Preview

The Impact of Professional Ethics on Financial Reporting Quality

Best Essays
Open Document
Open Document
2948 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
The Impact of Professional Ethics on Financial Reporting Quality
Australian Journal of Basic and Applied Sciences, 5(11): 2092-2096, 2011

ISSN 1991-8178

The Impact of Professional Ethics on Financial Reporting Quality
1 1-2

Mahdi Mahdavikhou, 2Mohsen Khotanlou

Young Researchers Club, Hamedan Branch, Islamic Azad University, Hamedan, Iran.

Abstract: This research aims to study the impact of professional ethics on promoting quality of financial reporting. The statistical population in this study includes 440 listed companies in Tehran Stock Exchange (TSE) in 2010. Using Krejcie and Morgan 's table for determining sample size, 205 companies were selected as the statistical sample and a 24-item questionnaire was designed to study professional ethics and qualitative characteristics of financial reporting based on code of ethics of International Federation of Accountants (IFAC) and qualitative characteristics of financial reporting of International Accounting Standards Board (IASB), then the questionnaires were distributed among the financial managers of companies. For testing the hypothesis, relevant statistical tests such as the Spearman 's correlation coefficient and other required tests were used. The data collected was analyzed using the SPSS statistical package. The results pointed to statistically significant relationship between professional ethics and quality of financial reporting. Key words: Ethics, Professional Ethics, Financial Reporting Quality, Tehran Stock Exchange (TSE). INTRODUCTION Accountants have obligations to shareholders, creditors, employees, suppliers, the government, the accounting profession and the public at large. In other words, their obligations go beyond their immediate client. Decisions made on information provided by accountants can materially affect the lives of any or all of these stakeholders. Therefore Behaving ethically is an essential and expected trait (Carroll, 2005). As a result, an accountant is responsible for the consequences of his moral choices not only for his own life but also


References: Abu Bakar, N., S. Ismail and S. Mamat, 2008. Ethics of future accounting professionals: Evidence from Malaysia, Journal of Financial Reporting and Accounting, 6(1): 21 - 33. Brenkert, G.G., 2004. Corporate integrity and accountability. Thousand Oaks: Sage, pp: 87-89. Caliyurt, K.T., 2007. Accounting ethics education in Turkish public universities, Social Responsibility Journal, 3(4): 74-80. Carroll, R.A., 2005. Model for ethical education in accounting, In Gowthorpe, C. and Blake J. (Eds.) "Ethical Issues in Accounting" (2nd ed) .Taylor and Francis e-Library, pp: 149-164. Catacutan, R., 2006. A humanistic perspective in teaching business ethics in accountancy, Paper presented at the 6th Annual Ben-Africa Conference University of Stellenbosch, Capetown, South Africa26-28 Strathmore University Nairobi, Kenya, pp: 1-6. Enderle, G., 2006. Confidence in the financial reporting system: Easier to lose than to restore. In: Lu Xiaohe, Enderle, G. (Eds.) Developing Business Ethics in China. New York: Palgrave Macmillan, pp: 163-173. Filipe, J.A., M. Alberto, M. Ferreira et al., 2011. An ethical issue in anti-commons management aquaculture case in Portugal. International Journal of Academic Research, 3(1): 250-252. Gaffikin, M., 2009. Commentary education for an accounting profession, Pacific Accounting Review, 21(2): 170-185. Gammie, E. and B. Gammie, 2009. The moral awareness of future accounting and business professionals, the implications of a gender divide, Pacific Accounting Review, 21(1): 48-73. Gowthorpe, C., 2005. Ethical issues and the auditor. In Gowthorpe, C. and Blake J. (Eds.) "Ethical Issues in Accounting" (2nd ed) .Taylor and Francis e-Library, pp: 135-149. Helps, L., 1994. Should we teach ethics in accounting education? Management Accounting: Magazine for Chartered Management Accountants, 72(6): 46. International Accounting Standards Board (IASB), 2006. Preliminary views on an improved conceptual framework for financial reporting: The objective of financial reporting and qualitative characteristics of decision-useful financial reporting information, pp: 44-58. International Federation of Accountants (IFAC), 2005. Code of ethics for professional accountants, pp: 4-14. Jabbarzadeh Kangarluei, S. and A. Bayazidi, 2010. The investigation of the relationship between ethics values and agency costs in accounting system of Iran. International Journal of Academic Research, 2(5): 345350. Krejcie, R.V. and D.W. Morgan, 1970. Determining sample size for research activities. Educational and Psychological Measurement, 30: 607-610. Luoma, G.A., 1989. Can ethics be taught? Management Accounting, 1: 14-16. Mahdavikhou, M., 2010. An investigation into the effect of applying ethics by accountants on preparing reliable financial information, MA Thesis, Islamic Azad University, Hamedan Branch, Iran, pp: 70-110. Sclove, S.L., 2001. Notes on Likert Scales. Available at: http://www.uic.edu/classes/idsc/ids270 sls/likert.htm. Smith, M.L., 2003. Fresh look at accounting ethics, Accounting Horizons, 17(1): 47-49. Talebnia, G., M. Salehi and S. Jabbarzade Kangarluei, 2011. A study of the impact of collapse on financial reporting quality of listed companies: Some Iranian evidence. African Journal of Business Management, 5(10): 3858-3865. Zakaria, M., H. Haron, I. Ismail, 2010. Knowledge of ethics, perceived ethical problems and ethical judgments, Journal of Financial Reporting and Accounting, 8(1): 50 - 64. 2096
Continue Reading
View Writing Issues

You May Also Find These Documents Helpful

  • Better Essays

    Bus 557 Assignment 1 Graded a
    • 2414 Words
    • 10 Pages

    Bus 557 Assignment 1 Graded a

    The paper will analyze the corporate ethical breaches in recent times, assess whether or not you believe that the current business and regulatory environment is more conducive to ethical behavior. Ethics behavioral aspect of accounting is a special area of accounting that is developed to address such aspect of human information processing behavior, judgment quality, accounting problems created by users and providers of accounting information as well as their decision making skills. Secondly, paper will describe the organization, the accounting ethical breach and the impact to the organization related to ethical breach. Thirdly, this paper will determine how the organizational ethical issue was detected and how management failed to create an ethical environment. In some cases, some company pledged its own stock to ensure that partnerships would be able to borrow money. And when Enron stock started plummeting, the whole thing fell apart. Fourthly, this paper will analyze the accounts impacted and or accounting guidelines violated and the resulting impact to the business operation. They operated as the masterminds behind the system to defraud investors. The banks, by offering fake, illegal and not approved by regulators deals,…

    • 2414 Words
    • 10 Pages
    Better Essays
    Read More
  • Better Essays

    ESSAY ON THE LEGAL ETHICAL AND TECHNOLOGICAL CONCERNS OF THE ACCOUNTING AND FINANCIAL REPORTING OF BUSINESSES
    • 1574 Words
    • 7 Pages

    ESSAY ON THE LEGAL ETHICAL AND TECHNOLOGICAL CONCERNS OF THE ACCOUNTING AND FINANCIAL REPORTING OF BUSINESSES

    The extent and expanse of the finance and accounting branches have been expanding at a considerable step which has also put load on this ground field. Companies and businesses interface their financial rank by producing few outlines to the exterior world so as to retain the interest of employees, shareholders, investors, customers, etc. This statistics is shared in the outline of financial declarations, annual reports, etc which makes it easier on the decision making procedure as well. Besides, showing misleading and untrustworthy reports to the clientele may dare the likeness of the firm which may tremble the interest of the outer parties inside the company. Few of the businesses which have demonstrated the interpreted financial statistics are WorldCom and Enron have drove to disasters, as a result of which investors, shareholders and others have to cause enormous quantity of losses, when these businesses proclaim bankruptcy, years after a healthy financial reports. The principal point of such type of financial announcement is to make it easier when it comes tho decision making process in the field of investment, credit, etc. The environment in which a business functions has an extreme impact on the accounting of that particular business. Countries possess all different past histories, cultures, values, political and economical structures, and they are also in diverse phases of economic development, these are the elements that highly influence the development as well as the operation of the financial accounting operations of the country. With these dissimilarities the financial accounting qualities that are being embraced by different countries differ significantly. There are so many different legal, ethical and technical matter that influence the financial announce as well as accounting. There have been few legal, ethical and technological responsibilities of this reporting of business, that are as follow:…

    • 1574 Words
    • 7 Pages
    Better Essays
    Read More
  • Better Essays

    Acc/325 Phase 2
    • 983 Words
    • 4 Pages

    Acc/325 Phase 2

    Ethics plays such an important role in the business world. There are organizations and boards that set guidelines specifically to improve the work environment and help control the amount of ethical dilemmas. The SEC works as the head quarters for these boards and has developed many new guidelines since the crisis of the early 2000’s. The International Ethics Standards Board for Accountants (IESBA) has established ethical standards and guidelines for accountants similar to those of the AICPA’s Rules of Conduct. There are many organizations that are working in unison to create the best atmosphere for the business world and those involved.…

    • 983 Words
    • 4 Pages
    Better Essays
    Read More
  • Powerful Essays

    Acc 556 Assignment 2
    • 4988 Words
    • 12 Pages

    Acc 556 Assignment 2

    Steven R. Jackson, Roby B. Sawyers, J. Gregory Jenkins (2009).Managerial Accounting: A Focus on Ethical Decision Making. 5th ed. Ohio: South- Western Cengage Learning. Page 386.…

    • 4988 Words
    • 12 Pages
    Powerful Essays
    Read More
  • Best Essays

    Nortel Case Report
    • 3865 Words
    • 16 Pages

    Nortel Case Report

    2 Mintz, Steven M., and Roselyn E. Morris. Ethical Obligations and Decision Making in Accounting: Text and Cases. New York, NY: McGraw-Hill/Irwin, 2011.…

    • 3865 Words
    • 16 Pages
    Best Essays
    Read More
  • Good Essays

    Legality & Ethicality of Financial Accounting
    • 917 Words
    • 4 Pages

    Legality & Ethicality of Financial Accounting

    Cited: Mintz, S. M. (2011). Ethical obligations and decision making in accounting (2nd ed.). New York: McGraw-Hill/Irwin.…

    • 917 Words
    • 4 Pages
    Good Essays
    Read More
  • Better Essays

    Analyzing Ethical Behavior
    • 920 Words
    • 4 Pages

    Analyzing Ethical Behavior

    When functioning in the corporate world, it is an essential to include moral ethics. Ethics is also particularly imperative when laboring with financial information. It is very hard to have faith in someone managing plenty of money. Corporations in the past have distorted their financial statements in regulation to look superior to stockholders, without thinking of the penalty that may be a consequence if they get caught. If a corporation does not encourage good quality ethical conduct within the business, it is difficult to confide in the financial statements.…

    • 920 Words
    • 4 Pages
    Better Essays
    Read More
  • Satisfactory Essays

    Kermsis G. F. And Kermis M. D.
    • 414 Words
    • 2 Pages

    Kermsis G. F. And Kermis M. D.

    Kermis G.F. and Kermis M.D. stresses that “Accountants’ failure to reflect ethically on the dilemmas they encounter in their work may lead them to make wrong decisions” (Senaratne, 2013). For this reason, ethics guides accountants and other makers of the corporation’s financial reports to include findings and data based on relevant sources. Top managers directed by ethical values develop effective leadership skills as well (Duggar, 2011). In this case, employees respect, trust and believe in them. Thus, it will lead to accountable financial statements that the corporation can use to make better decisions for the sake of the business in the distant future. These financial statements can be beneficial to other professional and to some practicing accountants as well.…

    • 414 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Good Essays

    Reporting Practices and Ethics Paper
    • 996 Words
    • 4 Pages

    Reporting Practices and Ethics Paper

    This paper is about information that will address financial reporting practices and ethics. It will address four financial management functions, summaries that accept accounting principles by generally accepted accounting principles (GAAP).It will also give an example from an article that has reflected ethical standards of conduct and financial reporting.…

    • 996 Words
    • 4 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    Accounting Assignment Week 1
    • 273 Words
    • 2 Pages

    Accounting Assignment Week 1

    It is important for a professional accountant to understand the ethic trends because we need to know the expectations of the public. After Enron and other banking issues caused some major changes in the new expectation in the business world. The ethics trends have slowly been changing but after what happened with set everything in place to set higher standards for the ethics. The accountant must understand the consequences of cutting corners and acting unethically. Times are changing and with the increased risk of errors causing problems for the company and its employees there is a large concern for accountants to understand the ethical…

    • 273 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Better Essays

    Review of Accounting Ethics
    • 1026 Words
    • 5 Pages

    Review of Accounting Ethics

    Ethics is a very important aspect of accounting and should be taken very seriously as accountant. Shareholders, potential shareholders, and other users of the financial statements rely heavily on the yearly financial statements of a company as they can use this information to make an informed decision about investment. The opinions of the accountants who prepared the statements, as well as the auditors that verified it, to present a true and fair view of the company. Knowledge of ethics can help accountants and auditors to overcome ethical dilemmas, allowing for the right choice that, although it may not benefit the company, will benefit the public who relies on the accountant/auditor 's reporting.…

    • 1026 Words
    • 5 Pages
    Better Essays
    Read More
  • Best Essays

    Ethics in Accounting
    • 1406 Words
    • 6 Pages

    Ethics in Accounting

    Corporate ethical breaches in recent times have raised questions about whether the current business and regulatory environment is conducive to ethical behavior. Cases leading to regulatory changes through scandalous financial reporting include Enron, Worldcom, Tyco, HealthSouth and others (Enofe, 2010, p.54). Since the barrage of scandals in the early 2000’s, regulatory bodies like the Federal Accounting Standards Board (FASB), Securities and Exchange Commission (SEC), and law reform like the Sarbanes-Oxley Act 2002 have worked to improve the standards and principles used in accounting and financial reporting. The FASB is “the designated organization in the private sector for establishing standards of financial accounting that govern the preparation of financial reports by nongovernmental organizations,” (www.FASB.com, 2013) and is considered the authoritative body by the SEC. The SEC oversees and inspects securities firms, private accounting firms, etc. in an effort to ensure the integrity of financial reporting for investors (www.sec.gov, 2013). The Sarbanes-Oxley Act of 2002 was written to “reduce unethical corporate behavior and decrease the likelihood of future corporate scandals,” (Weygant et al, 2012, p. 7).…

    • 1406 Words
    • 6 Pages
    Best Essays
    Read More
  • Good Essays

    Personal Ethics Paper
    • 6307 Words
    • 26 Pages

    Personal Ethics Paper

    When one takes an ethics course, several thoughts may come to mind. Some examples of these thoughts include, “This class is useless. How will it help me in my career? Why is this class even required?” However, I believe ethics is a very important topic, especially to myself because in less than two years, I will enter the business world as a professional accountant. As an accountant, we are responsible to report the financials of a company. Investors depend on these financials to decide which company or companies they will invest their hard earned money. If these financials were skewed by the accountants or upper management for merely personal benefit, an investor could be fooled into investing into a company who is about to declare bankruptcy or in serious financial trouble. The investor could then lose their hard earned money due to lack of ethics from the accounting department. This is why ethics means to me to always be honest and do the right thing even if it causes harm to yourself.…

    • 6307 Words
    • 26 Pages
    Good Essays
    Read More
  • Good Essays

    Ethical Considerations in Financial Management
    • 515 Words
    • 3 Pages

    Ethical Considerations in Financial Management

    In this article, the ethical considerations that are involved for financial decision-making are that the American Institute of Certified Public Accountants (AICPA) follows a professional ethics code of conduct. This code requires that all accountants use these codes in their business operations to guide them in the use of professional and ethical behavior. Also required by the AICPA is that all accountants are willing to make a pledge or commitment to use honorable behavior in their practices, even if this is at the expense of any personal benefits (Think+Up, 2011).…

    • 515 Words
    • 3 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    Accounting Ethics Wk 3
    • 350 Words
    • 2 Pages

    Accounting Ethics Wk 3

    References: Mintz, S. (2011). Ethical Obligations and Decision Making in Accounting: Text and Cases (2nd ed). McGraw-Hill Learning Solutions. Retrieved from http://devry.vitalsource.com/books/0077586859/id/id_0078025281_001_001750…

    • 350 Words
    • 2 Pages
    Satisfactory Essays
    Read More

Related Topics