All your Writing needs covered

Accounting Ethics: Code of Conduct

Calculate the price
your order:

275 words
Approximate price
$ 0.00

Accounting Ethics: Code of Conduct


Accounting ethics forms a part of the system of moral principles that governs the accounting profession (Barry, 1983; Lippke, 1995; Shaw, 1999). Professional ethics in accountancy is multi-faceted. In this profession, multiple cases with regards to ethics have always come up. Recent high profile cases that have hit the accounting profession have called for the development and implementation of tighter ethical rules and regulations. For example, the scandals involving WorldCom and Enron have posed a major challenge in the accounting profession. Therefore, the study and incorporation of professional ethics have become increasingly important in the accounting field. Due to the sensitivity of the careers, management accountants require ethics due to the nature of their work (Svennson and Wood, 2003). This is because they handle vital information and undertake critical transactions on behalf of their organizations and clients. Users of accounting information such as shareholders, investors, and the internal revenue department rely on the information provided by the accountants. Accounting statements prepared and audited must show a true and fair view on the position of the company in the market. Therefore, auditors, accountants, and managers ought to provide information that will not mislead the users of these financial statements. The presence of ethics in accountancy will enhance the credibility of opinion provided by the accountants.

On-Time Delivery!
Get your customized and 100% plagiarism-free paper done in as little as 3 hours
Let’s start
322 specialists online

A professional accountant must thus adhere to the code of conduct that is found on this profession. The code of conduct encompasses matters such as professionalism, confidentiality and integrity. An accountant must be honest, straightforward and sincere. Moreover, he/she must exhibit a high degree of competence and integrity. The guide for professional ethics states that a fundamental concept to professionalism in the accounting field is having an attitude and state of mind characterised by objectivity and integrity. Therefore, members of the accounting field who are in public practice must be free from influence from others that may distract him or her from being objective. An accountant must be impartial and should never allow prejudice to interfere with his work or judgement.

A code of conduct is needed in the accounting field to provide credibility within the industry. For example, development of ethics in information technology has led to an increase in trading via the internet (Hill and Singh, 2003; Awasthi, 2008; Bowyer, 2001; Brooks, 2010). Ethics is thus required to guarantee the confidentiality of clients personal information. The most commonly accepted reason for ethics in the accounting profession is to enhance credibility and professionalism. The idea of professionalism usually involves having knowledge of what is right to do and the right conduct of an individual. An accountant with the knowledge of right and wrong will usually ensure that he/she maintains professionalism at all costs. Moreover, ethics can be used to maintain an accountants’ discipline (Brown, 2004). Discipline ensures that the accounting industry maintains a level of excellence that is required by the clients (Brooks, 2008).

Ethical Challenges Facing in Accountancy

Every issue in managerial accounting has some degree of ethical implication. These issues may range from fraudulent reporting to cost manipulation. Research on management accounting has unravelled that there are several ethical issues affecting the normal activities of the profession. The issue of balancing ethical responsibility against practicality is one of the major challenges that managers face in the world today (Payne, 2006; Schneider, 2006). Accountants find it easy to overlook some business practices since. This act is committed quite often until it has become normal to do so. For example, a case where a business entity uses its funds to bribe the authorities to continue trading is very common in the current trading scenes. The auditors and the business entities are aware of this situation and its dangers but they normally overlook it. In most cases, managerial manipulation of unethical practices are mentioned but usually there is no evidence of actual occurrence apart from a few isolated cases.

Another challenge that faces the accounting profession is the lack of a code of ethics for managers. This was one of the major problem facing the accounting profession before 1983 (Charles, 2008). Management accountants were not governed by any code of conduct therefore, the tendency to overlook some vital ethics was relatively higher as compared to the current rates (Charles, 2008). The accounting profession operated on the assumption that the independent Certified Public Accountants (CPAs) who were governed with a code of conduct developed by American Institute of Certified Public Accountants could provide protection against ethical issues. However, several cases started emerging as a result of management accountants neglecting ethics. Therefore, the need for a code of conduct for management accountants arose.

Professional Accountancy Bodies and Action Taken to Address Challenges

Several decades ago, the development of ethical standards focused on the CPAs especially in auditing. For example, American Institute of Certified Public Accountants developed a code of conduct to serve members in its industry. The lack of a code of ethics in management accounting was due to the misguided view that the first line of defense in accounts was to be provided by independent certified public accountants subject to the code of ethics (Christopher and Nicholas, 2009). However, in the light of recent developments in the accounting field, in 1983, the Institute of management accountants has formulated a standard guide on ethical conduct for management accountants. In 1985, the Financial Executives Institute amended their code of conduct to ensure that the field of accountancy would adhere to a code of conduct that enhances professionalism. These guides provided guidance on issues relating to issues on confidentiality, competence, objectivity, and integrity. Moreover, the code of ethics provided guidance on matters pertaining to conflict of interest and discreditable acts.

Enforcement of Codes of Ethics and Monitoring Behaviour

In the accounting profession, the duty of enforcing ethics is vested on the Professional Ethics Division (Fisher, 2003). This division investigates any infringements in the code of conducts set by the American Institute of Certified Public Accountants (AICPA), Institute of Management Accountants (IMA) and Financial Executive Institute (FEI). AICPA has the right of expelling or suspending a member who has been found guilty of infringing ethical practices. The maximum suspension that a member can receive is of 12 years (Fisher, 2003). A suspended or expelled account cannot practice the profession in the name of AICPA or IMA. These bodies formulated these rules to ensure that accounting, as a profession, is not liable for individual mistakes.

Yes, we can!
Our experts can deliver a custom Accounting Ethics: Code of Conduct paper for only $13.00 $11/page
Learn More
322 specialists online

The ethics committee has the task of monitoring the behaviours exhibited by accountants. Accountants are usually subjected to ethical investigation. The professional ethics division has the duty of monitoring and investigating accountants on ethical issues. Accountants who infringe ethical issues are usually suspended or expelled. Those accountants who are reinstated after suspension are usually required to submit their work to the ethics committee who will ensure that they adhere to the code o conduct presented by the accounting profession.

Effect of ethics on companies

Professional ethics has affected the accounting profession both positively and negatively. The main aim of ethics in the accounting profession is creation of trust between the clients and the practitioners. Accounting firms that strictly observe the code of conduct usually makes their clients more comfortable while using their services (Tennant, 2007). The accounting profession is usually built on trust and therefore customers need to feel the need to trust the company before they use their services. Therefore, strict observation of ethics ensures that a company can attract more clients. Companies that observe ethics strictly are therefore more credible and reputable than companies that do not observe ethics.

However, observation of ethics does not work always in favour of the companies (Hoffman et al, 1999). Personal experience in accounting has shown that most companies have to ‘cut corners’ to survive and make profits. If strict observation of ethics is maintained by a company, there are high chances that such an institution may lose some of their clients in the process. A good example of such a case is the case of auditing firms. Audit firms in the current world overlook a lot of malpractices of their clients to gain business. This is as a result of an increase in competition among auditing firms for clients and corruption. If such audit firms observed strict rules, they would lose customers in the process as a result of exposing their shady deals.

Case / Examples of the Ethical Issues Faced by Management Accountants

Management accountants face various ethical issues. The nature of most of the issues faced by managers is that of decision-making. Investment and conflict of interest is the major issue that has been observed in management accounting. Usually, managers decisions on investments tend to serve personal interests rather than the interests of shareholders and owners (Schneider, 2004). This issue on investment is usually associated with conflict of interest when managers tend to serve self-interest. For example, a manager whose performance is measured on return on investment will usually pick the investment option that serves his/her interests first. If the manager is faced with the option of an investment that benefits the company but reduces his personal return on investment, he/she can reject the option. This is because the managers have the power to reject profitable investment options whose return on investment is below the average return on investment of his division. Acceptance of such an investment option may lower the overall return on investment of the division and not serve the manager’s interest.

Various cases on conflict of interest face management accountants. The New York Times presented a good example of a case on conflict of interest. Wyatt (2010b) reported of case about Mr. Date who was receiving compensation from Prosper Marketplace while he worked as a senior advisor to Ms. Warren. Warren was actively involved in the enactment of Dodd-Frank act, a financial regulation bill (Wyatt, 2010b). The conflict of interest, in this case, arises due to the fact that Mr. Date was serving as the advisor of Mrs Warren while he served as the director of Prosper Marketplace. The fact that Prosper Marketplace was a consumer loan company and Mr Date was advising miss Warren on a financial regulation bill presents a conflict of interest. This is because Mr. Date could easily have advised Ms. Warren to enact policy that favoured his company. Although it was said that Mr Date was not in violation of professional ethics, it is clear that he is involved in a case of conflict of interest. This can easily lead to him violating professional ethics.

Cases to do with ethics continue to litter the accounting profession. In the New York Times, Morgensen (2011) reports of an employee who exposed the Bank of America was awarded 3.8 million dollars in damages. The employee, Mr. Winston exposed how the Countrywide Company had failed to observe professional ethics while conducting its businesses. Countrywide wanted Mr. Winston to misrepresent the corporate governance practices in a report. The company president had asked Winston to write a report countering another report that had expressed concerns about executive pay and succession plan. The problem was that Winston had never come across an extensive succession plan and he refused to write the report. The president of countrywide wanted to terminate Winston’s employment but instead chose to reduce the number of employees working beneath him. When the bank of America took over Countrywide, they fired Winston on the account of being a whistle blower. This case shows the extent to which management accountants neglect ethics while performing professional duties. Wyatt (2011a) also presents an interesting article on how corporate whistle-blowers gains from reporting cases on unethical practices. The fact that the congress and financial market regulators offer rewards to whistle-blowers serves to show just how the management accounting field has abandoned ethics

Another case on ethics in the accounting is the case where an ex banker gave out data on taxes to Wiki Leaks (Somaiya and Werdigier, 2011). A senior Swiss banker admitted to giving Julian Assange founder of Wiki Leaks details of 2000 individuals and companies. This is unethical since professional ethics demand that the confidentiality of the client should be maintained unless one has express permission to release such information. The information released by the Swiss banker, Rudolf Elmer who worked for Julius Baer bank, released information that showed how individuals evaded taxes in the world. However, the bank known or its intense privacy released a statement that denied these allegations. This case also serves to show how the ethics has been abandoned in the accounting field.

Cut 15% OFF your first order
We’ll deliver a custom Accounting paper tailored to your requirements with a good discount
Use discount
322 specialists online

Various other cases have been publicized on the issues regarding to ethics of management accountants. Craig (2011) presented the case of a Goldman bank that puts its interest ahead of its clients. Moberg and Romar (2003), in their paper WorldCom, discuss how the issue of ethics affected the company. Chan (2010) provides an interesting view on ethics in his article ‘new rules on finance to be done in the open.’ These are just but a few examples of cases that management accounting is facing. With these cases being more common with the passing time, accounting professional bodies are seeking a way to ensure that professional accountants follow ethics. The level of regulation in the accounting field has been increased to ensure that accountants adhere to the code of conduct.


Accounting ethics comprise of a system of moral principles that govern the accounting profession. With the recent track record in accounting, there is need to enhance the controls in the field. In the last decade alone, the cases pertaining to ethics have to light. Previously management accounting had no ethics to govern their activities. They depended on the fact that independent certified accountants who had ethics would protect them on issues regarding to ethics. However, this opinion changed after cases on ethics increased among management accountants. In 1983, the institute of management accountants incorporated the use of ethics in management accounts. Various issues in managerial accounting have ethical implications. These issues range from fraudulent reporting to cost manipulation. Research on management accounting has unravelled various ethical issues in management accounting. The issue of balancing ethical responsibility against practicality is one of the major challenges that face manager in the world today. However, with the specificity of code of ethics, such challenges no longer exist. Moreover, the code of conduct has increased credibility of the work of management accountant. Ethics are also needed to ensure that the clients feel safe about their personal information. The most commonly accepted reason for ethics is accounting field is to enhance professionalism. The idea of professionalism usually involves having knowledge of what is right to do and the right conduct of an individual. An accountant with the knowledge of right and wrong will usually ensure that he or she maintains professionalism at all costs. Moreover, ethics can be used to maintain an accountants’ discipline. Enforcement of ethics is vested the professional ethics division. This division investigates any infringements in the code of conducts set by the American Institute of Certified Public Accountants, Institute of management accountants and financial executive institute. Therefore, in the current world a professional accountant must adhere to the code of conduct set by his profession. The code of conduct encompasses matters to with professionalism, confidentiality and integrity. An accountant must be honest, straightforward and sincere. Moreover, he/she must show a degree of competence, and independence. The guide of professional ethics states that a fundamental concept to professionalism in the accounting field is having an attitude and state of mind characterised by objectivity and integrity.


Awasthi, V 2008, ‘Managerial decision-making on moral issues and the effects of teaching ethics’,Journal of Business Ethics, Vol 78 No. 2, pp. 200-220.

Barry, V 1983, Moral Issues in Business, Wadsworth, Belmont, CA Bowyer, K W 2001, ‘Ethics and computing’, Institute of Electrical and Electronics Engineers, Vol. 15 No. 22, pp. 30-55

Brooks, R A 2008, ‘Addressing ethics and technology in business: Preparing today’s students for the ethical challenges presented by technology in the workplace.

Contemporary Issues in Education Research’ American Journal of Business Education, Vol. 1 No. 2,pp. 23-32.

Brooks, R 2010, ‘The development of a code of ethics: An online classroom approach to making connections between ethical foundations and the challenges presented by information technology’, American Journal of Business Education, Vol. 3 No. 10, pp. 1-13.

Get a custom-written paper
For only $13.00 $11/page you can get a custom-written academic paper according to your instructions
Let us help you
322 specialists online

Brown, T K 2004, ‘The costly myth of growth through acquisition’, Bank Director Magazine, Vol. 2 No. 1, pp. 15-22

Chan, S 2010, ‘New Rules on Finance to Be Done in the Open’, New York, Vol. 2 No. 2, pp. 12-15

Charles, H 2008, ‘Business ethics – Part One: Does it matter’, Industrial and Commercial Training, Vol. 40 No. 5, pp. 248-252

Christopher, J. R. and Nicholas, A. 2009, ‘Exploring business ethics research in the context of international business’, Management Research News, Vol. 32, No. 12, pp. 1130-1146

Craig, S 2011, ‘Goldman adopts new rules’, New York, Vol. 9 No. 12, pp. 87-120

Fisher, J 2003, ‘Surface and Deep Approach to Business Ethics’, Leadership and organization Development Journal, Vol. 24 No. 2, pp. 96-101.

Hill, M E and Singh, T 2003, ‘Consumer Privacy and The Internet: A View From Germany’, Journal of consumer marketing Vol. 20 No. 7, pp. 634-651

Hoffman, W, Michael, M and Jennifer, M 1999, Business Ethics: Readings and Cases in Corporate Morality. Prentice Hall, Englewood Cliffs, N.J

Lippke, R 1995 Radical Business Ethics, Lanham, MD: New Jersey

Moberg, D and Romar, E 2003, WorldCom. California: Santa Clara University.

Morgensen, G 2011, ‘How The Whistle Blower Conquered Country Wide’, New York, Vol. 13 No. 4, pp. 21-30

Payne, D and Landrey, B J 2006, ‘A uniform code of ethics: Business and IT professional ethics’, Communications of the ACM, Vol. 49 No. 1, pp. 81-84

Schneider, A 2004, ‘Ethical Decision Making on Various Managerial Accounting Issues’ JAMAR , Vol. 2 No. 2, pp. 29-35

Shaw, W H 1999, Business Ethics, Wadsworth, Belmont Somaiya, R and Werdigier, J 2011, ‘The Ex Banker Gives Data on Taxes to Wiki Leaks’ New York, Vol. 2 No. 1, pp. 22-25

Stead, W E and Stead, J 1983, Management for a Small Planet, Sage, Newbury Park

Svennson, G and Wood, G 2003, The Dynamics of Business Ethic: A Function of Time And Culture-Cases And Model, Management Decision, Vol. 41 No. 4, pp. 350-361.

Tennant, D 2007, ‘The Real Ethics Guru’ Computerworld, Vol. 4 1 No. 43, pp. 4-5

Wyatt, E 2010a, ‘Adviser To Consumer Agency Had Role In Lending’, New York, Vol. No. 3, 16-20

Wyatt, E 2010b, ‘For Whistle Blowers, Expanded Incentives’, New York, Vol. 4 No. 3, pp. 12-14.

Basic features

  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support

On-demand options

  • Writer's samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading

Paper format

  • 275 words per page
  • 12pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, CHicago/Turabian, Havard)

Guaranteed originality

We guarantee 0% plagiarism! Our orders are custom made from scratch. Our team is dedicated to providing you academic papers with zero traces of plagiarism.

Affordable prices

We know how hard it is to pay the bills while being in college, which is why our rates are extremely affordable and within your budget. You will not find any other company that provides the same quality of work for such affordable prices.

Best experts

Our writer are the crème de la crème of the essay writing industry. They are highly qualified in their field of expertise and have extensive experience when it comes to research papers, term essays or any other academic assignment that you may be given!

Calculate the price of your order

You will get a personal manager and a discount.
We'll send you the first draft for approval by at
Total price:

Expert paper writers are just a few clicks away

Place an order in 3 easy steps. Takes less than 5 mins.

error: Content is protected !!
Open chat
Reliance Papers Inc.
Get Help With All Your Homework Questions. Any Deadline, Affordable, Quality Work Guaranteed!!