Accounting

Accounting is one of the most important industries that have assumed immense importance in the world today. It has historically been deemed so necessary that writing was thought to have been developed by the ancients so that accounting of food production could be carried out. In todays world, the field has become much more complex and accountants have assumed crucial roles which form the foundation for the decisions taken by investors, shareholders, company management, analysts and a host of other users of financial statements as well as contributing to company performance via management accounting (Love 2008). Ethics thus can be said to assume an important role in the profession of an accountant as the numbers heshe produces can potentially prove very beneficial for some and disastrous for others.

There have been many accounting scandals in recent history that bear testament to the harm that can come if ethics are not thoroughly incorporated in the accounting industry. In 2002 WorldCom was caught by its internal auditors with use of fraudulent accounting practices that misrepresented its financial statements. The company had been underreporting its line costs, choosing to capitalize them rather than show as expenses in the income statement. Furthermore, fraudulent entries were made in the revenue stream, which had a combined impact of increasing the apparent profitability of WorldCom and averting troubles it was having with the declining stock price (Duska 2003). Enrons management embarked on a similar practice by choosing to under represent its expenses as well as utilizing fair value accounting to inflate its valuation on the balance sheet as well as making use of special purpose entities in a way that allowed it to conceal enormous loans from the financial statements and present a rosy picture to the investors (Alexander 2004). This had the impact of increasing investment in the company, making it a showcase firm in terms of performance and rapid growth. However, once the unethical practice of misrepresentation by the accountants of the company emerged, its stock price fell rapidly which also hit confidence among investors leading to adverse performance on the stock exchanges as a whole. There was also impact on the employees who lost their jobs as well as savings and pension that they had accumulated through hard work. Such practices by the accountants employed by corporations can cause harm to multiple stakeholders as the examples of
WorldCom and Enron illustrate.

Accountants also feature in the auditing industry and their role in that field is to provide confidence in the financial statements that they audit. This is basically a gate keepers job which requires a strong ethical framework as room for exploitation is enormous. In the case of Enron, the auditor Arthur Anderson was shown to be complicit in the misrepresentation done by the company, which hit their reputation hard as well as caused massive losses to investors and shareholders to the amount of 25 billion as well as a loss on almost 85000 jobs in the industry (Alexander 2004). These are the reasons why ethics are considered to be a crucial part of the accounting industry so that such catastrophic scandals could be avoided. The industry has already taken numerous steps in this direction.

Accountancy bodies such as the American Institute of Certified Public Accountants took steps to include ethical principles to adhere to which included responsibilities to clients and colleagues as well as independence, objectivity and integrity. Following such principles was a requirement for the members and candidates as relevant action could be taken against those who broke the convention. The Association of Chartered Certified Accountants also included such frameworks for the members which illustrate the almost global focus of such needs by accountancy bodies. The body has further introduced an ethics module in its trainings which is claimed to be significant in terms of lifting the ethical standards in the industry (Love 2008).

Further stress has been put on teaching ethics in the classrooms to students vying to enter the industry. The curriculum for this, a lot of material of which is borrowed from business ethics, revolves around simple lectures as well as case studies and role playing. This education from the start can be said to reinforce the ethical values of potential accountants entering the industry as well as prepare them with enough knowledge to stop others from engaging in ethically dubious practices (Berton 2002). This measure however does have its share of critics. Many opponents of the move have argued that education has little to do with ethics as the decision ultimately rests on the person and knowledge of ethical frameworks and the relevant theories would be inadequate to raise the professional standards in the field. There is however the obvious benefit in terms of challenging the mind to commit an unethical act, knowing where it stands in the theory the student is equipped with. However, requiring accountancy bodies to make adherence of certain standards as mandatory can be said to be a much better mechanism for quelling unethical behavior in the industry as it involves consequences which may hamper ones ability to continue practice in the industry if guilt is found. As Cottel pointed out, a person in the accounting industry must possess a strong value system, the skill to deliberate the consequences of unethical decisions as well as dedication to peoples well being. Only one of these is aided with the help of teaching ethics in classrooms which limits its scope for the accountancy industry, leaving the room open for other measures to be brought into the field, possibly borrowing from business ethics (Love 2008).

As the field stands today, some steps have been taken to bring in ethics into the field in the form of teaching in class rooms, ethical modules in syllabus and requirement of adherence to ethical standards by accountancy bodies with threats of punishment. However, gaps still remain as accounting scandals have kept on occurring and losses have mounted for investors, employees, customers and many other stakeholders, in some cases impacting the economy as a whole. Thus there is open room for expansions of the ethical frameworks present in the industry and improving the standards of the profession.

Objectives
The objectives of this research seek to explore the ethical situation in the accountancy profession and to highlight any potential issues that may exist. The basic objectives of the research are

To explore the factors that led to the present ethical modules and measures failure to stop the accounting scandals such as Enron from occurring.

To explore the problems faced by accountants in making ethical decisions according to the requirements outlined by Cottel.

To explore improvements in teaching methodology and ethical standards that can be brought to fulfill the requirements for ethical decision making explored by Cottel.
To identify best practice benchmark industries with ethical practices that can be applied to the case of the accounting industry.

Research Strategy and Methodology
The research will begin with a thorough secondary studying of the subject. This will be conducted via use of internet journals exploring the present ethical modules, standards in place and their drawbacks as well as exploring new methodology to possibly bring into the profession which may help professionals make more ethical decisions in the industry. This will be conducted not only through journals but also articles and books written in the field by the noted academics.

Once secondary research is completed, a case study will be begun by some professionals working in the field. Care has to be taken to choose the sample that is representative of the accountants in the field, showing not only those on the corporate payroll but also auditors. This case study method will be conducted for a space of one fiscal years financial statement release as well as in the closing season when most clients contract auditors for work. This method will aid in getting first hand qualitative information about the ethical challenges encountered by those in the accountancy profession and identify where ethical standards fall short in the field. It will also aid participant observation to be carried out, allowing the researchers to get into the skin of those involved in decision making at the foundational level.

This methodology will be complemented with a survey which will require questionnaires to be developed that ask pin point questions related to the problems faced in the accounting industry and the anonymity that this method provides will allow the participants to answer touchy questions such as the number of times in their career they have been offered bribes or they felt the need to bow to pressure from a manager in misrepresenting the numbers. Care must be taken here however in developing the questionnaire so that it is clear and concise and allows the collection of the most pertinent information without requiring the participants to give long answers, which may otherwise alter results.

Finally, the research will rely on interviews of professionals in the field who have been through ethical pressures faced in the industry. This will allow a chance to get direct response with qualitative reasoning as well as advice on how the existing factors and issues can be improved through application of different frameworks. The research will conduct interviews from those in the business sector, the auditing industry as well as academics who have studied the phenomenon of ethics in this industry. These interviews will be structured for the professionals and unstructured for the academics so that a broader spectrum of responses can be achieved as well as advice on how to go about tackling the issues at hand.