A few articles dealing with ethics in accounting practices.
Regulation and the promotion of audit ethics: analysis of the content of the EU’s policy
Accounting literature has commonly judged the impact of regulation on auditors’ ethical commitment by studying daily audit practice. The authors argue that the content of the regulations themselves is an important determinant of such an impact.
This paper evaluates the capacity of the content of regulation to promote audit ethics by reference to the European Union’s (EU) audit policy. Anchored in the extant conceptual perspectives on ethics, this analysis of relevant policy documents shows that the EU’s approach to audit ethics relates most strongly to the deontological perspectives on ethics and leaves largely unexplored other means of promoting auditors’ ethical stance, such as by stimulating virtue ethics.
The researchers find that it is the EU regulators’ restricted view of the conceptual foundations of audit ethics that limits the capacity of their policy to effectively stimulate auditors’ ethical commitment. The paper also discusses the potential implications of its analysis for the design of future audit policy.
Samsonova-Taddei, A. & Siddiqui, J. Regulation and the Promotion of Audit Ethics: Analysis of the Content of the EU’s Policy.
Journal of Business Ethics, 139(1), 183–195.
Audit committees and financial reporting quality in Singapore
Kusnadi et al. examine three characteristics (independence, expertise, and overlapping membership) of audit committees and their impact on the financial reporting quality for Singapore-listed companies.
The main finding is that financial reporting quality will be higher if audit committees have mixed expertise in accounting, finance, and/or supervisory. In addition, the researchers do not find evidence that incremental independence of audit committees enhances financial reporting quality because audit committees already consist of a majority of independent directors.
Finally, the authors fail to find any impact of overlapping membership on audit and remuneration committees on financial reporting quality. Overall, the results have policy implications on improving corporate governance effectiveness in terms of financial reporting quality.
Kusnadi, Y., Leong, K.S., Suwardy, T. et al. 2016. Audit committees and financial reporting quality in Singapore.
Journal of Business Ethics, 139(1), 197–214.
Ethics in finance and accounting
In light of the recent crisis and its aftershocks, it becomes crucial to reflect on the relationship between finance and accounting and on how to integrate ethics and efficiency, as well as on how to motivate and empower practitioners in the world of finance to commit to justice, fairness and enhanced understanding, and to improving their personal integrity.
This article, written as an editorial introduction to a special issue includes works related to control measurement and ethical behaviour, misbehaviours in finances and accounting, professionalism in accounting, ethical investing and corporate reporting.
The authors conclude by suggesting further research for a better integration of technical aspects of accounting and finances into business activity—human activity actually—and an for understanding of ethics not limited to rules, but as a mutual and interdependent system of values (human goods), virtues and principles.
Read this editorial introduction for free: Melé, D., Rosanas, J.M. & Fontrodona, J. 2017. Ethics in Finance and Accounting: Editorial Introduction.
Journal of Business Ethics, 140(4), 609–613.
Discriminating between accounting manipulators and non-manipulators
Accountants preparing information are in a position to manipulate the view of economic reality presented in such information to interested parties. These manipulations can be regarded as morally reprehensible because they are not fair to users, they involve in an unjust exercise of power, and they tend to weaken the authority of accounting regulators.
This paper develops a model for detecting earnings manipulators using financial statements’ ratios in a sample of Spanish listed companies. Results provide evidence that accounting data can be extremely useful in detecting manipulators. This approach can be used by a large category of users of accounting information among which one can cite stock exchange supervisors or investing professionals.
Vladu, A.B., Amat, O. & Cuzdriorean, D.D. 2017. Truthfulness in Accounting: How to Discriminate Accounting Manipulators from Non-manipulators.
Journal of Business Ethics, 140(4), 633–648.
Virtuous professionalism in accountants to avoid fraud and to restore financial reporting
Over the past decade, a number of accounting and financial reporting frauds have led to lost stock wealth, destroyed public trust, and a worldwide recession that called for necessary reform. Regulatory responses and systemic reforms quickly followed, and these authors show that, while necessary, these reforms are insufficient.
The purpose of this paper is to forward virtuous professionalism as a necessary path toward restoring financial reporting systems. Lail et al. take the position of external observer and analyze the accounting profession over time to assess what has transpired within financial reporting systems. The present analysis reveals that the combined influence of commercialism and regulatory response has led to a systemic decline in accounting’s professional ideals and, as a result, an erosion of public trust.
The authors then propose virtuous professionalism as a necessary process for restoring financial reporting systems based on sociological, professional, and philosophical theories. The researchers argue that virtuous professionalism is necessary for restoring the public servant identity of the accounting professional. Lail et al. conclude that efforts to restore financial reporting systems should begin with reforms that restore professional identity shaped by virtues.
Lail, B., MacGregor, J., Marcum, J. et al. 2017. Virtuous Professionalism in Accountants to Avoid Fraud and to Restore Financial Reporting.
Journal of Business Ethics, 140(4), 687–704.