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Ethics in Accounting

morally right (or best) action is the one that produces the Wagner, Michael E., ed. (1991). An Historical Introduction to
greatest possible happiness for the greatest possible num- Moral Philosophy. Englewood Cliffs, NJ: Prentice Hall.
ber. Thus, behaviors are not always moral or always
immoral. Instead morality is based on specific variables Keith Goree
unique to each situation. In some situations, lying might
produce more overall good than telling the truth (e.g.,
deceiving a kidnapper to save a child). In other situations,
truth would clearly produce more good.
ETHICS IN
ACCOUNTING
BUSINESS AND PROFESSIONAL
CODES OF ETHICS At least as far back as ancient Greece, when the Hippo-
cratic oath was instituted for medical practitioners, a hall-
These classical ethical systems are expressed and affirmed
in contemporary society in many ways. Codes of ethics are mark of a profession has been its claim to integrity. When
the public thinks of the accounting profession, they usu-
practical examples. A code of ethics is a written document
ally think of certified public accountants (CPAs) who
intended to serve as a guideline to those who would fol-
work in big national or regional firms that audit the finan-
low it. Most larger businesses and corporations have codes
cial statements of publicly listed companies. But many
of ethics for their employees, as do most professions for
CPAs work in smaller partnerships, auditing or organizing
their members. Professional codes are usually written by
the books and records of private companies and not-for-
members of the profession through a central national
organization. For example, it is generally understood that profit and governmental organizations. CPAs may also
American doctors are subject to the American Medical perform other services, most notably tax services. Some
Association code of ethics, and American lawyers follow work as financial officers and management accountants in
corporations, large and small, as well as governmental and
their bar association codes. But many other professions
not-for-profit institutions. In addition, many accountants
have codes of ethics as well, including such diverse fields
who do not have a CPA designation perform services sim-
as journalism, pharmacy, business management, educa-
ilar to some of the services—but not audits—performed
tion, accounting, engineering, nursing, law enforcement,
by CPAs.
and psychology. Even the best codes of ethics cannot guar-
antee ethical behavior. Indeed, many codes do not even
contain methods of enforcement, but merely express the ROLE OF ETHICS IN THE WORK OF
ideals and values of their respective corporations and pro- PUBLIC ACCOUNTANTS
fessions. The decision to act ethically or unethically is, as As noted, only CPAs can audit the financial statements of
it has been through the ages, up to the individual. publicly owned companies that have to report to the fed-
eral government’s Securities and Exchange Commission
BIBLIOGRAPHY (SEC). CPAs who audit the financial statements of an
DeGeorge, Richard T. (1999). Business Ethics (5th ed.). Upper organization have a clear ethical responsibility to all those
Saddle River, NJ: Prentice Hall. who use audited financial statements. But public account-
Frost, S. E. (1962). Basic Teachings of the Great Philosophers. New ants are in a peculiarly difficult position compared with
York: Anchor. those in the legal and medical professions, because the
Goree, Keith (1995). Ethics in American Life. Mason, OH: parties that rely on their work extend beyond the client
South-Western. (often a corporation) who pays them, to the business and
Gorlin, Rena A. (1994). Codes of Professional Responsibility (3rd financial community, including stockholders, investors,
ed.). Washington, DC: Bureau of National Affairs. creditors, suppliers, customers, employees, and govern-
Holmes, Robert L. (2003). Basic Moral Philosophy. Belmont, CA: ment regulators. These parties rely on the objectivity and
Thomson/Wadsworth.
integrity of CPAs to make sure that the financial state-
Denise, T.C., Peterfreund, Sheldon P., and White, Nicolas P., ments fairly present in accordance with generally accepted
eds. (1999). Great Traditions in Ethics (7th ed.) Belmont, CA: accounting principles.
Wadsworth.
In the early days of the public accounting profession
DeVries, Paul, Veatch, Robert M., Newton, Lisa H., Baker,
Emily V., and Richardson, Michael (2000). Ethics Applied in the United States, many accountants came to the
(ed. 3.0.). Boston: Pearson. United States to audit new and growing enterprises on
Ruggiero, Vincent R. (2004). Thinking Critically About Ethical behalf of British investors. These auditors clearly knew to
Issues (6th ed.). Boston: McGraw Hill Higher Education. whom they owed their loyalties. They also brought with
Shaw, William H. (2005). Business Ethics. Belmont, CA: Thom- them strict principles that, when many of these auditors
son/Wadsworth. founded U.S.-based audit firms, influenced the formation

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