Ethics in Accounting

Ethics in Accounting (BAT4M)

• Curriculum Expectations: The course aims to teach students about the impact of ethical issues on accounting practices, the relationship between Generally Accepted Accounting Principles (GAAP) and accounting practices, and the roles of various agencies affecting accounting practices.

Learning Goals

• Describe the impact of ethical issues on accounting practices
• Demonstrate the relationship between GAAP and accounting practices
• Describe the roles of various agencies and their effects on accounting practices

Success Criteria

• Define ethics and relate its importance to the accounting profession.
• Use an ethical framework to help make ethical decisions.

Business Ethics

• Ethics: Moral principles, rules of conduct, and values related to human behavior (right, wrong, good, bad).
• Ethical Behavior: Legal behavior with implications from individual, social, and corporate priorities.
• Ethical Dilemmas: Situations faced by managers daily, requiring choices between alternatives that may impact personal or organizational benefit, or minimize losses.

Why Accountants Should Act Ethically

• Governing Bodies: Accounting governing bodies require ethical behavior; unprofessional conduct can lead to license loss.
• Societal Expectations: Increased societal emphasis on corporate responsibility in the information age.
• Public Image: Improved public image for the accounting profession.
• Employee/Community Pride: Ethical behavior contributes to employee/community pride.
• Reduced Turnover: Less personnel turnover when employees feel valued.
• Human Respect: Treating others with respect, as desired.

Ethical Decision-Making Model

• Define the Dilemma: Clearly identify the ethical problem.
• List the Facts: Collect all relevant information.
• Identify Stakeholders: Note who is affected.
• List and Evaluate Options: Assess legality, GAAP compliance, Code of Conduct adherence, ethical considerations.
• Make a Decision: Consider impact on others, and professional organizations.
• Review and Revise: Refine the approach if necessary.

Case Study: Candice Crown, CPA

• Dilemma: Should Candice provide free audits to charities and offer referrals for a fee?
• Facts: It's Candice's policy to provide free audits to local charities. She's considering a $250 referral fee. There are few charities in her small community.
• Stakeholders: Candice, her clients, charities, club members, other local accountants.
• Options:
• Implement the donation referral.
• Discontinue doing charity audits.
• Continue charity audits without aiming at gaining new clients.
• Evaluation of Options:
• Option A: Potential violation of professional codes (e.g., commission receiving).
• Option B: Negative impact on business reputation and community perception.
• Option C: Acceptable approach to maintain ethical conduct and business image.
• Decision: The optimal solution is likely Option C. Continue to offer free audits without the referral program to maintain professional integrity and positive community standing.