Ethics and Independence in the Accounting Profession

Introduction

According to the course text, there are two primary reasons that people act unethically. A person will act unethically if their standards differ substantially from those of society as a whole, or if they consciously choose to act in a selfish manner.^[1] There is no profession more profoundly impacted by ethical standards than the accounting profession. The effects of ethical and unethical behavior on independence and daily functioning are implicit in everything an individual in the accounting profession does.

Recently, there have been many public scandals within the accounting profession, re-establishing the need for attention to ethical standards and training within the field. Public cases such as Enron have resulted in a diminished sense of trust among the public with regard to the accounting profession.

In earlier times, individuals pursuing accounting as a career might have assumed they would be afforded a relatively stable level of autonomy and independence. However, the lack of public trust now associated with the profession has reduced the independence afforded to most people in the industry. More and more, public accounting officials and private representatives find themselves subject to auditing and continual assessment, in an attempt to ensure that the highest ethical standards are observed in everyday practice and procedures. Many standards have also been established to help ensure that the accounting profession remains reputable and trustworthy.

The Impact of Ethics on the Accounting Profession

The effects of ethical issues on the profession and on professional independence are discussed in greater detail below.

Ethics has had many effects on the accounting profession. The public has increasingly questioned the ethical conduct of accountants, meaning that individuals working within this profession are more often subject to the scrutinizing eye of the public and are increasingly required to uphold the highest moral and ethical standards. A number of national standards have been established specifically for the field of accounting to help facilitate and reinforce those standards.

Accountants in particular face many ethical dilemmas during the course of their careers. One example is a client who threatens to seek a new auditor unless offered special perks.^[2] Accountants and other professionals within the field are often in positions that allow a great deal of autonomy and independence, which also opens the door to increased temptation and the potential for unethical behavior. Accountants may act unethically for a variety of reasons, though as the course text suggests, many do so for personal benefit alone — a product of natural human tendencies toward self-interest.

There are many justifications an accountant might use to rationalize participation in unethical behavior, such as the argument that "everybody does it" with regard to falsified tax returns, or the claim that "if it's legal, it's ethical" — a premise that treats ethical behavior as contingent upon the perfection of laws,^[3] which is a nearly unachievable standard. Unethical behavior also becomes more tempting when the person involved is less likely to be caught or to suffer harsh consequences.

Accountants work largely independently, which means there is considerable room for ethical or unethical behavior. It is therefore vital that an accountant hold ethical standards similar to, rather than markedly different from, those of society in general. The effects of unethical behavior on the profession can be devastating. A considerable portion of unethical conduct stems from an individual's decision to act selfishly rather than in the best interests of society at large.^[4]

Ethical Frameworks and Professional Standards

Fortunately, there are many frameworks an accountant or other professional in the field can use to overcome the tendency toward self-interest. The best approach involves a formal ethical framework that includes: gathering facts pertinent to a particular situation, determining who will be affected by the outcome of a given dilemma, identifying alternative courses of action and their key consequences, and ultimately making a sound decision.^[5]

Within the accounting profession, ethical standards "are the foundation for trust building and relationship making" in the eyes of the public.^[6] In order to maintain a standard of professionalism and leadership, education and training are vital for professionals entering the field. In addition, consistent monitoring and measurement of performance — and the manner in which individuals carry out their day-to-day tasks — are increasingly viewed as warranted.^[7]

As outlined by bodies such as the U.S. Securities and Exchange Commission, regulatory oversight has expanded significantly in the wake of high-profile corporate failures, reinforcing the connection between enforceable standards and the ethical health of the profession.