Ethics and Auditing

Topics: Ethics, Enron, Business ethics Pages: 5 (1675 words) Published: February 14, 2010
As the world of accounting rapidly grows and expands, so does the issues and complications associated with the process. The auditing process is a major part of Accounting. The issues about ethics in relation to Accounting process are becoming a more serious problem in today’s world. The Accounting process is highly sensitive, because it deals with what many people consider one of the most important thing in life: “money” Accounting incorporates a variety of functions- such as auditing- in which activities must be carried out with utmost care, adequacy and most importantly, the appropriate use of ethical judgments.

The public generally depends on auditors to provide accurate information in regards to financial data. Auditors are supposed to be highly skilled in their occupational field, and very trustworthy because they are dealing with the financial data concerning people and organizations. In this day and age, the trust that people embed on auditors has drastically declined due to the high profile financial disasters involving accounting fraud and deceptive acts. These events have reduced the high integrity that was once associated with Accounting professions, and has made the public very suspicious of auditors.

In the article, Ethics and Auditing Culture: Rethinking the Foundation of Accounting and Auditing, David Satava and his co- authors believe that the root of all the problems and fraudulent actions in Accounting is the fact that the people involved are abusing and manipulating the rules of accounting practices. The fact that financial accounting originated and functioned strictly on a rule basis provided an opportunity for people to bend the rules and get away with illegal actions including the infamous scandals associated with Enron, Arthur Andersen, Martha Stewart, etc.

Many accountants rely heavily on rules, even when it is clearly not the right or moral course of action. Although, it is good to follow rules, people tend to abuse rules sometimes by purposely interpreting them in a way that benefits them personally and thus becomes illegal. Rules basically provided a road map for some accountants to get around something because there are always a number of “gray zones” that are not obviously illegal but also not okay. A former accountant at Enron admitted that rules created opportunities for them to use the literature of it to their advantage. “we got to where we did because we exploited that weakness” (Satava 273).

In the Enron Scandal, much of their actions were out in the open, but the people who were affected chose to ignore the signs, and rather focus on the benefits “The business press which could have looked more closely at Enron‘s financial statement, couldn’t be bothered; the media was utterly captivated by the company’s transformation from stodgy pipeline to new economy powerhouse. and of course there any number of Enron’s own employees who could see for themselves how the company was making its numbers. And yet, they all chose not to make the logical leap, to see where it was inevitably headed. Instead, they all chose to believe” (Satava 273).

The main problem with Enron and its associates was the fact that they took a rule, exploited and manipulated it into becoming a whole new rule that fit to their own benefit, and then they completely believed in this new rule. No one was willing to step outside the box, and see what they were really doing to the public and themselves because they have formulated strong rationales of why their techniques were valid, and they were going to stuck by these rationales no matter what. They failed to look beyond the circumstances and examine the negative impacts that could surface from their actions, towards the general public and themselves.

Despite the fact that Enron was completely exposed of its fraudulent acts, the staff and staff of this company continued to maintain their innocence, claiming that they never took any actions that...
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