Research Paper on Benevolence and Professional Judgement

Introduction

Accounting profession survives on the degree in which the public has confidence in its service delivery. The public trust is achieved through legislation and enforcement of the norms and standards that govern service delivery (Sullivan, 2004). These ethical codes enable practicing accounting members and organization behavior monitoring and control. This has been implemented through the AICPA Code of Professional Conduct. AICPA is an accounting oversight body which has been authorized to review, document and act as a reference in ethical decision making.

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The accounting firms across the world who have adopted these core values are realizing reduced unethical behavior among employees. The AICPA code dwells on the following three principle trust characteristics; professional judgment, ability, benevolence, and integrity. Integrity ensures a strong relationship between trustor and trustee whereas benevolence is the level in which a trustee needs to act well to the trustor. Ability implies the capabilities, qualities and professional skill to carry out an accounting task. These as defined in the literature are the main pillars of enhancing public trust in the field of accounting and promoting the accounting firm or member integrity. The adoption of these codes is relative to a firm underlying norm in ethical decision making.

In the subsequent chapters, benevolence and professional judgment will be dealt with in detail. Benevolence ensures the CPAs prioritize and conserve the welfare of the customers or people with whom one is supposed to serve by accepting to undertake a given responsibility to them. AICPA code of ethics provides that quality of services delivered to the clients is dependent on the member's willingness to render them. Benevolence ensures that firms and individuals observe quality control and assurance to deliver high-quality services. The AICPA has implemented this code by setting up auditing requirements. It clearly states that these firms should ensure the interests of the public are prioritized, demonstration of commitment to service and preserving the trust bestowed upon by the public and should not be subordinated for personal gains, and advantage. Majority of accounting exercising persons and organizations have honored auditing standards prescribed by availing their financial records and statements to the general public.

Any person exercising an accounting profession should deliver their services diligently without expecting a reward or other personal gains. The public is the central focus in service delivery and should supersede personal interests. The client's or public expectation is that the certified public accountants (CPAs) observe these codes; they are honest, and loyal while delivering services to them. The CPAs should not deliberately ignore these codes while serving the public. During auditing, auditing principles outlined by the AICPA code should be observed. The mandated individual/auditor should maintain their client's information as confidential. The client should feel secured and their confidential information protected (Akers, 2011).

Additionally, in exercising true professionalism, the auditor should not alter, distort and manipulate the audit findings. Audit findings should be free from malice, and the auditor must not utilize the information for their motives beneficial to them financially. AICPA initiatives to curb malpractices arising in the accounting profession, including providing investor training and advisories on norms and standards in financial reporting.

AICPA defines professional judgment refers to the application of relevant training, knowledge, and experiences within the context provided by relevant professional and technical standards, as applicable, in making informed decisions about courses of actions that are appropriate in the circumstance (AICPA, 2015). Accounting professionals make a sound judgment by relying on stipulated professional work standards and norms. In the professional judgment, the ethics standards and norms act as a reference in conflict resolution and dilemma situations.

Professional ethics should prevail over personal interests. CPAs and accounting firms' operations should be guided by the AICPA code of ethics rules and regulations. The guidance tackles the current and emerging issues affecting the members while on duty exercising their profession (AICPA,2015). Members who consult these codes while making professional judgment are said to make an ethical decision.

Ethical decision making relies on professional judgment rather than a personal point of view. The individual framework while making an ethical decision is based on the following four bullets. First is the ethics system which is an individual approach when solving a professional related problem. Second, is the ethics application perspective, which can be described by an individual way of handling a challenging situation at hand and involves reference to the standard norms and practices. The third is the orthodox reasoning which is an individual moral view on the organization level of requirements in terms of the application of standard rules during service delivery. It defines moral authority in terms of external, transcendent influence, and finally, the level of moral reasoning which refers to how often an individual rely on standard reference and AICPA code of professional judgment to solve a problem or a conflicting situation in accounting (Sullivan, 2004).

Effective professional judgment depends on these four individual characteristics and determines the ability to solve an accounting dilemma adequately. It's imperative to note that personal judgment in resolving accounting challenges is based on individual personal ethics. The AICPA encourages the use of professional judgment rather than an individualistic approach in establishing a comprehensive, adequate, ethical and conclusive judgment. These decisions solidify individual and profession public confidence.

Professional judgment prohibits accounting individuals from subordinating their judgments when performing professional duties or voluntarily. Opinion difference between workmates, seniors, employer, and clients should be harmonized within the scope of work ethics. Accordingly, the member should apply accounting principles, auditing standards or any relevant professional standards that safeguard them appropriately while making a professional judgment.

This is to enable them to make an appropriate judgment when the resultant opinion difference threatens their integrity and ethical objectives. Any conclusion made by the member during these states should be consulted among colleagues and his or her supervisor.

From the narrative, the need to employ the three core trust principles is because of the need to promote public trust while exercising accounting duties. The need for ethics code culminated due to the historical backgrounds involving corruption scandals, businesses accountability failures and questionable integrity among the accounting workforce. Enron and WorldCom corporate misconduct are a good case study in defining the need for ethical codes in accounting (Dibra, 2016). Enron Corp which was referred to as a darling of wall street soared high financially before experiencing a dramatic collapse in 2001 when it was declared bankrupt.

The company's head spiked its shares by undertaking mark to mark accounting. The company was traded at the existing market value rather than by its book value. They inflated their shares despite making losses hence maintaining its market value while writing off its profits. This technique was good for trading securities; however, detrimental to the real enterprise. WorldCom, on the other hand, was a giant telecom company which became one of the biggest accounting scandals in the history of U.S. The company operated by cooking its accounting books leading to collapse. The company inflated its net income by capitalizing expenses with investments (Computer fraud and security, 2002). The failure of these two companies was a result of gross accounting malpractice and poor corporate governance. These deficiencies included a lack of professional judgment in decision making, deliberate dishonesty to the investors and the public, and non-benevolent behavior.

In order the mitigate these malpractices and ensure public confidence, the accounting discipline has undertaken numerous steps and measures to ensure total quality. First is the development of regulatory bodies, customer focus, promoting self-integrity, and education of the accounting professionals. However, despite the giant steps in curbing these accounting malpractices, numerous challenges are encountered along. These include the adoption of modern technology, i.e., artificial intelligence. The accountants and the public will take time to familiarize with the new sophisticated technology as they evolve from a traditional approach. Additionally, cyber-crime is a global threat in accounting. The second is the formulation of new policies governing regulations and the associated disclosure rules, and thirdly the globalization of standards and reporting.

Conclusion

In conclusion, the development of a strong corporate governance framework involving the application of the professional code of ethics by the accounting firms and members is important to protect the public and associated stakeholders, uphold investor confidence, and as a pipeline in attracting foreign direct investment (FDI). Integrating holistic approach while exercising the accounting profession will serve as a long-term solution in enhancing public trust.

References

AICPA. (2015). Code of professional ethics. Chicago.

Akers, M., & Giacomino, D. (2011). Ethics And The Accountants' Code Of Conduct. Journal Of Applied Business Research (JABR), 16(3). doi: 10.19030/jabr.v16i3.2045

Dibra, R. (2016). Corporate Governance Failure: The Case Of Enron And Parmalat. European Scientific Journal, ESJ, 12(16), 283. doi: 10.19044/esj.2016.v12n16p283

Gibbins, M. (1984). Propositions about the Psychology of Professional Judgment in Public Accounting. Journal Of Accounting Research, 22(1), 103. doi: 10.2307/2490703

Mintz, S. (2008). Incorporating the Principles of Professional Conduct of the AICPA Code Into an Ethical Decision-Making Process. Professional Ethics, A Multidisciplinary Journal, 5(4), 65-81. doi: 10.5840/profethics19965417

Sullivan, G. R. (2004). Enhancing public trust in the accounting profession using professional judgment rather than personal judgment in resolving accounting ethics dilemmas.

Worldcom admits internal fraud. (2002). Computer Fraud & Security, 2002(8), 1-2. doi: 10.1016/s1361-3723(02)00801-1