QUESTION
Arthur Anderson, in a 1932 lecture on Business Ethics, was quoted as saying, “To preserve the integrity of his reports, the accountant must insist upon absolute independence of judgment and action”. In order to impose standard and guidelines for ethical accounting professionalism, several legislative bodies are structured.
There are two accounting bodies Australia, CPA Australia and Institute of Charted Accountants in Australia. During 1940s, 50s and 60s compliance with the accounting standards set by these bodies low. However, later the two bodies created a jointly sponsored Australian Accounting Research Foundation, which carried out a research to develop accounting standards. The jointly issued standards provided to avoid government intervention in accounting standard process. It also created several corporate lapses and public pressures to develop effective and reliable financial reporting. It also provided for guidelines for capacity of professionals for self regulations. However, due to incompetency of professionals to develop reliable standards, the Commonwealth assumed the responsibility of approving accounting standards through several bodies and frameworks (Dagwell, R., Wines, G., and Lambert, C., 2007)
SOLUTION
Implication of Ethical Code on Accounting Profession
Accounting standards set the ‘floor’ for accounting and disclosure of accounts by management to the users of financial information. An accounting professional must be committed not merely to the standards but to their intent also. A study suggests that reported biases in the conduct of professionals is not entirely when they are not consistent with the CPA code, but it is the often the result of their personal code or of the firm’s code of conduct (Jeffrey, C. 2005).
Accounting, especially financial accounting may involve heavily prescriptive aspects. It is subjected to certain ethical conduct guidelines, which reflect increasing dynamic complex nature of accounts practices. The CPA code and guidelines is not only important to maintain reliability and effectiveness of financial reporting, but it is a salient factor that determines the reputation future of a professional.
Let us analyze the Noel Kevin Voigt case 2001 to find out what impact failing to meet the accounting code could have on the stakeholders and reputation of the accounting profession.
The findings of National Disciplinary Committee of the CPA charged Noel Kevin Voigt for not producing defending documents against the complaints of the clients regarding financial accountability, and for breaching professional statement by receiving tax refunds on behalf of a client without obtaining written authority. As a result of failing to respond to the complaints and notices, the committee admonished Voigt, suspended in Public Practice Certificate and called him upon to pay $250 towards the cost of investigating.
Hence the study clears that failing to meet the code of conduct to meet reliable financial reporting and accounting standards can badly affect the reputation of the professional and even suspend his or her Public Practice Certificate.
Furthermore, Noel Kevin Voigt led to substantial damage to stakeholders of the companies he dealt with. Despite making an appeal to national disciplinary appeal committee, Voigt failed to provide proof satisfactory to CPA Australia, that in his ensuing period he held professional indemnity insurance as required by law. Moreover, the stakeholders were ignored of this professional misconduct of the accountant of the entities they were associated with. Interest of stakeholders lies on the reputation of the company who maintain proper financial reporting, and taxation reputation. However, because Voigt failed to respond to clients complaints and negotiated tax refunds on the behalf of client entities, without acquiring permission, he put the reputation of those companies on stake along with the interest of the stakeholders.
Conclusion
The ethical code plays essential role in managing and address the risk factors and their attributes. Accounting profession requires a professional to provide assurance services with unimpaired professional judgement and objectivity. It is important that an accounting professional is seen as a reasonable observer while performing its duties (Joint Accounting Bodies, 2008). The CPA code of accounting standard serves as an important instrument for evaluating the reliability of a professional and maintain the ethical discipline in the accounting profession.
References:
CPA Australia’s professional conduct hearings, 2003. ProQuest Central
Dagwell, R., Wines, G., and Lambert, C., 2007. Corporate Accounting in Australia. Ed: 4th. University of South Wales Press.
Jeffrey, C. 2005, Research on Professional Responsibility And Ethics in Accounting. Vol. 10.
Joint Accounting Bodies, 2008. Independence guide: interpretations in a co-regulatory environment. CPA Australia Ltd. Version 3.
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