Purpose of Ethics in Accounting

Though accountants are rarely household names, historical evidence shows that the accounting profession has existed in some form for almost as long as civilization. Historical records show that accountants played important roles in ancient civilizations, including making major contributions to the development of writing, currency and banking. Though accurate financial record keeping is the primary purpose of accounting, many people consider ethics in accounting to be equally important.

The Facts

Ethics in accounting became a focal point during the American financial scandals of the early twenty-first century. The financial misdeeds and failed audits of major companies, including Enron and WorldCom, raised serious questions about the role of ethics in accounting.

A 2006 study presented at the Northeast Region of the American Accounting Association's Annual Conference found that students majoring in accounting scored lower on a standard test of ethical outlook during college and after graduation than the rest of the general population.

Theories

The role of ethics in accounting has led to considerable debate and two important theories.

The most commonly applied theory used in accounting is the Kohlberg model of moral development, created by Lawrence Kohlberg in the late 1960s. Kohlberg's theory divides moral development into a series of six progressive stages that an accountant can use to measure the ethical correctness of a given situation.

Another theory, formulated by James R. Rest and called Rest's Defining Issues Test, also uses the idea of stages to determine ethical correctness. In Rest's theory, some people are more ethically sensitive than others, and some situations create a stronger ethical compulsion than others.

Requirements

There is no set standard for ethics course requirements for students pursuing a degree in accounting, but most schools require at least an introductory ethics course for accounting students.

After passing the exam to become a certified public accountant (CPA), applicants must pass an ethics exam before receiving their license. The requirements for this exam are determined by individual states and may require applicants to complete an ethics course, take a test in ethics, sign an ethics agreement or some combination of the three.

Purpose

Because companies and individuals rely on accurate information from accountants when making financial decisions, public statements and other business actions, it is important that accountants be competent, unbiased and accurate.

Organizations

Because of the importance of ethics in accounting, several organizations have been formed to serve as watchdogs for ethical accounting.

The American Institute of CPAs (AICPA) has a Code of Professional Conduct that provides general and specific advice for accountants facing ethically uncertain situations. The Institute of Management Accountants (IMA) and the Institute of Internal Auditors (IIA) also both have ethical codes of conduct specific to their memberships.

References

• Accounting Ethics Courses: Do They Work?
• Introduction to CPA Requirements

Who Can HelpSponsored

• Earn your degree from industry experts at University of Phoenix. Take the next step in your career.