ETHICS & LAW 5-2

WEEK 1- PART 2 (ETHICS IN ACCOUNTING)

Accountants are professionals who are expected to feed the public as well as the organization they work for with timely and accurate financial information to facilitate their decision making. Failure to provide the right information have got the effects of making the users of the financial statements end up making poor financial decisions. If any stakeholder finds out that the provided information was not accurate and has let him incur losses in the process, he/she has the right to sue the concerned Accountant. Accountants have got the role of collecting accounts receivable, recording, carrying out analysis and presentation of financial information. Accountants being a profession, they are expected to maintain high levels of professionalism such as ensuring accuracy and honesty in their presentation. If convicted of any malpractices, they are subject to prosecution under the law (Sonfield, 2014).

Maintaining professionalism and honesty in accounting, came up as result of accountants’ act of issuing manipulated or false financial information to the public that makes them make poor decisions. It was found out that, even when the business is not financially stable, accountants can enter into an agreement with the management to manipulate the figures in the annual reports so that they can capture public interest hence attracting more investments into their company. In the past, many investors have ended up investing in companies whom they think are financially stable only to see the businesses shutting down after some few years of their investment. Shareholders also have been the victim of the same. Accountants prepare the financial statements in a way that they look attractive to show that the management is working out well and is managing their funds well, only to see that the business is not even in a position of paying any dividends to them (Strouhal et al. 2013).

WEEK 2- PART 2 (ETHICS IN ACCOUNTING)

By definition, ethics is a code or a moral system that helps in providing a criterion for the evaluation of that which is either right or wrong. Further, an ethical dilemma is a situation an individual or a group has to face a decision that tries to test the code mentioned earlier. The majority of the ethical dilemmas are easy to recognize and provide a solution for them. Moreover, just like any other profession, accountants who are operating in the corporate world, faces some ethical dilemmas. Besides, some of these dilemmas are quite sophisticated and possess a lot of difficulty in solving them (Ethics in Accounting. 2017). For example, the focus of a capital market that is always focused on the periodic profits may tend to lure the management of the firm to go towards or even overwrite the accounting rules to ensure that the reported net income is inflated. When these situations occur, then, the use of technical competence may fail to be enough to help with resolving the dilemma at hand.

One of the primary things that help in distinguishing the profession from the other related occupations in the ability of its members to take responsibility of the individuals being served. Those who are engaged in a trade like the accountants must uphold the highest possible standards of behaviors when carrying out their duties in the occupation. Public accounting has managed to achieve a broad range of recognition as far as professionalism is concerned. For instance, the AICPA, which is the professional body for the public accountants at the national level, outlines clear rules and regulations that all of its members should abide by (Ethics in Accounting. 2017).

WEEK 3- PART 2 (ETHICS IN ACCOUNTING)

The objective of the federal law in regard to Accounting is to create a legal medium of regulating accounting and financial statements in order to form some unified requirements for accounting purposes. The state laws in regard to accounting is put in place in order to regulate licensure. Accountants are licensed to be certified public accountant (CPA) and certify their businesses as well based on provisions in their respective states. “The mission of the Maryland Board of Public Accountancy is to establish educational and professional standards of competence and conduct of certified public accountants in providing financial services for Maryland businesses and citizens” (Maryland Board of Public Accountancy, 2017). The Board achieves this objective through a framework such as conducting “examination, enforcing licensure, continuing education, accounting standards, investigation of consumer complaints, and enforcement of State law and regulations” (Maryland Board of Public Accountancy, 2017).

Similarly, in the state of North Carolina, the state’s board of Certified Public Accountant (CPA) Examiners “is an independent, self-funded occupational licensing board that grants certificates of qualification as certified public accountants (CPAs) to those individuals who meet the statutory requirements” (North Carolina Board of CPA, 2017). The Board also accepts and implements the Rules of Professional Ethics and Conduct to be followed by all CPAs in the State. Other duties carried out by “the Board include registration of CPA firms; renewal of CPA certificates and CPA firm registrations; administration of the Uniform CPA Examination; administration of the continuing professional education (CPE) compliance program, administration of the Peer Review Compliance program; disposition of administrative hearings with respect to State statutes and rules” (North Carolina Board of CPA, 2017).

Agency law shows that an accountant is the agent and shareholders are the principal; and that the accountant is required to make a legal transaction on behalf of the owners by making a financial statements report that reflect the true conditions of the firm conditions. In the event that any accountant commits a fraud, they can be prosecuted and also have his/her license revoked.

WEEK 4- PART 2 (ETHICS IN ACCOUNTING)

Law and Accounting is a depiction of “how accounting problems morph

easily into what are essentially legal issues. In addressing the world’s transactions, accounting is ambitious” (Cunningham, 2017). Accounting is very useful in measuring and influencing “the mix of debt and equity capital used in businesses, for instance, it measures and influences the scope and form of employee compensation, benefits and pensions” (Cunningham, 2017). Accounting plays a major role in determining our financial situation, generating new financial products, financing mechanisms and transaction exchange mediums.

As beneficial as accounting is, it has some ethical issues. The reason why raising awareness about legal accounting challenges has been on the increase for the past two decades.

Legal-accounting issues rises from change in finances and regulations. Let’s look at the

“telecommunications boom of the latter 1990s which presented considerable legal-accounting problems to the entire sector, when numerous participants used a variety of leases and other 5 instruments to swap network capacity or sell excess network capacity to others” (Cunningham, 2017).

Another example is “a smaller firm faced with legal-accounting issues as it tried to exploit globalization’s promise by increasingly selling its aerospace and automotive software in the Far East” (Cunningham, 2017).

A significant accounting issue is one that occurred to one of the country’s most revered consumer products (Avon Products) which involves Computer challenges associated with the Y-2K problem (Cunningham, 2017).

Another “legal-accounting problems arising against the backdrop of global events is the case of a dispute between a military contractor (Litton) and the U.S. Navy over shipbuilding contracts during the waning days of the Vietnam conflict” (Cunningham, 2017).

“Many financial frauds may be traced to fraudsters exploiting cracks between the accountancy and legal professions” (Cunningham, 2017). There are rule-based techniques for preparing financial statements and for reviewing financial reports of companies and clients therefore it is very important for accountants to understand and know the ethics involved in this profession in order to make value-based judgments, one that will help them in preparation for any “issue with integrity, objectivity and competence plus concern for the good of the public” (Wiley, 2006).