Running head: ETHICS 1

Ethics

Hannah McKay

SLCC

12/10/2017

ACCT. 1110

Dr. George Smith

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Introduction

Ethics can be defined broadly as a set of moral principles or values that govern a persons

behavior. Ethics from an accountants standpoint is someone who acts as a professional

following the rules and principles of the Code of Professional Conduct. The Professional

Conduct is split into two parts: the principles and the rules. The principles provide the overall

framework, but they are not enforceable. The rules govern the performance of professional

services, and they are enforceable. (ET Section 0.300-0.300.07)

Just about every accountant will face a difficult situation or ethical dilemma at some

point in their life. A lot of the ethical dilemmas in the accounting world result from pressures

from management. One of the toughest scenarios an accountant can face is when the CEO or

other senior executive exerts pressures to suppress or change the results of an internal audit

financial statement findings because it reflects poorly on management or some other aspects of

the business (McCafferty). Studies have shown that these scenarios happen often.

An Ethical behavior in the real world.

An article from the internal audit foundation found that twenty five percent of the

internal accounting auditors surveyed at North American organizations said they have been

pressured to significantly modify or suppress a valid internal audit finding or report during their

career. Six percent indicated they would rather not answer the question. (McCafferty, Joseph)

In an ideal environment, accountants should always be able to present their findings to the

CEO or another person that is high up in the company without the threat of personal

recrimination(McCafferty). Sadly, this is not the case and accountants do not always operate in
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these types of environments. Accountants have faced different levels of pressure across

geographic regions across the globe. For example, East Asia & Pacific region reported that only

fifteen percent of internal auditor accountants were pressured to change or suppress the results of

the audit findings but nineteen percent from the same region declined to answer the question.

(McCafferty, Joseph) One interpretation of this is that when participants stated that they

preferred not to answer, that response often may have indicated that pressure existed not to

respond, either from an internal or external source. However, the average across all regions was

that twenty-three percent said they were faced with pressure to change findings at least one or

more times and eleven percent declined to answer. (McCafferty, Joseph)

How an Ethical behavior happens.

One thing to note is that the internal auditor accountants that were pressured to suppress

or modify audit findings reported that it happened on a regular basis. While only twenty four

percent indicated that it happened on occasional or frequent basis (McCafferty, Joseph). The

chief audit executives were the most likely to face the pressure to change the findings and

internal audit staff had a smaller percentage that were pressured to change their findings. It is

important to realize that pressure will never go away for internal accounting auditors because it

may exist because of legitimate disagreements about audit findings, or it may exist simply

because human nature is such that individuals do not like to see negative results in their findings.

The source of the pressure to suppress or change findings varied and depended on the rank of

the internal auditor reporting the pressure. Chief audit executives faced pressure most often from

the CEO, operations management, and the CFO. While staff internal auditors most often faced

pressure from operations management and from the internal audit department. The main reason

for the pressure to change results was that the operation audit would reflect badly on key
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operational management.

When internal auditors stood up to the pressure to suppress or change findings they often

faced consequences and they were excluded from meetings standing their ground on an audit

issue. Another percentage said they lost out on job opportunities, and a small percentage said

they faced budget cuts as a result of existing pressure, also in some rare instances internal

auditors said they faced job elimination, pay cuts, or hostile work conditions after resisting the

pressure to change the results and findings.

How to prevent the unethical behavior in the Accounting world.

There are many things that accountants and managers can do in a business to prevent

unethical behavior. One thing that they can do is create a code of conduct for the business that

specifies all of the expectations that the business has for the company to be a success financial

and ethically. Another thing that managers can do is lead by example. Employees in a company

really look up to management. If a manager is being unethical then it may lead employees to

thinking that it is ok to be unethical because their boss is doing it. The next thing that a business

can do to prevent unethical behavior is reinforce consequences. If an employee acts unethically,

refer to the code of conduct and take necessary measures to warn or terminate that employee

(Brookins). Another thing they can do is welcome ethics speakers and do training for ethics in

the business. Finally, managers should show employees appreciation and encouragement for all

of their hard work. This will encourage the employees to do what is right.

Conclusion

In conclusion ethics is very important in today's world. Unethical behavior can lead to

damaging a companys reputation and to completely closing a company down. Accountants not

only need to have integrity, but they also need the courage to stand up to forces that could try to
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undermine that integrity. Accountants face significant pressures from CEOs, top management,

and other forces to act unethically. However, if they choose to act unethically they will have to

face the consequences when they don't resist these significant pressures.
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References:

ET Section 0.300-0.300.07 Principles of Professional Conduct

https://www.aicpa.org/content/dam/aicpa/research/standards/codeofconduct/downloadabledocum

ents/2014december15contentasof2014june23codeofconduct.pdf

McCafferty, Joseph Nearly one-in-four internal auditors say theyve been pressured to suppress or

change valid audit findings. MIS|TI Training Institute 2 Nov. 2016 Web 13 Apr. 2017.

http://www.misti.com/internal-audit-insights/internal-auditors-under-pressure-to-alter-reports

Brookins, Miranda. Ways to Prevent Unethical Behavior in the Workplace. Chron. 2017.

http://smallbusiness.chron.com/ways-prevent-unethical-behavior-workplace-21344.html