ACCG 399 Research-Based Assignment
2.Main point 15
3.Main point 27
4.Main point 3….9
Social and professional expectations have been undergone a major shift as the global moves to adopt International Financial Reporting Standards (IFRS) which is a set of accounting standards, developed by the International Accounting Standards Board(IASB) as the global standard for the preparation of public company financial statements. To date, industry focus has been mainly on the technical aspects of IFRS adoption; however, IFRS also is likely to impact the ethical aspect of accountants’ professional judgment, because IFRS requires the use of a more “principled” approach to accounting standards than previously required a rules-based system General Accepted Accounting Practices (GAAP).
IFRS used in Global Fortune 500
Barth, M. W. Landsman and M. Lang (2008, pp. 467-498) provide that with the adoption of a more principled approach to accounting standards, the ethical aspect of accountants’ professional judgment takes on a greater importance, more professional judgment will be needed and more ethical challenges for accountants, because as professionals, accountants are required to act with integrity and professionalism. They need to understand that ethics and compliance are very important in their professional life. Corporate collapse of Enron, WorldCom, and recent banking scandals have shown that unethical accounting practices and ill-judged decisions can have devastating consequences for a firm, individuals, investors and, in the case of audit work, the capital markets.
This report discusses the ethical challenges of accountants and auditors after the conversion from GAAP rules-based to IFRS principle-based. First section will discuss the accountants’ role and the change of ethical thinking way since IFRS has been adopted, based on a Canadian survey which shows the usage of ethical thinking way. Second section briefly discusses the challenges of adopting IFRS with lack of accounting ethical guidance, Vincent J. Love and John H. Eickemeyer (2009) claims as convergence of GAAP with IFRS is probably the most difficult hurdle accountants will face in the future and this will require massive re-education and re-training, which will force firms and companies to spend untold sums of money as well, and finally, ethics has moved to the forefront of pressing issues, thus it will be more critical than ever for accountants to strictly adhere to ethical guidelines in the future.
Firstly, Scott Sims (2009) points that “professional accountants are individuals who have the knowledge and expertise recognized and valued by society. They play a key role in ensuring public trust in financial reporting and business practices. Because of the complexity of accountants’ role, clients and the public at large must rely on their professional judgment and expertise. Professional expertise must be applied with honesty, integrity, professional scepticism, and avoidance of misinterpretation”. However, as the new standard IFRS has been adoption, less understanding of new standards IFRS and change ethical thinking way could be a great challenges for accountants, as the standards has switched from a rules-based system GAAP to a principles-based system IFRS.
Accounting research suggests that accountants can think about ethical issues in one of the three types of ethical thinking way: pre-conventional, conventional and principled thinking. Linda Thorne and Dawn Massey (2006, pp. 30-1) define that accountants use conventional ethical thinking when social consensus, such as accepted practices, rules and laws, define what...