Ethics and the CPA: Building Trust and Value-Added Services

Ethics and the CPA: Building Trust and Value-Added Services

Ethics and the CPA: Building Trust and Value-Added Services

Ethics and the CPA: Building Trust and Value-Added Services

Synopsis

"A society without truth-and the related quality of trust-will not long endure." -from the Preface Ethics in corporate America has become a bottom-line issue. Scandals such as the junk bond debacle in the late '80s and the recent bankruptcy of Orange County, California, graphically illustrate just how devastating losses from corrupt business practices can be. Closing the rift between a company's public and private face, its avowed as opposed to actual behavior, is now more than ever the concern of the accountant. Examining a firm's business records and practices has traditionally placed the accountant in the role of watchdog. And in a corporate world where ethical ambivalence can complicate even the most routine business decision, a trusted accountant can guide a company toward a revived sense of purpose, showing it how to live up to its own expressed ethical standards-leading the way to new business, increased profits, and cost savings. Ethics and the CPA details just how an accountant can assess a company's ethical health as part of a rigorous accounting regimen-and institute corrective measures. The book begins by clearly defining the accountant's role in the area of "ethical services," with specifics on establishing and performing an audit on an ethics-based program for business, governmental, and not-for-profit entities. Issues such as the specific knowledge, competencies, and attitudes essential to the professional providing ethical services are also discussed. The second part of the book takes the ethical pulse of the contemporary business environment, analyzing some notable ethical failures in well-known companies as well as the range of regulatory demands on CPAs, including the requirement for finding unethical/illegal behavior (SAS 82) and SEC oversight responsibilities. Also included are the results of an ethics survey report on CPAs given to state CPA societies, regulatory bodies, and industry. Finally, part three looks at the framework and issues surrounding developing and leading an in-house ethics program, as well as the elements of an effective ethical program, developing an ethical oversight committee, benchmarking an ethics program, marketing ethical services, and the ethical challenges in the new millennium. Ethics and the CPA is a practical handbook for the accountant on guiding one's clients toward an improved bottom line and financial stability-through impeccable conduct from the boardroom on down. Ensuring your client's continued financial prosperity -with an in-house ethics program. Keeping a firm financially healthy has become more and more a question of monitoring its ethical pulse. Assessing the on-the-job behavior of managers and employees and how closely it measures up to their expressed codes of conduct has now become part of a CPA's overall financial review function. And building an in-house ethics program that both leads and inspires has become one of the key measures of an accountant's success. Ethics and the CPA describes how to make "ethical services" part of the accounting regimen, with specifics on establishing and performing an audit on an ethics-based program for business, governmental, and not-for-profit entities. It also surveys the contemporary business environment, analyzing some notable ethical failures in well-known companies as well as the host of regulatory demands on CPAs, including selected laws and regulations illustrating the range of compliance expected in the United States. The book also provides the specifics of setting up an effective ethical program, developing an ethical oversight committee, benchmarking an ethics program, marketing ethical services, and the ethical challenges in the new millennium. The essential guidebook on how to incorporate ethical services into an existing accounting practice, Ethics and the CPA shows accountants how to make their clients' bottom line an ethical one.

Excerpt

Has tolerance for corruption and fraudulent behavior in the workplace reached a point of serious concern? There is some evidence that the answer may be “yes.” A million dollar takeover of a securities firm was halted because of uncertainty about potential legal and regulatory inquiries about the practices of the targeted firm. The acquirer was stung by the financial collapse of Orange County (California), for which a penalty of $30 million was paid in 1997 and of $400 million in 1998. Yet, the securities firm was still not completely free of the legal consequences of Orange County's bankruptcy. A major insurance company announced plans for a new organizational structure. Some policy holders expressed skepticism as to the promises being made in the light of the company's sales practices, which led to a class action suit. Analysts estimated that the unethical practices may cost the company as much as $1.5 billion.

Attention to ethics in U.S. society reflects a far more sophisticated expectation on the part of the public than was the case in earlier decades. Not only are pressures for ethical behavior mounting, but there is a desire for verification of what is proclaimed to be true—to know the reality. Therefore, a new role for independent public accountants has developed.

CLAIMS ABOUT ETHICAL BEHAVIOR

Leaders of all types of organizations make claims about the quality of ethical behavior that they maintain in their organizations. They often point to wellwritten codes of conduct and to company policies and procedures to support their efforts. In fact, some businesses acknowledge their attention to ethics in management statements that appear in annual reports. The following is illustrative of such a statement:

Management … recognizes its responsibility for fostering a strong ethical climate so that the company's affairs are conducted according to the highest standards of personal and corporate conduct. This responsibility is communicated to all employees in a variety of ways, including training sessions. The Ethics Program is based upon a document called “The Standards of Ethical Business Practices.” The standards address, among other things, the necessity of ensuring open communication within the company; potential conflicts of interest; compliance with all domestic and foreign . . .

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