Accountants have a significant responsibility to the public. This responsibility exists because outside shareholders, creditors, employees, and others rely on financial statements in making various business decisions.
Internal accountants are employed by businesses to prepare financial statements. These financial statements are then audited by an independent CPA company. Both internal accountants and external auditors are accountable for carrying out their responsibilities with honesty and due diligence.
Numerous accounting organisations advocate for high ethical standards of conduct. The American Institute of Certified Public Accountants (AICPA) is one such organisation. It is a professional association for CPAs who work in public accounting firms or for other organisations (such as corporations). Its Code of Professional Conduct highlights CPAs’ need to serve the public interest, as well as their obligation to operate with honesty, objectivity, independence, and appropriate professional care.
In a given situation, formalized codes of ethics can often help in deciding the proper course of action. However, some situations are sufficiently complex that the codes do not provide clear guidance. Fortunately, ethicists have developed frameworks for examining ambiguous ethical situations. Two of these frameworks, utilitarianism and deontology,
are briefly described next:
It judges the moral correctness of action based solely on its consequences. According to this perspective, the act that should be taken is the one that maximizes overall favourable consequences (net of unfavourable ones). Consequences not only to the actor but to all parties should be considered.
The proponents of deontology argue that the results of an action do not determine whether or not it is morally correct. They feel that the fundamental character of the act itself has an impact on whether or not it is proper. Deontology, on the other hand, is divided into two distinct views. Some deontologists believe that the nature of an act is the only factor that should be considered when determining whether or not it is morally right.
Among other things, they believe that murdering and lying are both ethically reprehensible under any condition. Alternatively, other deontologists argue that both the essence of an act and its repercussions within a certain context must both be taken into account.
To illustrate these approaches, imagine you are in the process of filling out an expense report after having just completed a business trip. Your employer does not reimburse child-care costs while away from home, yet most of your colleagues (including your immediate supervisor) feel that child care is a legitimate expense. They recoup this expenditure by overstating the cost of meals (most restaurants provide you with a blank receipt). Is it ethically correct for you to overstate your meal cost?
Falsifying an expense report, according to many deontologists, is the ethically reprehensible act of lying. Instead of looking at the immediate consequences of an activity, utilitarians consider the long-term effects. It is unclear whether utilitarians would arrive at the same result. The impact of the fabrication on you vs. the stockholders would have to be evaluated.
To develop a strong personal code of ethics, each of us must understand how we think about ethical situations. We suggest that you consider how utilitarianism and deontology can be used to analyze ethical situations and that you assess which of those approaches, if either, is consistent with your own moral framework.