Ethical Issues Facing Accountants

The collapse of Enron resulted in black marks against the accounting profession and several reforms to change accounting standards. It is hoped that these changes will eliminate such unethical procedures as making the company's shares financially more viable, but establishing no gain to shareholders and creditors.

Responsibility

The task of accounting is to state the truth about an organization's financial condition and provide the conditions of trust required by a market economy. The American Institute of Certified Public Accountants has established ethical guidelines and rules of conduct that are to be followed by its members. This Code of Professional Conduct is applicable not only to accountants but to financial professionals. A part of the code stresses the profession's ultimate responsibility to its public, which includes shareholders, clients, creditors, the business community, governments, and employers who are involved with commerce.

Interests

One of the reasons that Enron and similar events occurred is that the accounting firms placed too much importance on the corporate interests and not enough on the investors' interests. The accountants cooperated with the company's management team, which led to "cookie-cutter" rather than principle-founded accounting practices, such as depreciation and inventory procedures.

Investigations

Because there can be such leeway with financial statements, accountants must act as "security guards" and be able to resist their own desire for personal gain. There are many cases where financial transactions continue to be inaccurately stated, such as essential figures left out of statements and debits listed on the ledger's credit side or not listed at all. Accountants need to be sleuths and find such errors and then tell the truth about them.

Oversight Board

Although the accounting profession has overall been recognized for its excellent work, such instances as Enron tarnish the whole field. The Public Company Accounting Oversight Board (PCAOB) was created to develop auditing standards with ethics rules and quality control for accounting firms.

Hiring Practices

Accounting firms must set high criteria in hiring and training practices of new personnel, especially courses on ethics and professional responsibility. In the past not enough emphasis had been placed on ethics issues. In addition to checking a candidate's references, the accounting employer needs to clearly discuss the importance of ethics in job interviews. Larger accounting firms may want to consider having one person who specifically oversees ethics and accountability. Nearly all states require that certified public accountants must take continuing education courses to keep their licenses, yet only a handful of states mandate ethics training.