of everyone" (Bolt-Lee, 39).

It is critical to note however that the accountants and managers did not reverse field based on newly discovered ethical principles; indeed there was no shift in "moral thinking" but rather there was a sense that in order to avoid sanctions and show greater respect for the law, legal behavior must be followed. Meanwhile in a peer-reviewed article in the Journal of Business Ethics the authors advocate for a move away from "rules-based" standards and instead a move toward "principles-based" standards.

This is necessary because corporate managers and accountants have "…honed their skills at finding and using loopholes and technical exceptions to complex rules" (Spalding, 2012, p. 50). In other words, the accountants have been able to basically "comply" with technical rules, but while doing so they have learned to "…camouflage problems at reporting entities" until those problems become "so large that the entity itself is swallowed up by them" (Spalding, 50). What is truly needed, Spalding insists, is for the accounting industry in the U.S.

To "improve its ethical standards" by conforming to the international Code of Ethics for Professional Accountants (50). This is suggested because some of the rules set out by the American Institute of Certified Public Accountants (AICPA) are "poorly drafted" and the basic concept of "honesty" is "clumsily addressed" (Spalding, 51). One of those "clumsily addressed" concepts is Rule 102, "Integrity and Objectivity," Spalding explains on page 51.

This rule asks AICPA members to be "…free of conflicts of interest" and yet Spalding insists that accountants "face conflicts of interests nearly every day of their working lives" (51). Because of the vagueness of Rule 102, which also demands that AICPA members must "…not knowingly misrepresent facts," accountants still can bend the rules to fit their clients' fiscal restraints or goals (Spalding, 51).

Notwithstanding Rule 102, accountants can still manipulate the system, the author believes, because deceit and dishonesty are not restricted to "outright lies"; this rule leaves it wide open for members to mislead others by "…omission, deliberate vagueness, circumlocution, or purposeful efforts to confuse without outright misrepresentation" (Spalding, 51). Hence, ethical standards are needed so crafty and deceitful practices cannot be acceptable. When it comes to the lack of ethical practices in corporate America, fingers should be pointing at.