Question

For the first part of this week’s discussion:

Compare the IMA Statement of Ethical Professional Practice to the AICPA Code of Professional Conduct and assess the effectiveness of the two codes.

For the second part:

Assess the aspects of a managerial accountant's job that are most likely to be challenged ethically and suggest the approach(es) you will take to handle these situations.   

Answer 1

Part - I

The IMA stands for The Institute of Management Accountants which is a professional association of management accountants and finance professionals. Management Accounting is defined as accounting within an organization, rather than external accounting and auditing done by Certified Public Accountants. Thus, the IMA primarily serves accountants and finance professionals not in public practice.

A collection of codified statements issued by the American Institute of Certified Public Accountants that gives an outline of CPA's ethical and professional responsibilities are called the AICPA Code of Professional Conduct. The code establishes standards for auditor independence, integrity and objectivity, responsibilities to clients and colleagues and acts discreditable to the accounting profession. The AICPA is responsible for drafting, revising and reissuing the code annually,

Similarities

· Credibility, often requiring objectivity: A professional accountant should not be influenced by others and he should not be dependable on third parties.

· Confidentiality: An accountant should not disclose any business matters to the third parties unless he is asked to do, only with the permission of higher authority .

· Integrity : An accountant should be truthful in his working attitude and also should maintain good business relationships

· Professional competence: An accountant should be professionally experienced in all areas of his work and should be aware of all the laws and regulations of accounting.

Differences

· Nature of the work determines its secrecy

· Output determines to be loyal and independent

Part - II

In a business it's easy to think of the major role played by the accounting staff as glorified mechanics, with specialized skills needed to keep the company's financial machinery running properly. As we say, finance is the lifeblood of business, so the accountants also play a role as the watchdogs of the business world. They're responsible for making sure that businesses report their finances clearly according to recognized standards, laws and regulations that often puts them in situations that can be ethically or even legally hesitating.

Challenging Ethical Issues

• Pressure to Manipulate the Figures: If the business is running into losses, for upliftment in society, the accountants are asked to manipulate the figures. They have a clear ethical – and legal – obligation to report the financial situation accurately, and failing to do that, can open them to civil or criminal liability, bringing their careers to a sudden stop. On the other hand, they also have to make a living and may fear losing their jobs, or clients, if they don't do it.
• Sins of Omission: The accountants are pressured to omit certain transactions for misleading the society
• Access to Information and Confidentiality Issues: Like other professionals too, Accountants spend much of their time dealing with confidential information. Using that information inappropriately, or failing to protect confidential information properly, is both ethical issues for an accountant.
• Conflicts of Interest : It is very difficult issue to recognize in a business organization.
• Blowing the Whistle: If the accountant's information is damaging enough, it could cause a company to fail or lose much of its stock value overnight.