Ethics in accounting is a high profile issue due to the numerous corporate scandals that have taken place in many organizations resulting to massive damages to the economy. In particular, these scandals question the morality of accountants. Many reports have argued that accountants have the main responsibility for ensuring continued ethical standards in business. The state of ethics of accountants today is in a critical position because of the numerous audit failures that have been there in various organizations.
Recently, there have been a number of financial scandals facing organizations from all over the world. Among the most recent one is the Toshiba accounting scandal. The scandal tied to approximately $1.2 billion in the company’s overstated operating profits. An independent investigative panel found improper accounting to have occurred for seven years. The scandal embroiled three CEOs of the company. However, the investigative report showed that the CEOs placed immense pressure on juniors and took their time until the corporate culture produced the results they wanted.
In Toshiba’s accounting scandal, there was direct evidence of unethical accounting practices as well as overstated profits in multiple business unit divisions of the company. The inappropriate accounting techniques varied from one business unit to another. However, there were a set of causes, both direct and indirect, to explain the occurrence of these practices. The corporate leadership of the company had strict challenges to the presidents of the various divisions to meet certain profit targets. Often, they handed the challenges when there was little time to achieve them and implied that they would not accept the failures. As a result, each business unit had to use irregular accounting techniques to meet the targets. Investigators identified the company’s corporate culture was among the major factors that resulted to fraudulent accounting techniques as subordinates did not have the ability to question their superiors.
The fraudulent financial scandals have also been in other large organizations the notable ones being the Bank of Credit and Commerce International, Enron and Olympus scandals (Awolowo 1). Some of the recommendations to prevent such incidences include the establishment of proper internal controls of a company, evaluation of employees’ adherence to standards of conduct, remedying an entity’s deviations to the standards of conduct promptly and reiterating the importance of adhering to the code of ethics. The five fundamental code of ethics principles that accountant should adhere to are integrity, objectivity, professional competence, confidentiality and professional behavior (Yarahmadi and Bohloli 2).
It is of paramount importance for accountants to have the to their professional practice. The nature of their work requires trust from employers, clients and the general public, who often use their professional judgments in making important decisions. These decisions have the ability to affect various sectors of the economy making the accountants key to attaining confidence from clients as well as the general public. The state of ethics in accounting today is compromised hence needing a lot of improvements. The ethical standards can be improved by in various ways by following ethical codes of conduct which need the participation of each. The accounting profession should adhere to ethical boundaries to prevent corporate scandals that may lead to the collapse of an organization.
Works Cited
Awolowo, Ifedapo Francis. "Financial Statement Fraud: The Need for a Paradigm Shift to Forensic Accounting." system 7.10 (2016): 23.
"Toshiba President, Top Executives Quit over $1.2 Bn Scandal." Manila Bulletin. N.p., 21 July 2015. Web. 19 May 2016.
Yarahmadi, Hossein, and Bohloli Ali. "Ethics in Accounting." Spectrum: A Journal of Multidisciplinary Research 4.8 (2015): 1-8.
