Business Ethics in Accounting Field

Introduction

Recent years, companies pay more and more attention to business ethics and problems caused by violation of ethical and moral rules. The law is a guarantor of social stability. The law provides for collective safety and security. But it has more than a stabilizing function for society–it also embodies values. Telling the truth is the root of all contracts. The ethics is a crucial element of every profession because it reflects social mores. And often the law demonstrates imperfections and uncertainties. The ethics, above all, embodies social principles, ideals that must not be violated easily or at all. In the realm of white-collar crime, in which personal enrichment is surely a major factor, there are also motivational complications. Accounting scandals in the USA unveiled a problem of business ethics in accounting profession and possible violations affected all countries around the world. After Enron and Tyco accounting scandals, many UK firms established strict codes of ethics for accountants in order to avoid violation of standards and unethical behavior. A major dimension of white-collar crime, one especially pertinent to working accountants who daily face the temptations of altering information in the pursuit of gain, is the factor of divided loyalties. Accountants are, of course, obligated to obey the law and to “refrain from engaging in any activity that would prejudice their ability to carry out their duties ethically” (Beauchamp & Bowie 2003, p 34).

So the law is both a set of structures for social stability and a set of moral guideposts. When the law is broken, the moral drama of a society trying to right a wrong. How do accounting professionals reconcile conflicting moral duties? In a fundamental sense, critics say that in practice they often do not. It is part and parcel of all professional activity to face ethical dilemmas and to experience rights and duties in conflict. We do not live in a homogeneous society. Indeed, in our century life seems characterized by diversity and difference to an extent many find horrifying. This is true because people are behind the corporate veil and these people make decisions with moral implications (Boatright 1997). Society therefore cannot condone as amoral corporate actions that would be considered immoral for the individuals who actually make decisions for the corporation. The aim of the paper is to identify and analyze the ways ethics is promoted in the work place, and examine a problem of unethical standards and unethical behavior in accounting profession. The hypothesis is that unethical behavior and practices in accounting profession are caused by inadequate codes of ethics and independence of accounting standards followed by many corporations.

Literature Review

Theoretical Literature

A large layer of literature discusses theoretical issues and main theories of ethical behavior. Beauchamp & Bowie (2003) pay a special attention to ethical theories which bound any profession and industry. Wherever possible these theories are also tied in and associated with some of the theories and philosophies of the thinkers, writers, and leaders discussed in the earlier historical background. Some recent ethicists (Boatright (1997), Buchholz & Rosenthal (1998) and Carroll & Gannon (1997) have suggested an ethical system, called ethical realism, that resolves the conflicts between utilitarian and deontological ethics. Ethical realism begins with the premise that moral concepts possess truth status. The theory specifically rejects the notion of empiricism–that is, in order to discover ethical truth, we must discover it by means of scientific method or experience. Ethical realists point out that their doctrine does not deny truth status to science; rather it says truth status in science and truth status in ethics are different matters. No contradiction need exist between science and ethics, nor is either necessarily considered a superior mode of thought. Each simply exists in its own realm.

Crane & Matten (2004) apply business ethics to a European environment and pay a special attention to uniqueness of European culture and values in ethical decision-making. The separation of ethics from science means that critics need not rely upon a scientific method to discover what is right and what is wrong. they underline that this is important to any profession because if, for instance, companies are to conclude that some past deed was “good” or that some proposed course of action is “right” it is not enough for us to know that we ourselves are psychologically disposed to approve of the deed, or that the proposed course seems right to them. Rather, employees must have reasons for thinking that the act was worthy of approval or that the course of action is worthy of selection. Intellectual authorities set ethical principles and appeal to a principle in ethical discussions. Such an appeal may be compared with an appeal to a scientific law in a scientific discussion. This is an evolutionary process. As all scientific laws are not equally well established, neither are ethical principles. In fact, within any moral community, one would expect to find ironclad ethical values as well as a developing moral code. Ethical change occurs in this system for the most part because leaders in the profession change their attitude toward an ethical principle.

De George (1999) and Donaldson et al (2002) examine the problem of ethical audit and moral dilemmas faced by business professionals. For many years there have been “financial audits” performed by most companies. In recent years there has been more pressure placed on business management to perform what has become known as the “social audit.” The mere fact that a company should conduct a social audit carries with it the implication that business does have an obligation to society. These books describe some of the areas in which business does have an obligation and commitment to society. In many instances, federal legislation dictates what the minimum obligation of business is: however, how a company determines how well they are meeting these obligations is to a great extent the responsibility of the company itself. Frederick (2002) and Sims (2003) pay a special attention of problem of corporate social responsibility and their relations with business ethics. They underline that a well-managed company of today will make every effort to meet its obligations to society. To help them with this, some companies have written objectives and policies in this area. In spite of this, social objectives and goals exist in an area that is not always easy to assess and objectively appraise. Just because it is not easy is no excuse for not trying to do something constructive about it. To gain some semblance of control in this area and to make certain that social objectives are actually being met, more companies have started using a social audit to measure, monitor, and evaluate the contributions that the company is making to society.

Research Studies

Another layer of literature examines narrow problems and issues related to business ethics and accounting profession. This layer of literature is represented by case studies and research studies. Badawi (2002) and Bernardi (2004) found that exposés of dishonesty and fraud in accounting practice are, naturally, disconcerting to the profession. A climate of public trust and approval is shattered when lapses become known. But there is at least one benefit from this negative publicity. Professionals who might be tempted by opportunities for personal enrichment are given a tacit warning: you might get caught. While it is impossible to determine, scientifically, how many potential unethical acts are prevented by the reporting of scandals, it is a fair assumption that the deterrent effect of such publicity may force some accountants to look more carefully before tumbling down the slippery slope. When more routine conflicts of moral duties and ethical behavior arise–when the role of accounting professionals, for example, impinges upon one’s personal values–the struggle for a solution to a dilemma is no less difficult.

Copeland (2005) and Bloom & Cenker (2005) found that the principal concern regarding competence for the accountant is one of individual conduct. Accountants should be well trained, and retrained when necessary. Undertaking a task when ill-prepared is not advisable. Working toward higher levels of knowledge and skill is clearly beneficial. Moreover, the code of professional conduct mandates professional competence. Waddock (2005) and Treviño et al (1999), Mahoney (1990) and Froomkin (2000) state that it is obligatory for an accountant who cannot perform adequately to suggest to the client that another professional be engaged for the needed service. In general, professionals, including accountants, are obliged by their codes to assist colleagues in maintaining professional standards and in enforcing code requirements. But professional behavior is complicated and draws from the professional a rich variety of forces and feelings, including jealousy, hostility, and vengeance as well as more positive feelings such as respect, concern, admiration, and loyalty.

Geiger & Rama (2006), Leizerov (2004), Peterson & Buckhoff (2004) and Shafer (2002) underline that for accountants, conflicts emerge when countervailing claims force a dilemma. If he respects the request, ethically unsound behavior is seconded. If he disregards the statement, a job might be lost, a family might be placed in financial jeopardy. But these are only the local manifestations of the dilemma. What about those unknown faces–consumers, other companies, political bodies, the public at large–who can be affected by one’s activities? Accountants are obliged to care for the public welfare, especially the interests of shareholders and other “owners” of corporate property, by telling the truth and by resisting unethical propositions. When an accountant rejects a client’s proposal of tax alteration or tax fraud, or when an accountant sees a conflict of interest or feels his independence jeopardized and acts responsibly–these are social acts rooted in a principle and a view of consequences.

Business Ethics

Main Trends in Business and Workforce

Values in the areas of government, business, education, religion, work force, and society have been changing with time. Foreign and domestic takeovers are continuing (Beauchamp & Bowie 2003). Businesses are growing larger and controlling larger segments of the market, and foreign business takeovers in the UK are growing at a much more rapid rate than is the growth of UK companies in foreign lands. Up until recently, productivity increases of companies in foreign countries far outpaced productivity gains in this country. Only in the past year have productivity gains in the UK exceeded those in other countries. the work force is becoming younger and more highly educated. The trends in population growth over the next few years, by age groups. Ages 1-19 show slow growth; 20-44 show rapid increase; 45-59 show slow increase, as does the age group over 60 (Boatright 1997). Without a large influx of foreign labor, the increased education levels and the younger age levels means that labor will be more demanding upon management in the future. It also means that with the rapid growth of population in the 20-to 44-year-old age groups that there will be a larger and more intense demand for existing middle and higher management positions. Unless industry is able to expand rapidly, this could create some serious management problems in the next 10 to 20 years. Even further down the road, with the small growth in population in the 1- to 19-year-old bracket, there could be a shortage of capable people if management does not start preparing for that situation now.

“Society” will refer to the stakeholders. Great steps forward have been taken by business in bringing the stakeholder into its confidence and attempting to grant them many of their desires (Boatright 1997). Much has been done and more needs to be done; however, care must be taken that the stakeholders do not go overboard and demand from industry more than they truly need or deserve. Society must also exhibit some restraint and patience in their demands on business (Beauchamp & Bowie 2003). Unless it is a life-and-death situation, it will do little good to force a company out of business by demanding immediate changes when corrections over a limited reasonable time would accomplish the same thing, keep the company in business, and save many jobs. This is not to say that where stakeholders have a legitimate problem or complaint that they should not take appropriate action to rectify the situation. Society’s demands on industry have been extensive and industry has tried in most instances to respond favorably to this initiative. In some instances these demands have caused the stakeholders new problems, for which they blame industry. One instance is the case of home fast food preparation and the extensive use of plastic containers (Buchholz & Rosenthal 1998). On the one hand, it has helped working people to have good meals on short notice, but has caused trash and garbage landfill problems as a result. As in all other situations, it is again emphasized that all parties involved must cooperate and work together to solve the problems — not just yell at each other.

Business Ethics Defined

In discussing ethics and morals as it applies to individuals, business, and society, three words (ethics, morals, and ethical) will be frequently used. Therefore, a good starting point might be to give a quick dictionary definition of each word and then progress from there. Ethics means the system or code of human conduct, with the emphasis on the determination of what is right and wrong (Donaldson 2002). The word “moral” can be explained as dealing with, or capable of making the distinction between right and wrong in conduct, good or right in conduct or character (Buchholz & Rosenthal 1998). The word ‘ethical’ means conforming to right principles of conduct as generally accepted by a specific profession or group, a given system of ethics, and so on. With these three definitions in mind, the next step is to apply them to defining ethical conduct. Since so many of today’s actions are based on legal concepts, this area must also be entered into the picture. Ethical conduct, however, goes beyond legality and is more comprehensive (Beauchamp & Bowie 2003).

If Ethical behavior is legal behavior plus some other element, then it is important that this additional element be identified, if possible. At first blush, many people will probably agree that this additional element is the collection of moral principles and values of what is right and what is wrong and what is good and what is bad, as determined by group behavior or by some member of the group. At this point of definition, it appears that one’s behavior is ethical if it is legal and in accordance with group norms. Based on discussions and some recent philosophies covered earlier, this is what many would have everyone believe (Donaldson 2002). This definition is, however, short sighted and flawed in that it does not clearly define “group” or the standards and values upon which the “group ethical norms” are based. For proper business and social conduct, these ethical standards and values must be shared by not only individuals but by the total business community and society as a whole. Without agreement by all parties involved, only legality exists to control the actions of everyone (Beauchamp & Bowie 2003).

Ethical Theories

The Judeo-Christian ethic is generally considered to be the foundation of Western ethical and moral standards. The Ten Commandments and the Golden Rule are firmly ingrained in this ethic as is the Protestant work ethic and faith, love, charity, fairness, and justice. The problem today, however, is that much of this basic truth has either been distorted, corrupted or applied only under certain circumstances or to the other person. It is not difficult to get most people to agree with the Ten Commandments, or at least on Commandments 5 through 10; that is, to agree with them in general or as they might apply to someone else (Buchholz & Rosenthal 1998). They will agree that no one, including themselves, should steal someone else’s automobile; but, what about a pencil or pad of paper from work, making personal long-distance telephone calls on the company phone, padding the expense account, or taking home a company computer for their own use and “forgetting” to take it back — where is the cutoff point? (Beauchamp & Bowie 2003).

Studies indicate that most business managers and people believe in the Golden Rule and use it as their most important guide to ethical behavior. In simple terms it basically mandates people to treat others as they themselves would like to be treated. If you want to be told the truth then you tell the truth; if you want to be treated fairly, then treat others fairly (Carroll & Gannon 1997). Since most countries and religions of the world have some form of belief that comes close to the part of the Golden Rule that relates to treating others as you want them to treat you, then in theory if properly adhered to it can personalize business relations as well as bring fairness into business. The only problems with this is that unless all parties involved also believe in and adhere to the Ten Commandments there may be marked difference in what constitutes fairness, love, charity, and justice between the parties whenever any exchange situation exists. Without a common foundation upon which to build, there are bound to be many differences and many problems (Beauchamp & Bowie 2003).

Utilitarianism

Utilitarianism is referred to by some as the consequentialist ethical theory. It is expressed in the form that asserts that people should always act so as to produce the greatest ratio of good to evil for everyone. Where most of them disagree with one another is in the area of how this principle should be applied. There are also several stated weaknesses in this concept. Rather than acting like the utilitarians and producing the greatest happiness for the greatest number, the situational ethics concept advocates acting in a manner that produces the greatest amount of love, fulfillment, and benevolence (Crane & Matten 2004). That is, it contends that moral action is the one that produces the greatest amount of Christian love of all the alternatives available. Christian love as used here refers to the Greek “agape” love; agape love is totally unselfish love, epitomized by Jesus, who made the ultimate sacrifice for all mankind. In part, this is the concept that Kenny was trying to portray in his concept of self-donation. On the positive side, situational ethics humanizes business decisions and forces people to accept moral responsibility. In the area of weaknesses, it overemphasizes the concept of “love your fellow man, no matter what,” without clearly spelling out on what basis this love should be founded. Certainly if it is true Christian “agape” love, it should be based on the Ten Commandments and all of the teachings of Jesus Christ; in most instances this is not what is done.

Most accountants are already familiar with a system that acts very much like utilitarianism: cost/benefit analysis. In the cost/benefit system the accountant/manager attempts to balance the probable costs of taking a particular course of action with the probable benefits to be derived. Most accountants realize that cost/benefit analysis becomes more and more sticky as the analysis moves away from measurability in terms of dollars. Measurement of benefits has been particularly problematic (Crane & Matten 2004). Nevertheless, cost/benefit analysis appeared prominently in the accounting literature in arguments about an ethical issue of interest to the profession: social responsibility accounting. Writers on this subject have attempted to balance the costs of companies reporting on their adherence to social responsibility with the costs of not doing so. seems to associate justice with efficiency rather than fair play); and it is extremely difficult to formulate and establish satisfactory rules of application (Beauchamp & Bowie 2003).

Critics of utilitarianism have pointed out many flaws. One is the apparent ability of utilitarianism to justify the imposition of great suffering on a few people as long as benefit is derived by many people. A second, more practical criticism centers around the difficulty of defining the probable benefits, called “utility,” and somehow summing them (Crane & Matten 2004). Great disagreement may be generated over which consequences are in fact “good,” which consequences should receive greater or lesser weight, and what probability should be assigned to different future consequences. Modern critics of utilitarianism also note that ultimately utilitarianism must seek non-utilitarian answers on assigning boundaries and values around the measurement of activities and values associated with the calculation of utilitarian systems (Beauchamp & Bowie 2003).

Deontology

While much deontologism comes from religious directive, for example, “thou shalt not kill” as a strict moral rule, strong philosophical support also exists. The premier deontologist was Immanuel Kant (1724-1804), who prescribed a just society that could come about only if all persons based moral decisions upon the “categorical imperative” (De George 1999). One should take that action that he or she would wish everyone to take in all circumstances, irrespective of the consequences of the single, individual action. For example, Kant believed the moral choice to be truth telling irrespective of the consequences, since if no one told the truth we would have chaos in society because communication would be meaningless (De George 1999). To the categorical imperative Kant added the “practical imperative,” that in considering actions one must treat all persons, including oneself, as an end and never as a means. Many people who have reflectively considered Kant’s suggestions have found his categorical imperative too rigid. More flexibility was given to deontological ethics by W. D. Ross, a premier Kantian scholar who wrote during the middle of this century (De George 1999). Ross identified seven prima facie duties that he believed to be intuitive. They are fidelity, reparation, gratitude, justice, beneficence, self-improvement, and non-maleficence. Ross contended that adherence to these duties was the preferred moral course of action irrespective of the consequences foreseen in a particular circumstance (Donaldson et al 2002).

The viewpoint is complex but may briefly be described as stepping away from a situation mentally and pretending that you will predetermine right action in a particular society without knowing what role you would have in that society. Without benefit of knowing one’s role in society, an ethical agent can make a judgment about justice that is fair, since it is untainted by the self-interest of that agent. Perhaps another illustration can point out the use of deontological ethics (Donaldson et al 2002).The deontological perspective has its share of critics. With respect to Kant’s ideas, moralists have pointed out that both the categorical imperative and the practical imperative can clash with human welfare and even prescribe actions that lead to human suffering. On the other hand, the deontological view concentrates upon the action itself. The thrust for the moral agent is to do his duty. Out of this comes rights for both himself and for others in society. Finally, the goal of a more ethical society is reached because in the ideal everyone is doing his duty. The focus upon the differences between the two systems often obscures the fact that much of the time the two views will lead to the same decision with respect to an ethical issue. Let’s consider a modern day phenomenon, sexual abuse of children, and discover how the seemingly opposite views of ethics can and do arrive at the same conclusion with respect to the ethics involved (Geiger & Rama 2006).

Codes of ethics in Accounting Profession

Codes of Ethics

Clients served by professionals have no choice but to rely upon their doctors, lawyers, or accountants for expert advice. Professionals are assumed to have a command of a complicated and changing subject matter; that is why they have been hired. But this also means that clients are rarely able to evaluate the professional’s competence (De George 1999). This is true in accounting as well as in the other professions. In accounting this is a more complex notion because of the issue of third parties. In any event, the professional expert is expected to serve the client’s and not his own (or his firm’s) best interests. Public confidence is based upon this foundation of trust. Codes, and their enforcement, play a strong role in maintaining such public confidence (Frederick, 2002). Accountants have a special reason to desire public support of their endeavors: businesses whose financial statements are audited pay for the accountant’s services. Those who receive and rely upon published financial information must be confident of the independence of the professionals who conducted the audit. The new codes of accounting standards come at a time when business in general is feeling pressure to have a code of ethics. Most accountants work in the business environment and those who do not interface with it. They therefore might find themselves confronted with two codes that could even be contradictory. Many accountants will bristle at the notion of lay persons regulating the profession. There is a not so subtle warning in statements such as these; the proper response to criticism is to ascertain any truth in the criticism. Where fault is found, correct it. To ignore this advice is to risk the specter of having outsiders do it for the profession, perhaps in a heavy-handed way (Mahoney 1990),

Accountants are not without their critics with respect to their professional responsibilities. Public accounting is finding itself increasingly in the glare of publicity surrounding several issues of professional responsibility. The most prominently publicized are the responsibility of detecting fraud and the appropriateness of auditing the same firm for whom one has provided consulting services. Public accountants are also being asked to re-examine their perspective of who receives their service. The Public Interest Section of the UK Accounting Association in particular has criticized the profession for being too close to the clients at the expense of the readers and of identifying users exclusively as investors to the exclusion of labor, government, and other third parties. Despite efforts at developing certification procedures and codes of ethics, those not in public practice have faced skepticism about their claims to professionalism. The primary problem is that the National Association of Accountants and the Institute of Internal Auditors have precious few recourses available to enforce their codes of professional ethics.

Moreover, the certificates they issue are not required for the practice of the profession. Many have questioned whether the necessary elements for professionalism are even present in these groups (Mahoney 1990), The struggle for professional recognition for accountants in either managerial accounting or in internal auditing still has a long way to go. On the other hand, the struggle in public accounting will be one of protecting the profession’s already well established professional reputation (Shafer et al 2002). Even if companies were completely persuaded that the standards of the profession–especially independence, objectivity, and integrity–are sufficient to guarantee conformity with code requirements, we would have many other ethical dilemmas to consider. Some are global (and apply to all professions); others are more specific (and deal with accountants as professionals). Any trusting relationship entails the keeping of secrets. In medicine, law, and business, a relationship between professional and client (or patient) could never proceed unless a guarantee of protection of private information were either implied or explicit. Lawyers have been granted almost total privilege by the law. Physicians will not divulge information about a patient unless an authentic threat to public health (e.g., a communicable disease) is apparent (Robbins, 2002).

Professional Dilemmas

The designation “professional” is highly desired in our society and has been for centuries. People will even take courses of action that seem on the surface to be against their economic interest because they want to protect the privilege of being known as professional. An example would be the refusal to seek higher wages by participating in collective bargaining efforts for the primary reason that such an activity might appear unprofessional. What is it about being professional that makes it so desirable? One pervasive aspect is the notion of community. Advocates of any profession attempt to set the professional apart from wider society. This is accomplished first through technical knowledge, then through an informal dynamics and language game that springs forth in the formative stages of professional development. Professions are thus exclusive in nature (Shafer et al 2002). This exclusiveness makes the professional designation more valuable to its members. This value comes from both the obvious economic rewards available to successful professionals and from certain privileges granted by society to professions. Professions rigidly guard entry (Sims, 2003). The knowledge possessed by each profession is a source of power for that profession. Through their publications, meetings, examination syllabi, and other activities, various professional associations have historically played a role in defining and furthering the technical aspects of the profession, deciding who is competent to practice in that profession, and elaborating the discourse carried on by that particular profession.

All professions have high standards for those licensed (or accredited) to practice them. Codes and standards, even oaths, are commonly encountered for doctors and lawyers, engineers and teachers, nurses and social workers. To be a professional is to achieve special status; the acquisition and maintenance of important skills is presumed for members of the profession. Above all, a professional achieves a new “identity” on entering a profession (Sims, 2003). Accountants are perhaps a little harder to tell from their non-professional business colleagues, but a conservative gray or navy business suit and audit bag at least provide evidence. The acronym after the name and membership in a professional society are other sure signs of special status. Most authorities agree that a profession is characterized by four important elements (Treviño et al 1999).

To use accounting as an illustration of these four elements: accountants must study long, graduate from college with a minimum number of accounting and business hours, pass a lengthy and difficult examination, have character references, gather enough years of professional experience, and be able to perform specific tasks in a thorough and efficient manner in order to be specifically recognized. Moreover, accountants are increasingly required to satisfy continuing education requirements in order to keep their professional status. Accountants do not claim professional privileges in order to maximize fame or fortune; rather, the profession’s principal responsibility is neither to self nor to employer nor even to client, but rather to the public (Treviño et al 1999).

Members of the profession who lie, cheat, steal, or behave in violation of standard practice are disciplined (at least in the preliminary stages) by the profession itself. Discipline may range from reprimand to expulsion. Clearly, those who remain members of the profession in good standing achieve many benefits, including income and public recognition. These things are rewards for the achievement and maintenance of high standards. The esteem that derives from membership in an elite group makes professional status desirable. Thus, a professional is not like other persons (Waddock, S. 2005). He or she has a commitment to a way of life that is intellectually complex and demands constant updating of knowledge and skills. Public service, both direct and indirect, is presumed. Above the fray, behavior is scrutinized for its ethical dimensions. Accountants, like all professionals, make difficult judgments in which technical competence and moral values are intertwined. They confront moral dilemmas routinely. And they are held to the high standards of professional codes.

Unethical Behavior: Roots and Causes

Most important cases in which there are ethical (and legal) issues are hard to “solve.” Weighing wrong and right, reasoning clearly, testing potential solutions, looking for guidance to both principles and consequences–these activities are the essence of decision making. No one is attempting to force you to take a particular position on a specific case. Rather, we ask you to examine a case carefully, understand its facts, look for the nuances, and then choose a justifiable analysis in order to enhance professional responsibility (Waddock, S. 2005). The following steps form a basis for responsible decision making. As professional people increasingly under public scrutiny, accountants find themselves exposed to complex ethical issues. By understanding the rational methods by which ethical issues may be examined, the professional accountant is better prepared to cope with complex ethical situations that are likely to arise in the professional working environment.

From the standpoint of the profession, the mentoring relationship can cause an ethical conflict when the values passed along in the relationship are not virtues but vices. While from a profession wide stand-point we believe that those who rise to the top in the profession are the good accountants–the ones who possess and nurture virtue–it is certainly true that at least occasionally an individual rises in the profession whose value system is not in line with the expressed or even implied values of the profession (Peterson et al 2004). When a person is in a position of influence and authority in the profession and that person does not possess virtue, it is still possible and perhaps probable that an employee will enter into mentoring relationships with one or more employees. When this occurs the accountant will pass along his/her values to employees, who will accept them if a true mentoring relationship exists. So from the stand-point of the profession, the good effects from mentoring–the teaching of virtue–can have a dark side we may call the teaching of vice. The nurturing and teaching of vice is an undesirable side effect that cannot be eradicated in an imperfect world. The best that the profession can do is to minimize it by seeking to allow only those with virtue to rise to positions of influence and authority.

As a community, accountants must do this because the alternative is the loss of status in society as a profession, should the public perceive that the values of the profession are not in fact virtue but vice. The close personal ties created during the mentoring relationship have the potential to conflict with independence in certain circumstances (Beauchamp & Bowie 2003). The accounting profession is one in which a great deal of professional mobility may be observed. Certified public accountants frequently leave their firms and take positions with that firm’s clients. With mentoring as widespread as it is, particularly between partners and managers in public accounting, the probabilities are high that persons who make these career changes are mentors. The potential conflict with independence comes when people who used to have a mentor-proéeée relationship find themselves in an auditor-client relationship (Peterson et al 2004). The conflict here will be more in the realm of independence in fact than independence in appearance. Since the relationships are personal and private, so too must be the resolution of any internal conflict that occurs. No set of rules will solve this dilemma. One must draw upon one’s own ethical value system.

Methodology

Primary Data

The research will be based on primary and secondary data analysis aimed to test the hypothesis. For primary data analysis questionnaire methods is used. A questionnaire is a standardized set of questions to gain information from a subject. In this research, postal questionnaire are used. Questionnaires were designed for completion by the researcher (see Appendix 1). This method was used because it allows a researcher to collect data from a geographically dispersed sample group. It allows a researcher to reduce bias: there is little opportunity to introduce bias into the results as may be the case with interviews (Oppenheim, 1992). This method proposes a high anonymity level: in many cases the presence of the researcher interested in certain sensitive issues. A postal questionnaire allows anonymity and may improve the validity of responses. This method provides structured quantitative data that is comparable. It was taken into account that this research method has some limitations. Some participants can misunderstand questions in a postal questionnaire. A researcher does not have control over who completes the questionnaire. The main limitation is potentially low response rates (Oppenheim, 1992).

100 questionnaires were sent to middle size accountant companies in London area. Random sampling was used for primary data collection. This method allows every member of the accounting profession being selected. This is considered the best technique to obtain a representative sample, and produce findings that will be general sable to the overall population. At the first stage, the population was identified. At the second stage, it was ensured that each member of this population has an equal chance of being selected. A sample is considered as a subset of a specific population. Its purpose is to gain information about the overall population by selecting a smaller number of individual cases from the population. The responses of the sample, if it has external validity, can then be applied to the overall population. The sample size was 100 respondents (accountant from large audit companies) (Oppenheim, 1992).

These samples consisted of women and men accountants between the ages of 25 and 50 years of mixed race. Each protocol was separated into meaning units. That is, each response written by each participant was divided into a series of expressions, which, if read consecutively, match the original protocol. Next, each meaning unit was condensed to its central theme. The central themes were combined and form the final formal step in this qualitative analysis, namely, the demarcation of the typical components for this sample of accountants. 87 responses (questionnaires) were received. In order to measure collected results a scale technique was used. A scale is a series of questions designed to gain a single measure of a concept, such as an attitude towards or opinion on something. This method allows the accountant to indicate the extent to which they agree with a certain statement. At its simplest level, such a scale may provide a statement and the respondent may be asked whether they agree or disagree. Respondents tick the appropriate point on the scale that matches most closely their feelings. A score is assigned to each possible response, from one when the box on the far left is ticked, through to eight for a tick on the far right box. This allows an overall score to be calculated (Oppenheim, 1992).

Data Analysis

To summarize, a review of the data allows for a description of the nomothetic characteristics of the phenomena. The accountants were united to form a single unit here because the analysis of the protocols renders any differentiation arbitrary at this exploration phase. In describing why they follow ethical standards, the subjects in this study indicated a variety of reasons. Subjects identified a capacity to follow ethical standards alone or at self, but some preferred to share ethical rules, especially the “contagious” type, with others. The tension between professional and personal values is, for many accountants, a frequent experience. It is easy enough to ignore such problems, to regard them as “coming with the territory.” It is also not uncommon to rationalize such dilemmas away under the rubric “when I’m at work, I am a professional and must behave in accordance with the canons of the profession.” This is certainly not irrational thinking. But it does not eradicate moral doubts or feelings of conflicting obligations between professional and personal values. Conflicts of moral duty come in various shapes, sizes, and intensities

. We cannot anticipate all such problems. But what such conflicts have in common is both situational and philosophical. By situational we mean that a personal moral dilemma is experienced by the professional accountant. An employee is faced with a concern and, often, a hard choice situation. By philosophical we mean that thinking about essentials–goals, purposes, reasons–is ignited by the moral conflict. Confronting ethical dilemmas in professional accounting is a real task. 80 respondents answered that ethical rules and principles is the core of accounting profession because they help accountants to accept decisions and behavior in compliance with the law. 7 respondents answered that ethical rules and norms limit their professional duties and do not meet accounting requirements (see Appendix 2). 35 accountants responded that professionals (accountants) are themselves responsible for unethical behavior and immoral practices while 52 accountants claimed that inadequate codes of ethics and corporate goals limited their behavior and ethical decision-making.

Secondary Data

Secondary data was obtained from current case studies and scenarios published during the last three years. The case studies used: Bloom & Cenker (2005) “Importance of Commitments: A Case Study of a Broken Promise”, Copeland (2005) “Ethics as an Imperative”, Peterson & Buckhoff (2004) “Interstate Business College: A Case Study in Fraud Examination”. These scenarios clearly depict a conflict between professional responsibilities (auditing activities for the real estate firm) and personal morality (a desire to see that the homelessness problem is solved or, at the very least, does not increase). Principles and duties are at stake and seem irreconcilable. But there are strategies that, if not providing a convenient “way out” of the dilemma, do clarify (and sometimes make public) the conflict at hand. The accountant can, if impelled by conscience or strict adherence to the deontological principle of non-maleficence (or, do no harm), resign from his position and make a public declaration of his resistance to any action that will create more homelessness. There is a long, and honorable, tradition of resistance to injustice. Here, of course, individual moral sensibilities will differ. But one useful guidepost is what we may call a rule of proportionality. Simply stated, it asks us to reflect on (1) the nature and extent of the moral wrong we wish to see remedied; (2) the intensity of our desire to see change occur; (3) the benefits and burdens–to others, innocents especially–entailed in resisting authority or professional obligations; and (4) in a general way, the likelihood of accomplishing at least some of the goals we wish to establish.

Discussion Section

Analysis of Research Results

It was found that the basis of accepting or rejecting a rule is whether the consequences of everyone following the rule will result in the maximum probable good consequences. Rule-utilitarianism may be regarded as a weaker form of utilitarianism than act-utilitarianism. A rule-utilitarian, when confronted with a situation in which he believes that abiding by the rule will not in the present case be most beneficial, will simply modify the rule. Ultimately, this would end logically in one rule, “maximize probable benefit,” which is the position of the act-utilitarian. By far the oldest and best developed professional group among accountants exists in public accounting. Amid much publicity and fanfare, the Institute of Certified Public Accountants recently celebrated its one hundredth anniversary. Perhaps only doctors and lawyers can surpass certified public accountants in the claim to professionalism based upon history and longevity of public service (Beauchamp & Bowie 2003).

The balanced approach–some would call it “middle of the road”–is not without difficulties. The research results show that the firm’s profits are at stake. But the accounting firm’s profits are also at risk. For if the real estate firm, upon hearing this “balanced” advice, fires the accounting firm, no social change may ensue and the accounting firm will lose a client. The consequences for the individual, conscience-stricken auditor may also be personally disastrous: he could be fired. If business professionals–accountants for certain–stopped to list the manifest goals their activities entailed, they might be surprised. If, in addition, they sought to contrast such goals with their own theological or religious beliefs, they might be disappointed (Bernardi 2004). For example, an executive for a chain of electronics stores might have as a goal the maximizing of sales of such commodities.

It was identified that professional morality demands adherence to the law. But legislation, court opinions, administrative decisions, and (especially) bureaucratic interpretations of the law are rarely crystal clear. Because of this necessary imprecision, there are many opportunities to “bend the rules” or to “find the loophole.” Such behavior, by accountants, is not inherently wrong. Nor is it subject to prosecution or condemnation if discovered. In tax accounting, especially, a premium is put upon creative interpretation of regulations (and of prior interpretations). The system exists to be used, we are told; a clever accountant takes advantage of ambiguity and resolves it in the perceived best interest of his client. This is normal professional practice. In this realm, we are not talking about hiding data or obscuring documentation. We are describing a set of behaviors taught in colleges and universities and validated by professional activities. Yet if ethics has anything to offer the professions, it is an opportunity to consider, reflect, and criticize common practice from the point of view of morality (Froomkin, 2000).

Think of a company (let it be a large manufacturing firm, ABC Inc.) that is negotiating with a party for a potentially lucrative contract. A staff accountant, in the midst of preparing reports and summaries, discovers that certain information about his own firm is not being communicated to corporations. The accountant thinks that the data is quite material to the negotiations and that the transaction will be affected by withholding such information (Sims, 2003). The accountant faces a very common difficulty: the expectations of management, in this case, conflict not only with personal concerns but also with internalized professional values. Here the accountant’s almost instinctual obligation to make public relevant information has been headed off by a legalism that mandates concealment. Clearly, a discussion about the legal versus ethical issues would be in order (Bernardi 2004).

To trust another person professionally and personally sometimes demands that secrets be kept. We introduced the notion of confidentiality in accounting practice earlier. But nuances and problems–conflicts of obligation–occur in this realm. The requirement that professionals of all kinds (physicians, attorneys, accountants, even clergy) preserve client confidentiality has two roots. First, promises must be kept and moral professionals must keep them. If one promises to keep a secret, this is almost a sacred obligation. Second, confidentiality is necessary for the conduct of business. Professionals need to hear all relevant material regarding a client’s activities. Clients will not disclose useful data if they feel that a professional will speak of such matters publicly (Sims, 2003). In business, especially, knowledge or information is power. And the privileged relationship between professional and client is a means to contain the spilling of information that may abuse power or transfer it to an outsider illicitly. Accountants, of course, have an obligation to report data and interpret it. But much that is secret is expressed to accounting professionals and they have both an explicit and a tacit obligation to keep such matters private. Suppose, in the course of a discussion with a client, an accountant discovered a corporate practice that struck him as morally objectionable. Suppose further that the activity had nothing material to do with financial affairs, currently or in the near future. In a word, this confidentially expressed statement was never going to be included in or excluded from a financial statement. But, still, the data ran across the grain of the accountant’s personal value system (Sims, 2003).

It was found that the opportunities and temptations do not vanish through the promulgation of codes. Loyalty to the truth–embodied in the very notion of objectivity-is fundamental to accounting. But there are other, often competing, loyalties, especially for the young practitioner “on the way up.” While auditing may be the “bread and butter” of an accounting organization, increasingly we find that consulting is where the profits lie in the accounting profession. In fact, concern has frequently been expressed that competitive pressure, particularly price competition, is reducing the audit to a mere commodity. With pride in a quality audit and the attending external and internal rewards in danger of extinction, the audit could be reduced to nothing more than a means to entry for lucrative management advisory service work. To be successful one must be productive; one must “get along with” one’s superiors in the accounting firm; one must demonstrate expertise, sophistication, and drive.

In dealings with the client, one must tread the fine line between telling the truth and not completely alienating a source of income and networking opportunities. If we hold that all actions are equally valuable, or if we claim that all systems of moral evaluation are equal in status and power, we are in deep trouble. A complete ethical relativism is almost unworkable. But beyond this minimum, a belief in ethics entails a non-empirical concern for values. There is no scientifically verifiable way to validate moral claims. Ethical statements are not proven in the same way as, say, a surveyor’s predictions about land borders. In order to be ethical, we must have some kind of faith–and it definitely need not be religious in the conventional sense–that values count. Corporate crime–price fixing, illegal payments to foreign governments, tax evasion, and securities fraud–became a priority for prosecutors. Today there are also defense attorneys who specialize in white-collar criminal work. The media have taken up the banner and it is a rare month in which a story on embezzlement, fraud, or conspiracy in corporate settings is not featured on the television documentary shows or in the newspaper and news magazines.

“Unethical” Behavior

Analysis of primary and secondary data shows that ‘unethical’ behavior is caused by independence in accounting standards and procedures. As in all professions, this aspect of independence is a well-established ethical norm in public accounting. In every engagement, including engagements of tax services and consulting, the company must refuse to subordinate professional judgment to the judgment of the client. Like the doctor/patient relationship, a primary concern here is that the client will receive the best professional advice and service the accounting standards can provide. A danger does exist in emphasizing independence (Sims, 2003). The danger is creeping paternalism. For instance, in medicine the fear is that the doctor will not hear the real story since the accountant, as a professional, already has the “answer.” The same danger can and does exist with respect to the accounting standards (Beauchamp & Bowie 2003). Ultimately some degree of mutual respect must exist between professional and client. Independence is a more fundamental and pervasive concept in accounting than in the other professions. This is the only exclusive function that the standards perform for society. In rendering an opinion the independent auditor assumes a public duty.

Moreover, this public duty must transcend any employment relationship or other duty toward the client. So important and ingrained is independence in the public accounting profession that it may be regarded as a cornerstone upon which much of the ethics peculiar to the profession is built. Note the radical change in focus when the accounting profession speaks of independence. The perceived peril in lack of independence is not to the client but to an outside third party. This third party may be any person who reads and relies upon the financial statements upon which the auditor has rendered an opinion. We find that to serve the third party the auditor must take an unbiased viewpoint when he performs audit tests, evaluates the results of those tests, and then issues an audit report and opinion with respect to the financial statements. Traditionally accountants have viewed independence on three ethical planes. First, in order to take an unbiased viewpoint, an auditor must possess the virtues of honesty, objectivity, and responsibility. In other words, on this plane we are concerned with the character of the auditor. We may regard this as the highest form of independence. At the second level independence refers to the relationship of the accounting standards and the client. Here independence means avoiding any relationship that would likely, even subconsciously, tend to impair the accounting standards’ ability to take the unbiased viewpoint. The public accountant must avoid personal and usiness relationships with clients that could cause even the most well-meaning person to slip or compromise in professional judgment.

it was found that on the final level, independence means the accounting standards should avoid any relationship that might suggest to a reasonable observer that a conflict of interest exists. Even when the professional is completely satisfied that no relationship impairs judgment as a professional, the accountant has not gone far enough. The accountant must concern herself with the jaundiced eye of the beholder. So, even is the accountant is completely satisfied that she/he can render an impartial judgment or opinion for a client with whom the accountant has a particular business relationship, the standards of the profession still might prohibit an accountant from acting as independent auditor. In this respect we can compare the accounting profession with the legal profession, which demands of the judiciary that no appearance of impropriety exists. We thus see that on two levels independence is a condition of the mind and character of the professional. On the third level the issue is not about the professional himself but the way others view an accountant (Sims, 2003). The common expressions used in professional circles to describe these phenomena are independence in fact and independence in appearance. Independence in fact is one of the most elusive aspects of ethics in the accounting profession. Most public accountants are ready to assert that for the most part independence in fact is the norm in daily professional life. Yet they are at a loss to provide evidence for this assertion or even to explain why they believe it is true. After all, it is difficult to discern the virtues necessary for independence in fact.

Moreover, we have little basis to doubt the existence of independence in fact in a particular circumstance until the most dramatic of events, the audit failure, comes to light. An audit failure is said to occur when accounting standards opines to third parties that a client’s financial statements are fairly presented in accordance with generally accepted accounting principles when in fact they are not. Often the root of the audit failure is found to be a lack of independence in fact. Some frequently cited examples of a lack of independence in fact include lacking objectivity and skepticism, accepting the work of management for something that normally requires independent verification, agreeing to a significant client-imposed restriction on the scope of the audit, or knowingly neglecting the critical evaluation of a significant client transaction. Failure to test the accounts receivable by independent confirmation would be a concrete example. Some people also believe incompetence is a manifestation of a lack of independence in fact. In each of these cases, the virtues required to render an unbiased opinion are missing. Independence is thus violated on its highest plane. Another dimension of independence in fact originates in relationships with clients. In other words, the accounting standards in UK cannot serve two masters: they cannot hold themselves out to the public in a traditional auditor-client mode while at the same time serving that client as a controller, treasurer, or internal auditor. Neither can the accounting standards hold a direct financial or a material indirect financial interest in a client about whom he is rendering an opinion (Peterson et al 2004).

The secondary data analysis shows that independence in fact exists when an auditor is actually able to maintain an unbiased attitude in the conduct of the audit. By contrast, independence in appearance refers to the interpretation or perception of others about the auditor’s independence. Most of the value of the audit report stems from the independent status of the auditor. Therefore, if auditors are independent in fact, but readers of the financial statements or members of the public at large believe them to be advocates for the client, most of the value of the audit function would be lost. These users of financial information can have faith in an auditor’s representations only when they are confident that the auditor has acted as an impartial judge. The principle is veracity (truth telling); the assumption about consequences is that airing a grievance will lead to conflict resolution and that all parties, including society per se, will be better off if legal and moral norms are adhered to. Philosophers refer to the idea of unanticipated or unforeseen consequences of singular acts as the slippery slope concept. Simply put, ethical professionals must worry about precedents (Peterson et al 2004).

The entire reason for a profession of public accounting rests upon the foundation of independence in appearance. Otherwise the audit function could be performed by internal auditors who work for the company. These men and women are honorable people who possess requisite virtue for performing audits. Moreover, organizational systems could be devised to protect them from management retaliation. It is therefore at least possible that they could be independent in fact. Nevertheless, users would almost always have a lingering doubt about the statements’ impartiality and freedom from bias. Readers might suspect that the auditors were really serving the best interests of the company for which they worked. In other words, the internal auditor would not appear independent. Hence the accountant representations would not have value to the user. An analogous phenomenon may be found in our government, where an independent prosecutor is appointed when a federal official, especially one in the Justice Department, is accused of a crime (Bloom & Cenker 2005). Concern about lack of independence in fact not only lowers the value of a particular audit report but also can have an adverse effect on the profession. Certified public accounts are given special status in society–the status of “professional”–because of the perceived role that they play in that society. The role of the auditor is to give an unbiased opinion on reported financial information based upon professional judgment.

At least three positive things can be found in our recognition that accounting professionals do, routinely, encounter conflicting moral duties: consciousness about our common situation is raised when we make public, and discuss with colleagues and others, our moral problems; firms and professional organizations can develop policies and programs that respond to difficult moral dilemmas; recognizing that all professionals are also persons can alleviate unrealistic expectations regarding vocational activity and serve to humanize the profession. In all of this work, it will be useful to make a careful examination of the styles of ethical reasoning that inform accounting practice, especially by giving attention to both principles and consequences. Some modern ethicists argue that corporations are moral persons (Bloom & Cenker 2005).

The problem once again is how the public perceives all of this. Can a person play this increasingly important role as an advisor to clients on how to conduct their businesses and at the same time give an unbiased opinion about the reported financial information? The profession strongly defends the position that by keeping auditing and consulting activities separate, independence is in fact maintained. Yet the very fact that the question is raised means that independence in appearance is threatened. A third problem with respect to independence arises due to the sheer size of the firms in which many certified public accountants practice. Increasingly the profession is being dominated by huge, multinational firms known as the Big Six. Ethically, there is nothing wrong here. But to the public these large firms are beginning to look more and more like big business (Bloom & Cenker 2005). Therefore, these firms must be especially careful to guard against perceptions of a lack of independence. A final factor that can erode independence in appearance is the length of time a particular client is served by a single auditor. In many cases an auditor-client relationship has stretched across decades. As time passes the client and the firm are increasingly identified with one another in the public eye. Again, the danger here is in appearance. The organizations may seem to be too close in the eye of the beholder even if the strictest measure of independence in fact is maintained.

Problems of credibility in each of the above cases almost always arise outside the profession. Therefore accountants must be constantly aware of the perception issue, which can have an adverse impact upon auditing firms and the direct and indirect users of their services. The issue is rarely concerned with the validity of negative perceptions, but rather the belief that users and society hold with respect to objectivity and freedom from bias. Concern about the issues of both independence in fact and independence in appearance is clearly reflected in the current Code of Professional Conduct. Currently this code of ethics consists of two sections–(1) the principles and (2) the rules. The principles are designed to provide a framework for the rules. We first encounter the concept of independence as a principle. With respect to its membership, the accounting standards impose stricter standards upon those who practice as public accountants. Those members must hold to the principle of independence in fact and to the principle of independence in appearance. Independence–the very foundation of the profession rests upon this concept. Debate about it will continue if the profession is to remain viable, for such debate is an indicator of ethical health. Accountants must continually seek to strengthen the ethics of independence. Perhaps the greatest danger to the profession lies in potential apathy toward independence. If the public and its representatives were ever to perceive that independence was a sham, the profession would likely be swept away like a sand castle before the tides (Bloom & Cenker 2005).

In some measure any immoral act of a member of the profession affects the whole because by its very nature the profession has advanced itself to society as a special community deserving special privilege and therefore having special responsibilities. We have tried to create an illusion that is mildly elitist. The public does not expect professional people to commit violent crimes. That is the sort of thing one expects from the laboring “class.” So when it happens that professional people also commit violent crimes, the news is somewhat more sensational and pierces the aura that professions attempt to build about themselves. By its very nature as a community, the accounting profession contains dynamic and living relationships. In turn, these human relationships inevitably lead to ethical conflicts and to ethical dilemmas. Human relationships are complex; so too are the ethical conflicts and dilemmas that arise from these relationships. No simple solution can be proposed for any class of ethical conflict. Each must be judged and analyzed on its own merits. The ethical models are useful to the professional accountant faced with such conflicts as both a rational ethical agent and as a member of the professional community (Bloom & Cenker 2005).

Corporate policy should state clearly, “Illegal actions in any form will not be condoned or tolerated by the company” (Donaldson 2002, p. 43). Stringent enforcement of such a policy must develop at the highest levels and be supported all the way down the organization. Internal enforcement action should be immediate, not simply a reaction to external discovery and prosecution. Closely related to legal compliance are moral and ethical standards. Political contributions, bribery, and other acts of conduct illegal in this country may not be illegal in other parts of the world. They fall into this category, as do areas such as proprietary information, product misrepresentation, disparagement, premature disclosures, acquiring or divulging confidential information, certain gifts and entertainment, and conflicts of interest. Developing a code of morals and ethics is not always simple. The frame of reference is large and sometimes complex. Consideration must be given to existing and proposed laws, Judeo-Christian values, family norms, society and industry as a whole, the firm, and the background and desires of owners, managers, and other employees. In spite of these complexities, a recent survey shows that most large and many smaller firms have codes of conduct that are distributed to offices and employees, who periodically must sign a statement that they have read the code. Further, these firms have specific procedures for enforcing the code and handling violations.

Professional accountants interviewed believe that the reason for strict codes of practice is the “career management”. One partner in charge stated that he believed the importance of mentoring for career management has increased in the last decade. Partners and managers agreed that a good mentor instructed the employee on office and firm politics, gave advice, and directly assisted the employee in managing visibility and the perceptions of important others. In the partner-manager relationships studied there was an emphasis on behaving and being “partnerlike,” with the partner serving as a role model for the manager proéeée. Many partners believed that mentoring is essential to the long-run survival of the firm. We may readily conclude that mentoring plays an important role in public accounting firms in the socialization of professionals at the highest levels in the organization (Copeland 2005).

True mentor relationships are rarely formal in nature; they are not purposely planned, regulated, and rule bound. Some public accounting firms have developed a formal internal counseling program to assist in the development of their professionals. Several firms call these “mentoring programs.” Many of the public accountants interviewed saw their firms’ attempts to formalize the “mentoring” process as failures, primarily because of two factors. First, neither counselor nor counselee had proven to the other that he was trustworthy. Second, formal counselors were thought to carry too many advisees, nine or ten, contrasting with a typical mentor who has two or three. Both factors work against the formation of close personal ties. Those interviewed held that true mentor relationships arise only where the individuals feel “comfortable” with one another (Copeland 2005). The research results show that formalized “mentor” relationships, though perhaps valuable to the firm, are not true mentor relationships. Moreover, they rarely evolve into true mentor-proéeée relationships for two reasons.

First, most mentor-proéeée relationships evolve informally with free choice on the part of both. Second, most true mentoring relationships develop a strong emotional component, and this is something that cannot be dictated by organizational hierarchy. The profession benefits from cultivating the recognized virtues and ethical values among its younger members, since accounting will not long survive as a recognized profession if the public perceives that the pursuit of monetary gain is its only aim. Values and virtues are passed along in the accounting community through mentoring. The close personal ties that accompany mentoring provide fertile soil for teaching the proéeée to accept the mentor’s viewpoints. The stronger the bonds developed in the mentoring relationship, the more likely the proéeée is to adopt the mentor’s values and virtues as his/her own. One of the functions of the mentor is to look after the interests of the proéeée in the world of office politics. Personal loyalty and friendship are paramount values here. In this we have another ethical duty that is at least closely allied with Ross’s fidelity. An implied if not implicit promise of protection and advancement is present in the mentoring relationship. In this environment the duty of fidelity will inevitably find itself in conflict with the value of promoting the best qualified (Copeland 2005).

Conclusion

The research allows to say that the accountant is a key professional involved in assisting management with the task of setting responsibilities and with monitoring progress toward meeting such responsibilities. This may be accomplished by classifying each responsibility perceived by management as a corporate duty under the deontological framework of total impact accounting. The primarily and secondary data prove the hypothesis that unethical behavior and practices in accounting profession are caused by inadequate codes of ethics and independence of accounting standards followed by many corporations. Accountants are responsible for reporting on “how well we are doing,” not only in purely profit and loss terms but also in terms of fulfilling our duty to society. Further research into total impact accounting may reveal appropriate ways to report upon fulfilling corporate duties. In many cases this would be an internal reporting issue only, so that management can monitor progress toward their responsibility objective and the cost of fulfilling their duties.

In other cases management may wish to report to financial statement readers what duties they believe the company has and what private costs have been incurred to reach the public gains. With respect to external reporting, several writers have noted that managers would naturally have a bias toward reporting the socially responsible actions that they have taken. Correspondingly, they would be reluctant to report upon the organization’s ethical failures. Accountants should view this as an opportunity for an increase in their role through the auditing function. The so-called social auditor can monitor total impact accounting much the same as the financial auditor monitors financial statements. The increase in professional responsibility would be both internal and public. Accounting should be developed to provide information to management on the financial implications of acting or failing to act upon ethical issues. If this is accomplished, research into social responsibility accounting can go hand in hand with research in business ethics. A deontological framework provides a starting place for the conduct of such research. By accepting a positive, deontological approach to modern social and ethical issues, accountants will be better able to serve society and thus enhance their claim to ethical professionalism.

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Appendix

Questionaire

Please underline a number for each question using a scale from 1-5 (1 not at all score– 5 very much so)

1. Do the standards of the profession exist for good reasons? 1 – 2 – 3 – 4 – 5
2. Are standards clearly and sufficiently articulated? 1 – 2 – 3 – 4 – 5
3. Is the present system of internal regulation fairly and consistently applied? 1 – 2 – 3 – 4 – 5
4. Does “who you know” matter more than “what you know” when ethical judgments are made within the professional organization? 1 – 2 – 3 – 4 – 5
5. Can the standards of the accounting profession be understood by its membership, and by the public, in practical ways? 1 – 2 – 3 – 4 – 5
6. Or are codes and guidelines unnecessarily jargon filled and complex? 1 – 2 – 3 – 4 – 5

Please answer the following questions in full:

1. What ethical “blinders” are imposed upon insiders in a given profession?
2. What is lost when critical distance lessens?
3. To whom does the accountant owe duty?
4. Are there conflicts between the duties owed to clients and the duties owed to third parties?
5. Who are the third parties to whom the accountant owes duty?
6. Are current reporting and auditing practices sufficient to meet duties owed to financial statement readers other than investors and owners?
7. What professional responsibilities do accountants have between and among one another?
8. In light of recent court rulings with respect to competition and the competitive environment that has followed, have these responsibilities been met?
9. Will the public accept a limited responsibility in the area? How can the profession better communicate with the public on this issue?
10. For the accountant not in public practice, to whom are duties owed?
11. How may conflicts between duties owed to third parties and desires of the employer be resolved?
12. Are there any differences between the ethical duties of a professional accountant and a businessperson? If so, what are they and why do they exist?

Appendix 2

Results Answers for Part 1

Question 1.

Question 2.

Question 3.

Question 4.

Question 5.

Question 6.