The country selected for this study is the United Kingdom (UK). UK Generally Accepted Accounting Practice (GAAP) has been in place for a long period of time and was harmonized in 2005 so as to comply with the international accounting standards. The UK embraced the principles of the International Financial Reporting Standards (IFRS) in 2005 after the European Union (EU) mandated that all members that were publicly listed companies be subject to reporting under the International Accounting Standards (IAS). This was to help facilitate that those listed companies could easily be compared to onr other on their performance and transparency was improved since they were now subject to the same principles of reporting. Companies in the United …show more content…
Chartered accountants are therefore expected to display professionalism in their work so that they are able to maintain public confidence in the companies. This is a result of the accountants reporting the true performance of the companies they represent (Radebaugh & et al, 2012).
The conduct of chartered accountants in the UK is governed by the Code of Ethics. The latest revision of these ethics took place January 1, 2011. The fundamental rules that govern the work of these accountants are as follows and similar to those in the US:
Integrity – Accountants should always ensure that they are honest and straightforward in their activities with every instance that they have clients. They should always maintain the lines of duty and maintain business relationships during all official duties (Nobes, 2015).
Confidentiality – This calls upon any professional accountant to ensure that they do not disclose the accounting information of one company to any unauthorized parties. Such information should only be disclosed if the professional or legal right is granted by the relevant authority. Information obtained from a company should therefore not be used for any personal benefit by a professional accountant (Nobes, 2015).
Professional behavior – This indicates that professional accountants comply with the stated UK laws and regulations that govern the
“ In order to prevent fraudulent financial reports and statements, the American Institute of Certified Public Accountants(AICPA) has created ethical standards” (Ethical standards in a financial statement, 2011). These standards aim to make financial professionals accountable for their accounting practices. This includes the integrity of financial reporting and ensuring financial reporting is done fairly and factually. Financial accountants and professionals should maintain professional integrity, objectivity, and independence to reduce the risk of resulting legal action, loss of profits, and a poor reputation if improper financial reporting is done (Ethical standards in a financial statement, 2011).
Accountants are relied upon to be trustworthy and maintain high ethical standards. It is because of the nature of the profession that puts them in a position of trust with people who rely on their professional judgment and guidance in making decisions. These decisions are extremely important in accounting and more so that companies that have high ethical standard or main good ethical culture spend enormous time to train the staffs about the conduct that is expected of them.
Accountants should always carry out the public responsibility, meaning they have a responsibility to ensure that the accounting functions are performed to the highest possible standards and the information which an organisation provides for its stakeholders is true and accurate. To reach the goal of improving the performance of accountants, there might be several steps to undertake. There should be on-going education to keep abreast with the existing and emerging
The Model of Trust Enhancement was established to enhance and maintain the public’s trust in the accounting profession. Over the last two decades, the ethics of the accounting profession has been questioned and public trust destabilized, in particular for auditors, due to the Enron debacle. The fact that an auditing firm would assist their clients with publishing an inadequate set of financial statements shows their willingness to violate laws and regulations (Sims & Brinkmann, 2003). According to the textbook, “Because trust is essential, even the appearance of an accountant’s honesty and integrity is important. The auditor, therefore, must not only be trustworthy, but he or she must also appear trustworthy” (Duska, Duska & Ragatz, 2011, p. 116). The majority of statements filed inadequately have a substantial impact on the credibility of the accounting profession as a whole. Sullivan (n.d.10) states that a CPA must possess a high level of trust, by applying professional judgment and enhancing the three trustworthy characteristics (ability, benevolence, and integrity) when resolving accounting ethics dilemmas (slide 3).
The Morley (2012) website states that generally accepted accounting principles are standards that determine how accountants in the U.S. “Conduct and format their reports are determined by the FASB, U.S. Accounting records must be seen by a number of people outside of the organization for transparency purposes” (Morley, 2012). The Morley (2012) website states that if each company created its own accounting reporting methods, comparing financial statements would be inefficient and hiding information would be easier. According to the FASB, entities such as the U.S. Securities Exchange Commission and the American Institute of Certified Public Accountants recognize FASB's authority to set standards. This law ensures that no money is pocketed without being taxed and that all revenues are reported. As far as general financial ethical standards, “financial professionals have obligations to be competent, accountants and financial professionals must not only have secured education and practice that prepares them for their positions, but they must also continue that education by learning new information that can affect their practices” (Morley, 2012). According to “Associations For Financial Professionals” (2012), “financial professionals have an obligation to their
Each element of the ethical decision making model is interdependent. If an accountant is lacking in ability, i.e. professional competency and appears inept, a client would be well within their rights to withhold some level or all trust in its entirety. When considering the ability of an accountant, a good example of this is preparing annual reports for submission to the Securities Exchange Commission. Without the proper level of ability, the results could be erroneous. Incorrect financial statements damage the reputation of the accounting profession and weaken public confidence and trust. Ability is further developed by continuing education classes and staying current in evolving topics. (Tolleson & Guess, 2013)
The Institute of Charted Accountants of England and Wales (ICAEW) issued a technical bulletin Audit 01/03 recommending that audit reports now should have disclosure limiting liability (The Institute of Chartered Accounants In England and Wales, 2003). On the opposite side of the argument the question was raised as to whether the added disclaimers undermine the accounting profession and raise more unanswered question than they leave answered. The Association of Chartered Certified Accountants (ACCA) issued a technical factsheet regarding this disclosure stating the “their incorporation as a standard feature of the audit report could have the effect of devaluing that report” (Technical Factsheet 84 - The Use of Disclaimers in Audit Reports, 2004). Meanwhile, academic circles seemed to follow the factsheet from ACCA, Dr Hooper agued that the “disclaimers undermine the concept of public interest and are more like a screen to legitimate the profession (Hooper & Xu,
Professional behavior: A professional accountant should comply with relevant laws and regulations and should avoid any action that discredits the profession.
Due to the controversy economies have had towards which method to use for accounting, there has been a compromise to converge the two most commonly used methods – GAAP and IFRS. However, these two methods are still very different. The convergence project has yet to be completed; in the meantime, more and more countries are running towards the IFRS since it is more reliable and relevant. The main difference between these two methods is the US GAAP is rule-based while the IFRS is principle-based; this means that the US GAAP makes its decisions based on research and literature, while the IFRS bases its decisions on patterns that result in facts. A deeper look into the differences between these two methodologies shows
Thus, it was seen as necessary to maintain the integrity of the profession of accounting as
In collaboration with the National Association of State Boards of Accountancy, the AICPA published the first bill that would standardize the public accounting practice. This was legislated in the Uniform Accountancy Act. Moreover, the Restructuring Professional Standards to Achieve Professional Excellence in a Changing Environment was issued by the Anderson Committee as a reply to concerns regarding the profession’s competence to serve the public interest and maintain their trust.
The generally accepted accounting principal (GAAP) and international financial reporting standard (IFRS) are standards governing how economic events are reported. In the United States, the Securities and Exchange Commission (SEC) relies on the FASB, the accounting standard-setting body of the US, to develop accounting standards that public companies must follow when publishing financial statements. On the other hand, many countries outside of the Unite States have adopted the International Financial Reporting Standard (IFRS) which
SAICA, SAIPA, CIMA and the IRBA are just a few of the professional bodies, or institutions, found in South Africa with the purpose of developing and maintaining the professional standard of Chartered Accountancy perceived within this nation. The real question is though, how do they do it? Especially in such a way that sees South Africa renowned for the top seat in Chartered Accountancy standards. To understand how this feat is achieved it is important to first know what a profession is: A profession is an occupation organized in an institutional form, its members offer client services based on an intellectual body of knowledge and a specialised repertoire of skills, that are not ordinarily possessed by the non-professional, in order to explicitly serve public interest. (Lee. 1995, 49) These members are, in addition, required to practice and behave in an ethically and functionally sound way as set out by the
Literature Review. The authors use a systematic review of literature in the research. The researchers examine studies of Frankel (1989), Backof and Martin (1991), and Beets (1991) to review the history of the progression of ethics in accounting industry. The accounting as other professions has its own ethics framework. The history of accounting profession demonstrates that competence, integrity, and independence always were essential to have a
In Ireland, the Irish Auditing and Accounting Supervisory Authority (IAASA) was set up conformity to the provisions of Part 2 of the Companies (Auditing and Accounting) Act, 2003 (the Act). IAASA’s objectives under section 8 of the Act include the supervision of how the recognized accountancy organizations control and monitor their members and the promotion compliance to high professional standards in the auditing and accountancy profession