Question

Thank you for your post Tracy! Ethics in the accounting profession and financial reporting is an essential characteristic. Users of financial statements are dependent on the data provided. They expect the preparers of the financial statements to be adhere to the highest of ethical standards. For CPAs, a code of professional conduct is issued. Violations of the code of conduct could result in fines, suspensions and revocation of license. Ethics in financial reporting also involves the actions of senior management, i.e. CEO and CFO. In many companies, the senior management earns bonuses based on the bottom line. In addition, there are other pressures to perform well from stockholders. As seen in historical cases such as Enron and WorldCom, these pressures resulted in senior executives performing acts that had devastating results for themselves, the company, its employees and investors.

Answer 1

Ans. Ethics in the accounting profession and financial reporting is an essential characteristic. Users of financial statements are dependent on the data provided. They expect the preparers of the financial statements to be adhere to the highest of ethical standards.

For CPAs, a code of professional conduct is issued. Violations of the code of conduct could result in fines, suspensions and revocation of license. Ethics in financial reporting also involves the actions of senior management, i.e. CEO and CFO. In many companies, the senior management earns bonuses based on the bottom line.

In addition, there are other pressures to perform well from stockholders. As seen in historical cases such as Enron and WorldCom, these pressures resulted in senior executives performing acts that had devastating results for themselves, the company, its employees and investors.