Accounting Ethics

Iris Stuart is Professor of Auditing in the Department of Accounting, Auditing and Law at NHH (Norwegian School of Economics), Bergen, Norway. Bruce Stuart is a philosopher with a degree in American Studies who currently lives in Bergen, Norway and is working as a writing consultant for the Department of Accounting, Auditing and Law, NHH.Lars Jacob Tynes Pedersen is an Associate Professor in the Department of Accounting, Auditing and Law at NHH, Bergen, Norway where he teaches accounting ethics, business ethics and corporate social responsibility.

• Preface ixAcknowledgments xiPart I Purpose, Background, and Approach 1Chapter 1 The Technical and Ethical Responsibilities in Accounting 3Accounting, Ethics Reform, and You 3A Brief History of Accounting Ethics in Higher Education 7The Authors’ Perspective 9Accounting Education: Training for Competency and Moral Philosophy as a Resource 13Accounting Theory and Ethics 15Accounting Discourse: Knowledge Production and Communication 17Accounting as Practice: The Realization of Internal Goods and Virtues 20Chapter Review Questions 23References 24Chapter 2 Decision Making in Accounting 26The General Nature of Decisions and Decision Making in Accounting 27Making a Decision Under Conditions of Uncertainty 28The Learning of Technical Competency in the Classroom and Mentored Work Experience 29The Goal of Accounting: The Production of Financial Reports for Various Stakeholders 30A Working Definition of Ethics 36Utilitarianism 39Deontology 40Virtue Ethics 41Social Contract Theory 43A Decision Model for Accounting Ethics 45Outline of the Book 53Chapter Review Questions 55References 55Part II A Decision Model for Accounting Ethics 57Chapter 3 Defining the Problem – From an Accounting and an Ethical Point of View 59Introduction 60Problem-Definition: Finding and Formulating the Problem 61The Accounting Problem and the Ethical Problem 63Finding the Problem in Accounting Ethics 68Formulating the Problem in Accounting Ethics 73Summary 77Chapter Review Questions 78Cases 78Chapter 4 Accounting Standards for Financial Statements: Resources for Decision Making 81The Objective of Financial Statements 82Using Rules for Financial Statement as a Resource to Make Accounting Decisions 83The Conceptual Framework 84The Financial Statements 85Accounting Rules for Recording Transactions and Valuing Accounts 88Quality of Information 92Ethical Issues Associated with the Profit or Loss Statement and the Statement of Financial Position 93Fraud and Ethics 101Chapter Review Questions 104Cases 104Chapter 5 Moral Philosophy and Ethical Reasoning: Resources for Decision Making 116Toward an Ethical Framework in Accounting Practice 117Using Moral Philosophy Principles as a Resource to Make Accounting Decisions 119The Philosophical Traditions, Duties, and Virtues 120The Elements of Moral Philosophy Embedded in Accounting Practice: Utilitarianism 121Summary 123The Elements of Moral Philosophy Embedded in Accounting: Deontology 124The Deontological View of Human Nature: Reason, Freedom, and Autonomy 125Virtue Ethics and Accounting 133Chapter Review Questions 143Cases 144References 149Chapter 6 Professional Ethics as a Resource for Decision Making 151Accounting and Professional Ethics 152Professional Ethics as a Resource to Make Accounting Decisions 152Accounting as a Profession 153Professional Ethics 156Codes of Ethics as Tools for Decision Making 159The Code of Ethics for Professional Accountants 160Using Professional Ethics in Decision Making in Accounting 166Summary 169Review Questions 170Cases 170Chapter 7 Stakeholders in Accounting Ethics: Pressures and Conflicts of Interest 178Accounting and Stakeholders 179Stakeholders and their Influence on Accounting Decisions 180Characteristics of Stakeholders 182Classifying Stakeholders in Practice 185Pressures on the Accountant in the Decision-Making Process 189Conflicts of Interest 190Summary 193Chapter Review Questions 194Cases 194Cash Fraud 195Long-Term Debt Fraud 196Misappropriation of Assets 196The Auditors 196References 202Chapter 8 Generating and Assessing Decision Alternatives: Practical Wisdom and Action 203Introduction 204Reflections on Our Decision Model 205Year-End Adjusting Process, Adjusting Entries, Bad Debt Expense Estimates 206A Violation of Accounting Standards? But Not an Ethical Problem? 213Internal Controls and Embezzlement 215To Bribe or Not to Bribe: That is the Question 216Reflections on Case Analysis: Practical Wisdom and Deliberative Judgment 221Human Motivation and Behavior: Incentives and Support for Ethical Action 224Chapter Review Questions 225Cases 225References 232Part III Accounting in Society 233Chapter 9 Auditing Ethics 235The Role and Responsibilities of the Auditor 235Values, Standards, and Virtues in the Professional Codes of Conduct 236Audit Judgment 242Appendix 260Chapter Review Questions 263Cases 263References 269Chapter 10 The Accountant in Society: Deciding for Ethical Action 270Chapter Themes 271The Individual Accountant: Making Ethical Decisions 271The Social Context for the Accountant’s Decision Making: The Ethical Domain 272The Moral Structure of Accounting: Economic Events and Accounting Discourse 274The Perception that Accounting is Only a Technical Craft, But Not an Ethical Practice 276Professionalism in Social Context 277The Accountant and the Profession in the Market and Society 279The Mixed Good of Accounting Discourse: Market Values and Accounting Ethics 283Market Values and Accounting Values: The Social Domain of Accounting Ethics 284Market Values and the Function of Accounting 285Social Contract Theory 288Corporate Social Responsibility 291Chapter Review Questions 293References 294Index 297