Professional Ethics in AIS Services - Research Paper Example

Professional Ethics in AIS Services Analysis of Professional Ethics Applicable to (AIS) Accounting Information System services of CPA Firms Accounting Information Systems (AIS) combines modern information technology resources with the accounting study and practice. AIS facilitate collection, processing, and storage of accounting and related data which are used to make decisions within an organization (Hall, 2008). The system generates statistical reports and other necessary information that that is to be used by the management of the organization and external parties such as tax authorities, creditors, and investors to make decision. Hall (2008) notes, AIS are made up of six very important components that ensure that the system works effectively. The first component is information technology infrastructure comprising of systems and devices that facilitate AIS to perform and operate its functions. The second component is people who operate the AIS. The third component is data relating to the business processes within an organization. Another component is internal security and controls measure that the organization has to implement in order to protect the data. Additionally, software is major component that provides application that allows for data processing. Lastly, procedures and instructions is AIS component that entails data collection, management, and storage processes. AIS play a very critical role in providing the organizational management and external parties with financial accounting information that enables them to make decisions. However, due to the importance and its impacts of this system in organizations and other interested parties, there are serious ethical issues that have been raised relating to it. There are fears that sometimes the management of the reporting organization may alter the information to achieve certain ends. Also, there are concerns that the AIS of an organization can be interfered with by persons with ulterior motive (Hall, 2008). It is for these reasons that ethics is very critical in AIS. This paper will delineate professional ethics for AIS services, particularly of CPA firms, analyze these ethics including changes made by Sarbanes- Oxley Act, and make a summary and conclusion regarding the same. Just like in professions such as medicine and law, accounting profession demands that competent practitioners should solve their work-related problems through their professional judgment and application of strong ethical standards (Love, 2008). Since the problems that the accountants encounter in the course of their practice are often unique in specific circumstances and complex, it is necessary that high level of integrity and professional ethics be observed. The American Institute of Certified Public Accountants (AICPA) has provided code of professional conduct that guides accountants in their practice. The code of conduct also provides for the professional ethics of AIS services. Ethics for AIS services include security (accuracy and confidentiality), misuse of computers, privacy, artificial intelligence, ownership of property, and internal control of integrity. In regard to security (accuracy and confidentiality), security of AIS is critical in ensuring that undesirable events such as loss of data integrity and confidentiality is avoided. According to Guy et al (2003), security of the AIS is necessary in preventing fraud in addition to protecting and furthering the legitimate interests of the constituencies of the system. The ethical issues that relate to security have in recent past raised serious concerns not only among the accountants but also the users of information generated through the AIS. These issues arise from emergence of sharing of computer databases which can cause serious harm to CPA firms by disseminating information that is inaccurate to authorized users (Hall, 2008). Similarly, accurate information can be disseminated to unauthorized persons hence affecting the confidentiality code of the accounting profession. Therefore, accountants should ensure adequate security of AIS to avoid breach of accuracy and confidentiality code. Secondly, professional ethics for AIS of CPA firms demand that, computers, which form integral part of AIS infrastructure, should not be misused (Love, 2008). Misusing of computers through ways such as copying proprietary software by using firm’s computer for personal gain is illegal and is a breach of professional code of conduct. In addition, professional ethics for AIS requires that privacy should be observed at all times. Guy et al (2003) argue that it is important that companies should have full control of how much and what kind of information about them is available to others. Privacy issues in accounting arise when improper disclosure of the information is made. Financial accounting information such as amount of assets, person’s or company’s financial transactions, outstanding debts, and positions held in funds among others should be accorded privacy that they deserve (Hall, 2008). This is because of this kinds of information are accessed by unauthorized persons, the person or company that the information relates to may become a victim of identity theft or fraud. Love (2008) advises that CPA firms should implement systems and policies that protect the privacy of their clients. Furthermore, artificial intelligence is a professional ethics for AIS; it is a new set of ethical issue that arisen from the expert systems’ popularity. Hall (2008) argues that domain experts and knowledge engineers have made AIS reliable but this does not mean that the system may not generate inaccurate, incomplete, and faulty information that may compromise decision- making process. Therefore, this raises an ethical issue as the question of responsibility for appropriateness and completeness of the information generated arise. Professional ethics for AIS demands that accountants should be responsible and therefore should exercise extreme diligence in their work (Guy et al, 2003). Moreover, professional ethics for AIS provides for ownership of property in regard to information systems used in financial accounting. Basically, ownership in this respect is in regard to software that provides application for processing of data. There are copyright laws that are applied in protecting software developers against piracy (Hall, 2008). Professional ethics requires CPA firms to use original software in AIS to ensure that they do not violate copyright laws. Lastly, professional ethics for AIS require that internal control integrity be observed to ensure that accurate information are generated and subsequently contribute to good decisions. Love (2008) observes that integrity is critical to any organization’s success and more so accounting firms. He explains that integrity helps in maintaining and broadening client’s confidence to the firm. Therefore, accountants should discharge their responsibilities with the highest level of integrity. AIS of CPA firms should have strong internal control integrity to ensure that information communicated is not biased (Hall, 2008). Observations of all of the aforementioned professional ethics for AIS will enable CPA firms to discharge their responsibilities diligently and appropriately hence boosting the credibility and reliability of their information. The Sarbanes-Oxley Act of 2002 led to the creation of the Public Company Accounting Oversight Board (PCAOB) which has changed the accounting practice in relation to the adherence to business ethics by CPA firms that have implemented the use of Accounting Information Systems. The PCAOB acts as an independent body which evaluates the auditing firms with an aim of providing an oversight on the auditing services of these firms including determination of their compliance to professional ethics of accounting practice (Braganza & Desouza, 2006). Through this board, the regulation of audit professional is made possible. Because the board is responsible for the registration of public auditors, it ensures that the auditors comply with the ethics of management of accounting information within accounting information systems before their registration (Michael, 2005). The board enforces to compliance to accuracy by editors in addition to practice of integrity in the auditing process. As a result, the Sarbanes-Oxley Act has influenced the business ethics within accounting information systems of CPA firms. Auditor independence is an important ethical consideration in the management of accounting information within accounting information systems by CPA firms (Biot-Paquerot & Hasnaoui, 2009). The auditing firms should be separated from the activities of accounting firms as a way of ensuring that auditing process and the auditor decisions are not influenced by the management of CPA firms. The Sarbanes-Oxley Act provides for auditor independence by ensuring that the standards of accounting professional activity comply with business ethics. Through the Act, conflict of interest is prevented in the auditing financial information within the databases of an accounting information system (Braganza & Desouza, 2006). The requirements for the approval of new auditors are specified through the Act which ensures that auditors who are independent from the firm are allowed to edit financial data in the AIS and as a result, the Sarbanes-Oxley Act has helped in ensuring accountability and thus compliance to the ethics of business practice. The ethics of internal control of CPA firms is taken care of by the standards of the Act because auditors are no longer manipulated by the internal affairs and the management of the firm in auditing accounting data in the information systems of the firm. Additionally, the act provides the standards for the reporting requirements of auditors which safeguards against the manipulation of the auditor’s report due to lack of independence from the management of the firm. Professional ethics in the AIS of CPA firms calls for corporate responsibility in safeguarding the firm’s data from fraud which would result from unethical practices such as disruption of the accounting information system, corruption of data, destruction and theft of an asset within the computer systems of the firm (Biot-Paquerot & Hasnaoui, 2009). Through the Sarbanes- Oxley Act, firms are mandated to practice corporate responsibility to ensure that financial records within the information systems of CPA firms is free from manipulation or corruption of data with an aim of defrauding the company (Michael, 2005). Executives of business firms are specifically mandated by the Act to ensure that all financial records are complete and accurate. The management team of CPA firms should therefore ensure that accounting reports and data within their information systems are accurate and free from corruption or alteration. The interaction between CPA firm’s audit committees with the external auditors is defined by the Sarbanes-Oxley Act with specification of their roles in ensuring that business data is valid and accurate. Moreover, the Act limits the behavior of executive officers of CPA firms in relation to auditing of data with specification of the penalties to managers who fail to comply with the ethics of professional practice (Braganza & Desouza, 2006). Transparent disclosure of financial transactions is an ethical requirement for the management team of CPA firms. To ensure compliance of corporate officers, the Sarbanes-Oxley Act stipulates that external control on the disclosure of pro-forma financial figures and the transaction of business stock is necessary so that professional ethics are adhered to (Michael, 2005). Through the disclosure of business transactions, unethical activities such as the use of accounting information systems and computers for personal transactions can be identified so that professional responsibility is accounted for by the officers concerned. Moreover, through the disclosure of financial transactions, the disclosure of any manipulation of computer input of financial information would be identified to which would enable disciplinary committees to take appropriate action against the unethical practices (Michael, 2005). Disclosure of financial transactions is also important in determining if the transactions are accurate and free of fraud. The Act also mandates for auditing and reporting of financial transactions in a timely manner which would not allow time for possible manipulations of data by CPA financial officers. Criminal fraud in CPA firms may result from unethical behavior such as bribery, economic extortion, illegal gratuities and conflict of interest. All these are corrupt activities in business dealings which would utilize vulnerabilities in accounting information systems to lead into criminal fraud within CPA firms (Biot-Paquerot & Hasnaoui, 2009). Such corruption within accounting information system has been curbed through the provision of the Sarbanes-Oxley Act which provides for Criminal Fraud Accountability in business firms. Within the act, the penalties for the manipulation of financial records within accounting information systems have been provided. Additionally, the Act stipulates the criminal penalties against corporate officers who are involved in alteration or any form of destruction of the financial records of CPA firms (Braganza & Desouza, 2006). The Act also protects those who provide investigators and auditors with helpful information for identifying fraud in CPA firms in addition to definition of the penalties that the officers who try to interfere with the financial investigations must face. In conclusion, CPA firms have adopted and implemented the use of modern technology in transacting business and managing data because of their efficiency effectiveness. As a result professional misconduct has been recorded which aims at defrauding the company. Computer fraud is common in business firms and it results from professional misconduct and non compliance to the professional ethics in the financial transactions. In accounting information systems for example alteration of financial data, alteration of business software applications, misuse and misappropriation of company assets are common forms of unethical practice. The Sarbanes-Oxley Act of 2002 became necessary due to the increased defrauding of company assets by professional ethical malpractices. The Act is mandated to stipulate the standards that financial reporting must follow and the penalties for non compliance to the various provisions of the Act. References Biot-Paquerot, G., & Hasnaoui, A. (2009). Stakeholders’ perspective and ethics in financial information systems. Journal of Electronic Commerce in Organizations, 7(1), 59-70. Braganza, A., & Desouza, K. C. (2006). Implementing Section 404 of the Sarbanes Oxley Act: Recommendations for Information Systems Organizations. Communications of AIS, 2006(18), 464-487 Guy, D et al. (2003). Ethics for CPAs: Meeting Expectations in Challenging Times. New Jersey: Wiley. Hall, J. (2008). Accounting Information Systems. Cengage Learning. Love, V. (2008). Understanding Accounting Ethics. The CPA Journal. Michael K. S. (2005), The Impact Of The Sarbanes-Oxley Act On Threats To Auditor Independence. Research on Professional Responsibility and Ethics in Accounting. Emerald Group Publishing Limited. Vol. 10, pp.123-138. Read More