BAT4M - Ethics in Accounting

Where do ethics fit in?

Expectations

The Accounting Cycle

• ACV.03: demonstrate an understanding of ethics and issues in accounting.

Learning Goals

By the end of this activity you will be able to:

• reflect on the ethical issues facing business people and accountants
• examine current accounting issues

Success Criteria

I will know I am successful when:

• I can research and report on information related to accounting careers and/or accounting issues
• I can discuss the findings of other students and make valid comments about their reports

Texbook

pages 19-21, 32

Purpose

Accountants are expected to perform their job accurately and appropriately. They may be placed in positions where there is a conflict of interest (two competing objectives). Examples of conflicts include:

• Accounts should honestly report financial statements but their firm will receive more business if they give companies a favourable report (Objectivity Principle).
• Whistle blowers should come forward to advise shareholders about any material concerns about the business but if they do, they may not be protected (Full Disclosure).

Accountants have legal, professional and moral responsibilities to balance with their job duties.

What are some of the characteristics of an ethical accountant?

A Small Case Study

Nortel Canada

• Video: http://www.youtube.com/watch?v=7n8jF5uZFEA
• Text: http://www.canadianbusiness.com/business-news/industries/technology-industry/nortels-cookie-jar-accounting-reserve-becomes-focus-of-trial/

What are some of the accounting principles or ethical values that were/were not violated in this case?

A Larger Case Study

Bigger than Enron

When Enron failed in 2001, it was a shock to the business world not only because it was one of the largest companies in the world but because the checks and balances in the system, such as government regulation and external auditors, failed to identify the problem.

The Federal Government was criticized for pushing deregulation that favoured Enron while receiving campaign donations from the company, which was also tied to George W. Bush. Arthur Andersen was fined for eschewing its responsibility to accurately report on Enron’s financial state and painting the company in the best possible light.

To Hand In After the Video and Discussion

• Hand in Thursday: Conflicts of Interest

For More Information

Professional Designations

One of the specific expectations of the course is to recognize the differences between Chartered Accountants (CA), Chartered Management Accountant (CMA) and Chartered General Accountant (CGA). Each required different post-secondary courses and professional certifications and is suited for different positions. A CPA was more likely to be involved in the preparation of financial statements and other accounting practices, a CMA might help interpret accounting information in order to make decisions and a CGA had a broader background in business.

To eliminate some of the overlap between the professional associations and reduce confusion, Canadian accounting associations merged in January 2013 under the auspices of CPA Canada. A designation - Chartered Professional Accountant - and training program is under development throughout Canada. It is in place in Ontario currently. Members retain their current designation and add CPA to their credentials.

• Textbook, page 27.