Business Ethics Paper

Running Head: Account Ethics in a Corporation 1
Accountant Ethics in a Corporation
Ryan Van Riper
BUSM 2230-01
April 30, 2014

Account Ethics in a Corporation 2
Abstract: This paper involves an ethical review of accountants in a corporation. It will
begin with an overview of corporations and the ethics involved in it. Then, it transfers to the
overview of the ethics involved in accounting. After an overview of accounting, the next section
will involve the tools that are used by accountants to monitor, prevent, and resolve ethical
dilemmas. Finally, this paper will involve my personal approach to working and managing
ethically from two perspectives. The first approach will be from an employee and then the other
approach will be from a manager.
Keywords: accountant, ethics, statement

Every day, corporations are faced with ethical issues related to their business. It involves
everything from scheduling conflicts to dealing with employees who make the wrong decisions,
acting negatively towards consumers. Ethical dilemmas can also come from inside the corporate
office, including the board room. Sometimes, businesses that are not careful get caught and
through the justice system, become prime examples of how not to run an ethically successful
business. For example, “Organizations such as Enron and WorldCom have rocked the corporate
world and become front-page news…creating concern from consumers about whom to trust and
who is ethical in today’s business world…corporate Social Responsibility has become
increasingly important” (Leonard and McAdam, 2003, p. 27). The best example between Enron
and WorldCom was by far Enron’s story. Enron was an energy company that was established in
Oregon in the mid-1980s. They were so successful in their early years that by 2001, they held
one quarter of the world’s energy trading contracts. They also became “…one of the world’s
most admired corporations, holding a consistent place in Fortune magazine’s 100 best
companies to work for. The sign in the lobby of Enron’s headquarters read, WORLD’S
LEADING COMPANY” (Jennings, 2012, p. 233). The problem was that Enron was allowed,
like other energy companies, to record noncash gains they expected to receive, which was based
on assumptions. This began the downfall of Enron. The amounts that were recorded were based
on what the current market was doing and since the market was booming leading up to the year
2000, they were recording massive amounts of cash that they did not receive yet. They also
recorded off the book entities with corporations in the Cayman Islands and other places where
they took up Enron’s assets and debts. The downfall continued when then-CEO Jeffrey Skilling
stepped down from his position in 2001 and their share price fell by almost half. They also let go
its then-CFO Andrew Fastow and reported massive reductions in earnings. Just like Enron and

WorldCom, there are many more U.S. corporations that have faced ethical dilemmas which have
led to indictments, lawsuits, fines, guilty pleas and even jail sentences for high-profile
executives. These disclosures have led to the financial failures of many businesses, and the loss
of billions in investors' savings and many jobs.
To counter actions like Enron’s from happening again, or at least decreasing these
instances, corporations are required to hire more accountants for their company. Not only that,
they are also being forced to have the accounting firms they work with not be their consulting
services in order to eliminate any conflict of interest. Congress is also stepping in to decrease the
chances of unethical actions being performed by corporations. One of the major ways is that they
“…enacted the Sarbanes-Oxley Act in 2002 to create stronger oversight of the nation's major
companies” (Nichols, Nichols, and Nichols, 2007, p. 37). They can do all they can to force
corporations to change, but the real change from within corporations cannot happen unless top
management and the board members change first. “Once the top executives demand high ethical
standards and demonstrate allegiance to ethical behavior, all employees will be more likely to
follow suit” (Nichols, Nichols, and Nichols, 2007, p. 38). Corporations even help out during
times of war. Ford Motor Company had a plant in Germany during World War II. The German
military needed vehicles to transport military personnel and the Ford Werke Chairman of the
Board, Robert H. Schmidt, decided to help since he was a supporter of Nazi Germany. Since he
decided to help, Ford could not shut down their plant since it was under the German
government’s control. Then-GM CEO Alfred Sloan said it best about the situation that while in
“…Nazi Germany… ‘We must conduct ourselves as a German organization … We have no right
to shut down the plant.’ Following Sloan’s logic, and common business practice then and today,
business has no right to interfere in the internal politics of another country” (Betton and Hench,

2002, p. 536). Corporations must always be ethical, but accountants must especially be ethical as
well.
Accountants deal with a countless amount of personal information every day from social
security numbers to street addresses from clients. When it comes to tax time or even when
companies are in need of items recorded in their ledgers, they are given a large amount of trust
from their clients and other customers that they will oblige to the law and not do anything
unethical. They also have a strong knowledge base in their profession, which includes many
legal items and what to include and what to not include in balance sheets, income statements, tax
returns, and other legal documents that are seen by the state government. “Accounting
professionals have a specific skill set that includes knowledge of tax laws, accounting principles,
and auditing standards” (Breaux, Chiasson, Mauldin, and Whitney, 2009, p. 2). Customers
normally go to the accounting professionals because of the knowledge gap between customers
and accountants. There was a survey conducted about what ranks high and what ranks low in
terms of specific accounting topics. One of those topics, the coverage of ethics, ranked very low
in terms of recruiting decisions for entry level college accountants. This spells bad news, because
this portrays that companies do not care if their new accountants will be ethical in making
decisions. As long as the new accountants follow orders and perform the company’s accounting
actions, there is no need to teach or train the new employees about ethics because, according to
the company, they were taught ethics in school. “Although they have been taught professional
ethics in an academic setting, these may be easily ignored in practice” (Lv and Huang, 2012, p.
1479). The main reason for this is because of managers and top executives wanting their profit
percentages and other assets and costs to be at specific amounts when in reality they are not.

The determining factor if companies are to repeat their actions is if their financial
statements will be recorded or not. “Auditors who are pressured by the managers of the audited
company are more willing to allow (material) errors in financial statements if the financial
statements are not published, if the company is financially healthy, and if there is a small risk of
a takeover” (van Dijk, 2000, p. 298). The companies who are powerful enough to avoid legal
trouble normally take this route, but companies who are not as powerful and are ethically sound
do not take this route. The powerful companies that have multiple lawyers sometimes do not get
by the legal system and become front-page news in the newspaper, being noted as an unethical
company. Accountants have the information from many sources to record everything in their
proper places. Sometimes the accountants are forced to record information unethically from
management while other times they record information unethically themselves because they
receive poor treatment from management. “The accounting profession provides information used
by investors, stock market analysis, and shareholders. The effects of unethical behavior by
accountants can cause catastrophic events that extend from the corporation to its shareholders”
(Breaux, Chiasson, Mauldin, and Whitney, 2009, p. 2). There are an increasing amount of
women becoming accountants and because of that, there are some assumptions that are made
about them. Some assumptions are true, like the fact that women’s attitudes and judgments are
different than men’s and they are stronger in gender and moral development. There are other
assumptions that may be questionable in regards to their truthfulness. “Because women are
usually taught more connectedness between individuals, they see moral and ethical correctness
as part of the social norm that helps them gain approval from others” (Lv and Huang, 2012, p.
1478). Not all women in the business world see moral and ethical correctness as part of the social
norm. There are ruthless leaders who are women that are willing to take more risky, unethical

chances than their male counterparts in order to succeed. Accountants use tools, mainly financial
ones like bank statements and general ledgers, every day when recording transactions done by
their company, but the ethical use of the tools is vital if they want to stay in their profession.
The tools used by accountants are not physical tools like those used by construction
workers or by barbers and hairstylists or even by our police force. Tools that are used by
accountants are financial statements, which have been in use for years. Financial statements are
the records of financial activities performed by businesses. Two of the most important and
arguably the most popular are the income statement and the balance sheet. The income statement
records the revenues and expenses of an organization that were performed for a specific time
frame. The balance sheet records the assets, liabilities, and the owner’s equity for a company at
their current amounts at the end of a given period. Both of these tools have been in the business
world for many years. Businesses continue to share with anyone and everyone what their
financial position is by using the income statement, the balance sheet, and other financial
statements that are required by law. One of the issues with these tools is that a company can lie
on the statement and state that they are doing well when in reality they may not be. They do this
to protect their image so that customers will continue to buy their products and use their services
and not hear in the news that they are financially in trouble and are about to go bankrupt. Not all
companies are able to be successful while lying on financial statements about their financial
position. When companies get caught lying on the income statement and the balance sheet, they
know that they will be both punished and regulated somehow. So “…throughout corporate
America, companies have been adding more outsiders to boards, beefing up crucial committees
and recruiting financial experts to bolster their audit panels” (Leonard and McAdam, 2003, p.
28). For companies that have done this, they have realized that this simply makes good business

sense, they become more respected by not only their local community, but the entire country, and
have an enhanced reputation which leads to greater financial value. For companies that do not
have outsiders perform their audit reports and have their accountants perform them, there is a
possibility of mistakes being done that are normally not done by auditors. “The most important
source of information on an entity’s going concern and cease of an entity’s activity should be…
the annual financial statements and… the auditing report” (Neag and Pascan, 2011, p. 230). With
accuracy from the financial statements via the auditing report, companies can focus their
attention on what needs to be fixed, whether it is to increase an asset or to decrease an expense.
In addition to these two, there are a couple more tools that are used. One of them is the
cash flow statement, which “…records the amount of cash that is entering and exiting a company
during a specific period of time” (G. Andrus, personal communication, April 3, 2014). The other
tool that is used is analytics, which is the discovery and communication of patterns of
meaningful data. These tools that accountants use are only as accurate as the information that is
inputted by them. To determine whether or not they will follow through and record the
information ethically, they have to answer questions that are similar to what employees at a
calculator-making company have to ask themselves. “Texas Instruments employees receive a
reference card to help them make ethical decisions on the job. It includes statements as ‘Does it
comply with our values?’, ‘If you do it, will you feel bad?’, ‘How will it look in the newspaper?’,
‘If you know it’s wrong, don't do it!’, ‘If you're not sure, ask’, and ‘Keep asking until you get an
answer’” (Nichols, Nichols, and Nichols, 2007, p. 38). Accountants will always have to make
ethical decisions under extreme pressure every day. If they were to have a tool like the reference
card Texas Instrument employees are given, they would be more comfortable making ethical
decisions. They would also be able to explain to their superiors why they made the decisions

they did. In addition to having an ethical reference card, another way to resolve ethical dilemmas
in accounting would be to have accountants realize that some actions will work in the short term,
but will catch up to you in the future.
As an employee for an accounting firm, I would want to know how my manager deals
with ethical issues. Being raised in a family that is ethical in their decision making while the
companies they work for might not be goes a long way in determining how I will make
decisions. The decisions my parents make are always ethical and fair. Being in the accounting
industry, we will be having ethical dilemmas every day. So knowing how a manager makes
decisions when a situation appears in our company will help me decide if I will continue working
for that specific accounting firm or if I will put in my resignation from the company. I will not be
working for a company that does not believe in, nor actually put into practice, the ethical
business ideas that make sense to common people. Business entities that are responsible to keep
their ledgers and accounting books all separate from each other is a company I would like to
work for. That proves to me that they have very high organizational and responsibility skills that
they possess. Article 10 of Accounting Law indicates, “The entities set out… shall, as a rule,
organize and keep the books in separate departments, headed by the financial-accounting
director, the accounting officer, or any other person empowered to fill this position” (Neag and
Pascan, 2011, p. 233). If I were to work for either the financial-accounting director or the
accounting officer for an accounting firm, I would like to learn how to keep all of the
information that is gathered separated, recorded, and organized so that the recording and proving
of transactions will be a simple task. I would want to be taught the ethically correct ways of
dealing with every situation. I know that I cannot learn all of the situations in the classroom, but
if I learn a fair amount of them, I know that my job experiences will help me along the way

outside the classroom. An example of this is that in the classroom, I can only be taught the main
dilemmas that I will be dealing with as an employee because of time constraints from the college
and the extent of material that must be covered in any given semester. In real life though, I can
learn much more because most work days are eight hours and more events and situations
naturally happen within that time frame compared to an hour or two twice a week in a college
classroom.
An influence that can have a major impact on my abilities as an employee in accounting
is from an industrialist named Henry Ford. “Henry Ford’s traits included… humanitarianism,
sincerity, simplicity, competence and individuality” (Betton and Hench, 2002, p. 534). As an
employee, I want to know that my manager has these characteristics. Managers like these are
becoming harder to come by, especially since upper management is bottom line focused, forcing
lower managers to be focused like that as well. Although he was a great businessman, Henry
Ford’s business, the Ford Motor Company, was in cooperation with the German military and
made up to 20 percent of all the vehicles they used during World War II. There were stories that
came about after the war that some of the workers were abused and sometimes beaten. They
were constantly pushed and there was no situation in which the workers were evaluated for their
performance. Even though what they were doing was for the war efforts and they technically did
not have to evaluate their workers, the workers might have wanted to know how good of a job
they were doing in producing the military vehicles. “There were also reports in Ford’s files of
beatings of forced laborers. In the fall of 1943, the numbers of such reports were increasing”
(Betton and Hench, 2002, p. 535). There were three reports in three days in October 1943. The
reports were because of mistreatment and beatings of workers by management. As an employee,
I know that if a manager continually pushed me without any type of criticism, encouragement, or

reward and then mistreated or even beaten me, I would feel like I was being used so that they
would reap the rewards of having their goals being met or exceeded. In accounting as an
employee, I have goals to meet as well. Some of these goals I have include completing financial
statements on time, being very accurate within the financial statements, and communicating
effectively with my clients.
As a manager or a leader for an accounting firm, I will want to be as fair and firm as
possible to everyone, do everything that I need to legally and ethically, and not be intimidating
towards anyone. I will also want to implement an open door policy where anyone and everyone
can approach me and talk to me about any situation, whether job related or not. Also, I will want
to be especially sure that my employees are trained and prepared ethically to do their job
correctly. “Because being an accountant is the most trusted profession, if you enjoy working with
numbers and with people, you can go far with being an accountant” (T. Banks, personal
communication, April 29, 2014). Ethics training is absolutely necessary for the success of any
accountant, or any other profession. Without it, companies will not last very long and go out of
business quickly unless the person that invested into the company has so much money that they
can avoid the legal system. The problem with that strategy is that it will not last forever and they
will eventually be caught. Ethics training will be implemented at my accounting firm if anyone
has had an ethics class or not. I will implement an ethics test during the interview process to
determine how much ethics training I will need to invest in a job candidate if I hire them for a
specific job position. College students who are in the accounting field will have to make more
ethical decisions than most professions because of the amount of personal information and other
accounting information they will be in possession of every day as well as goals that they will
have to meet. “As students enter the professional world, they will have to make a wide range of

decisions; thus, it is important that instructors strive to instill in them a commitment to high
ethical standards” (Nichols, Nichols, and Nichols, 2007, p. 37). If college instructors do this,
then the amount of time I will have to spend on college students teaching them ethics will be
reduced.
People today are becoming more sophisticated in what quality products and services
really are compared to what they are not, they are becoming knowledgeable about what products
and services society really needs, and how ethical and unethical products and services affect our
world. Due to these facts, “…the right thing for business and the right thing ethically become one
and the same (Leonard and McAdam, 2003, p. 29). As a manager, knowing that society is
becoming more and more knowledgeable daily, I will make sure that the services we provide and
the actions we perform are ethical, fair, and legal. Religion will play a role in what will be
acceptable behavior and what will not be acceptable. I know that all religions are not the same,
but at the same time, all religions have the same basic principles. “Religious beliefs are
significantly correlated with accounting students’ ethical-reasoning abilities. Accounting
students with religious beliefs tend to present at the higher levels of ethical-reasoning abilities”
(Yi-Hui, 2009, p. 677). I also understand that not all people are religious and that not all people
even go to church, so to counter that, I will make sure that all of my employees use basic ethical
practices, like showing respects towards customers, coworkers, and managers. There have been
studies about accounting firms and their poor choice of ethical decision making. The “…studies
have shown that auditors are willing to allow (material) errors in financial statements as this will
prevent clients from leaving the audit firm” (van Dijk, 2000, p. 298). As a manager, I am not
pleased with that because even though they can do that to keep their clients for years to come,
they are not praising their clients who are accurate on their books. One manager who would not

do this is Henry Ford. He was a model business leader of the twentieth century and became to be
a very popular manager and businessman. He was the archetype of an entrepreneur “…tough,
competent, moral, independent individual freed by wealth from external constraints” (Betton and
Hench, 2002, p. 534). I would like to be as successful as him as a manager. He treated everyone
with fairness and integrity. As the famous saying goes; I would like to treat others in the same
way I would like to be treated, both as an employee and as a manager.

References
Betton, J., & Hench, T. J. (2002). "Any color as long as it's black": Henry Ford and the ethics of
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Breaux, K., Chiasson, M., Mauldin, S., & Whitney, T. (2009). Ethics Education in Accounting
Curricula: Does it Influence Recruiters' Hiring Decisions of Entry-Level Accountants?.
Journal of Education for Business, 85(1), 1-6.
Jennings, M. (2012). Case 4.15- Enron: The CFO, Conflicts, and Cooking Books with Natural
Gas and Electricity. Business Ethics: Case Studies and Selected Readings (7th ed., pp.
233-245). Mason: South-Western Cengage Learning.
Leonard, D., & McAdam, R. (2003). Corporate Social Responsibility. Quality Progress, 36(10),
27-32.
Lv, W., and Huang, Y. (2012). How Workplace Accounting Experience and Gender Affect
Ethical Judgment. Social Behavior and Personality, 40(9), 1477-1483.
Neag, R., & Pășcan, I. (2011). From the Assumption of Continuing the Activity to Insolvency-
Debates and Reflections. Juridical Current, 14(4), 229-236.
Nichols, N., Nichols Jr., G. V., & Nichols, P. A. (2007). Professional Ethics: The importance of
teaching ethics to future professionals. Professional Safety, 52(7), 37-41.
van Dijk, M. M. (2000). The Influence of Publication of Financial Statements, Risk of Takeover
and Financial Position of the Auditee on Public Auditors' Unethical Behaviour. Journal
Of Business Ethics, 28(4), 297-305.
YI-HUI, H. (2009). Associations between the Religious Beliefs and Ethical-Reasoning Abilities
of Future Accounting Professionals. Social Behavior & Personality: An International
Journal, 37(5), 673-678.

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