Accounting Profession and Ethic - Essay Example

?DQ1 As an accountant if I had a chance of working for one of these three boards I would choose the Financial Accounting Standards Board (FASB). My entire accounting training has been based on GAAP and the regulations and principles that were developed by the FASB during the last four decades. I like the field of international accounting, but unfortunately I do not possess the knowledge necessary to become a valuable asset for the IASB. During the past course I took, accounting theory, I learned a lot about the importance of the FASB and how much the principles created by the FASB affect the operations of companies in the domestic U.S. marketplace. I believe that the Sarbanes Oxley Act of 2002 was a game changer in terms of regulations. SOX raised the integrity, credibility, and accountability of all accounting information in the United States of America. The FASB indirectly benefited from the implementation of the Sarbanes Oxley Act because its bylaws were strengthen as a result of this new regulation. When people believe in the accounting numbers published by US corporations they are strengthening its trust in the GAAP and the FASB. In terms of the GASB I am not really interested in governmental accounting. DQ2 The current accounting standards in the United States of America are ethically based. Ethics and integrity are two of the values that all accountants uphold at all times when working the profession. The generally accepted accounting principles (GAAP) represent the bible for accountants. Ethics is taken into consideration in accounting in many circumstances. For instance the principle of conservatism states that when in doubt an accountant should always underestimate revenues. Sales forecasting techniques such as the Delphi method should be implemented taking into consideration the principle of conservatism. During the past nine years the accounting profession has increased its credibility with the inception of the Sarbanes Oxley Act of 2002. The CEOs and top executives of the company including the CFO and controller are personally liable if the financial statements of their company are full of material error or fraudulent activity. SOX also created better internal controls and the integration of auditor independence. Accounting students since the undergraduate level are taught that ethics is an extremely important aspect of accounting work. The curriculums of universities should include more courses in pure ethics as part of the curriculum of business administration. At the corporate level most companies have code of conducts that integrate ethics into its bylaws. DQ3 Ethics are extremely important to the accounting profession. Accountants form close business relationship with their clients. Trust, loyalty, and high ethical conduct are expected from all accountants. Accountants work as facilitators of financial information for internal and external stakeholders. Some of the stakeholders that depend on information provided by accountants include investors, suppliers, lenders, employees, customers, government and the community. The ethics bar was raised nine years ago when the U.S Congress and the Security and Exchange Commission (SEC) worked together to create the Sarbanes Oxley Act. Section 802 of the Sarbanes Oxley Act imposes criminal penalties for altering, destroying, mutilating, concealing, falsifying records, documents or tangible objects with the intent to obstruct impede or influence a legal investigation (Soxlaw, 2003). I think that justice was served in the Enron case because some of the executives received jail time. When ethics are not in play in the accounting profession a lot of criminal activity can occur. Deceptive accountants can defraud the government out of hundreds of thousands of dollars by falsifying information in the personal tax returns of their clients. Unethical accountants also do not comply with the generally accepted accounting principles (GAAP). It is the duty of all accountants to comply with GAAP. Soxlaw.com (2003). Sarbanes-Oxley Act Section 802. Retrieved November 4, 2011 from http://www.soxlaw.com/s802.htm 4. I agree with your perspective that the FASB indirectly influences international accounting standards. I learn during the last accounting course I took that there exist a major convergence project that will become a game changer for accountants in the United States. The purpose of the project is to make FASB and IASB frameworks compatible. I believe that due to the fact that the FASB has been around for over 39 years that they are better prepared to rule the accounting profession internationally. One of the problems with the convergence project is that the FASB thinks that same way I do. The IASB wants the United States to accept the IFRS in order to substitute US GAAP rules. 5. I agree with you that the role of accountants is critical to our society. Accountants are needed in every single business organization in the United States of America. There are approximately 29 million business establishment in the US (Census, 2011). Large multinational corporations such as Coca-Cola, McDonald’s, and Microsoft have accounting staff composed of hundreds of accountants. The accounting field is a very attractive career option. High ethical conduct is expected of all accountants. In general accountants are very trustworthy and they always comply with the generally accepted accounting principles. Census.gov (2011). Statistics about Business Size (including Small Businesses) from the U.S. Census Bureau. Retrieved November 2, 2011 from http://www.census.gov/econ/smallbus.html 6. You are right on target on your asseverations concerning the fact that the influence of the FASB has intrinsically integrated ethics into the accounting standards. When faced with two alternative options for the valuation of a building the accountant should choose the lowest estimate based on the principle of conservatism. Accountants have to always record expenses based on historical cost. There are numerous instances in which the actions of an accountant are made taking ethics into consideration. The collapse in the financial world that occurred at the beginning of the 21st century led directly to the creation of the Sarbanes Oxley Act of 2002. 7. In your response you mentioned that auditing is an important element in order to ensure accountability in the profession. Back in late 1990’ up until 2001 the accounting firm Author Anderson colluded with Enron in order to hide the fact was making funny money. The firm claimed it made $1 billion in earnings in 2000, but in reality they had cero income. Today auditor independence rules prevent auditors from colluding with their clients. 8. I agree with you that stakeholders depend and expect that accountants behave in an ethical manner. Back in 2001 before the Enron scandal broke out the stakeholders of Enron though that the accounting of the company was based on the generally accepted accounting principles since Arthur Anderson audited the numbers. Both the accounting staffs of Arthur Anderson and Enron colluded to keep the lie a secret. I recently saw the movie Enron smartest guys in the room. It was amazing how corrupted the organizational culture at Enron was. Ethics was not a principle its executive staff and brokers believed in. 9. After reading your response I agree with everything you discussed. Accountants have to be unbiased at all times. Most of the time when accountants behave ethically the financial information provided in the financial statements and other reports is free of material error and it is prepared based on the generally accepted accounting principles. Section 401 of the Sarbanes Oxley Act enhances financial disclosures. Despite some of the rotten apples the majority of accountants behave ethically in their business dealings. 10. I agree with you that the FASB has been instrumental in fostering ethics within the accounting profession. Accountants operate in a self-regulated environment. Ethics are applied in accounting through compliance with the generally accepted accounting principles. The amount of financial scandals that occurred at the beginning of the 21st century has gone down a lot in the 2nd decade of the century. 11. The professor has a very valid point in regards to the importance of integrity. When a person hires an accountant for a job they expect the person to have a high level of integrity. A person that has integrity is a person that believes in the importance of ethics in the business world. I did not realize that the AICPA website had a list of wrongdoers. If I ever hire an accountant I will verify this website to check if the accountant that I hired has any outstanding disciplinary actions from the AICPA. Read More