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Accounting Ethics: A Practical Guide for Professionals.

Accountants, perhaps more than any other professionals, are expected to be accountable. So, what happens when professional duties come into conflict with moral principles? How are individual accountants to think and act when they face more conflicts? Does the account owe loyalty to the client or to the law - the greater good? For example, should an auditor who realizes during an audit that a client has been underreporting income to the Internal Revenue Service provide that information to the IRS?

For the purposes of this book, the frame of reference for balancing conflicting duties is the accounting profession, with its code of ethics and longstanding commitment to honest reporting. The authors note the skepticism of the public regarding accountants in general and auditors in particular. As an attorney, I also am acutely aware of the stinging criticism leveled by the public who frequently feel both unfairly reliant on the accounting profession and misled or victimized by the persons they must rely upon.

This book provides an overview of ethical theory and then considers the following specific areas: independence, whistle blowing, mentoring, law and ethics (audit failures), conflicting moral duties (seeking loopholes, issues not affecting the financial statements), professional relationships, gender issues and social responsibility accounting. It is not a rule book; it does not provide sure guidelines, for all imaginable events, nor is it a religious work.

The book, a good treatment of some of the more typical ethical dilemmas faced by accountants in today's society, consists of a pinch of theory (a review of the fundamental systems of ethical analysis), mixed with a healthy dose of real-life situations. The two potions are then mixed and the results are studied. Each chapter closes with hypothetical cases illustrating some of the key conflicts discussed in the chapter, complete with questions to assist the reader in applying the systems of ethical analysis to the case.

The strengths of the book are its organization, its enumeration of potential ethical conflicts and its offers of a theoretical framework for considering the conflicts.

The authors, an accounting professor and a "liberal professor of interdisciplinary humanities" also known as an "a ethics," note that accountants, due to the rigors of professional practice including the need to constantly stay breast of new developments and standards, do not have many opportunities to step back and ask, "What are we doing and why are we doing it?" The book affords us just such an opportunity to scrutinize our personal values and the values of our profession.

The shortcomings of the book are few, and most result from not considering a broader audience, particularly government accountants. The focus is clearly on the private sector. In most scenarios the accountant is either in a CPA firm which is auditing or providing other services to a corporate client, is an internal auditor in a corporation or is an employee of a corporation. Some issues such as whistle blowing and mentoring apply to both government and private-sector situations.

Finally, the authors recognize that accountants like certainty and may be disappointed when definite answers are not possible. I believe that accountants do not always have to have "the answer" to a particular situation. But I was left with the feeling that although the theory presented was interesting, the "bottom line" usually involves weighing the relative costs/risks.

The theoretical framework of the book embraces two fundamental systems - utilitarianism and deontology - and the authors provide a concise and readable discussion of these two philosophically antagonistic systems. The utilitarian approach requires us to to look to the consequences of our acts for their moral justification. This is a form of moral relativism - rights and duties have no independent values. The goal of the actor should be to maximize good or pleasure and minimize evil or wrong. Thus, utilitarianism involves weighing the relative good and evil resulting from engaging in the convlicting courses of action. The authors point out that most accountants can relate to the utilitarian model by considering its analogy to a cost-benefit analysis.

Deontology disregards the consequences of actions. The emphasis is on the features of the act itself, underlying fundamental principles, rules and maxims, and not merely the results. Classical deontology identifies seven prima facie duties considered to be intuitive: fidelity, reparation (righting wrongs), gratitude, justice, beneficence (doing good), self improvement and nonmalfeasance (doing no harm). In its most extreme form, deontology is a very rigid system. For example, any lie, regardless of its consequences, would be unacceptable.

A more moderate approach to deontology, employing what is known as the "practical imperative" rather than the "categorical imperative" calls for the actor to consider the consequences of his or her actions in order to take the course of action that will result in a greater number of good duties being met and a greater number of bad consequences being avoided. This softening of the traditional deontological view not only approaches the utilitarian perspective, but also invites subjectivity on the part of the actor since the relative values of the competing duties are up to the actor.

The final chapter of the book discusses the concept of social responsibility accounting - developing criteria for financial statement presentation measuring the balance of the costs of companies reporting adherence to social responsibility with the costs of not doing so.

The authors discuss the fact that when most people are made aware of the different ethics systems, they tend to blend the systems rather than to select one over another. Although the examples in the book and the cases and related questions refer to the two main ethical systems and their derivatives the authors do not advocate any one system.

Although the book does not focus on the government sector and does not necessarily provide answers to moral dilemmas, I would recommend it as an opportunity to step back and reflect on what it means to be a professional. As the authors point out, as professionals, accountants have a moral contract with society. The continued influence and respect of the profession depends upon a moral contract among the members of the profession. Understanding debits and credits is necessary to our our work, but an occasional moment to reflect on our role in society is essential to a full appreciation of our profession.

It is ironic that at a time when the world is looking to the economic and political system of the United States as the ideal, many of our own citizens are more distrustful of our system than ever before. It has often been said that great intellect, without a moral reference, is incomplete. Perhaps books such as this one can help to balance our education and training.

Available for $39.95 from Quorum Books, 88 Post Road West, Westport, CT 06881 (203/226-3571).
COPYRIGHT 1991 Government Finance Officers Association
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Author:Hayes, Arthur A.
Publication:Government Finance Review
Article Type:Book Review
Date:Dec 1, 1991
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