Business Ethics and Accounting Professional Ethics

Author: Brooks
Publisher:
Publish Date: 2004-01-01
Features: This book introduces and analyzes the latest cases in the field of business ethics and accounting professional ethics, placing readers in real social environments. It lays a solid foundation for readers to deeply understand and establish correct values and behavioral norms. Particularly valuable is the moral reasoning method provided in this book, which helps readers confidently navigate various ethical dilemmas in their actual work.
Sources of Ethical Guidance The guidelines that constrain professional accountants come from many sources. The most important sources are the professional codes of conduct or ethical guidelines of the professional bodies, firms, or employers to which they belong. Other relevant norms may include those from chambers of commerce, government agencies, or special interest groups and environmentalists. How these norms function and how to handle conflicts when they arise will be the subject of the next chapter.
Law and Jurisprudence Professional accountants may also be involved in legal cases, where lawyers may need to explain their legal responsibilities and potential lawsuits to them. To help readers understand this aspect, the reading material includes an article titled "Trends in the Legal Liability of Accountants and Auditors and Feasible Legal Defense Strategies Since 1994," which provides an analysis of relevant trends and summaries of major legal judgments since 1994. It also documents the early trend of expanding the responsibility of accountants and auditors from strict contractual obligations to existing shareholders to a broader "foreseeable group" that could exploit financial statements. As a partial counterbalance to the trend of excessive expansion of professional liability, recent cases, such as the ruling in Hercules Management Company v. Ernst & Young (1997), have favored the limited liability of auditors. This case was argued on an unusually extraordinary basis—where auditors were not held legally responsible to shareholders and investors—and many observers considered it only a temporary exception in the expected evolution of professional accountants' liability toward a broader scope of responsibility. To avoid expanding their liability further, auditors have begun taking corresponding actions to "build safe havens" or implement limited liability. As discussed in the discussion on limited liability partnerships, this organizational form would impose some degree of limitation on the legal damages each partner must bear in litigation. Moreover, limited liability partnerships would not stop lawsuits from occurring.
One must exercise caution when applying legal standards to ethical issues for three reasons: , law appears to provide permanent standards for correct judgments, but in reality, it is constantly evolving to reflect various situations that society deems reasonable. In other words, legal standards generally lag behind changes in social moral standards. Second, and more importantly, what is legal is not always ethical. As former U.S. Supreme Court Justice Potter Stewart once said, morality is "the distinction between what you have a right to do and what is right." There are numerous examples in legal, moral, and behavioral standards that reflect these distinctions: For instance, a factory in a third-world country owned by a company may have pollution problems that harm workers' health because the local standards are not as strict as those in the company's home country in North America. Sometimes, legal standards are very clear, such as in tax matters or bribery, but most social groups do not comply with them, so the majority of people do not