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It's Time For Principles-Based Accounting Ethics

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In the article, “It’s Time for Principles-Based Accounting Ethics”, I agree with the authors that there needs to be more than a minimum set of standards. A minimum set of standards allows someone to have a range of acceptable behavior even though it may still be wrong or there is no specific guideline stating it is wrong. Accounting needs to have ethics principles which describe the correct ideals as guidance rather than a minimum set of specific ethical standards. Having standards to go by makes it easier for accountants to properly follow the rules for which the standards describe, but will not give guidance for situations that do not have a specific rule or interpretation. With principles-based accounting ethics, the accountant has a …show more content…

Members of AICPA are punished by not following the rules of the Code of Professional Conduct. On the other side, the IFAC Code of Ethics for Professional Accountants requires accountants to take notice of the behaviors, circumstances, and habits that go against the principles. The AICPA’s Code of Professional Conduct is being modified to align closer to the IFAC Code by the adoption of a principle-based code. In order for the AICPA to adopt a code that lines up closely to the IFAC Code, they need to make two changes: “First, define what it means for an accountant to be an ethical professional (that is, by what virtues a professional accountant should be characterized). Second, develop a continuous improvement process that helps accountants to foster those virtues” (Spalding & Oddo, 2011). Before the transition to align with the IFAC code, AICPA has been rule-based because managers and auditors needed specific guidance in regards to reporting transactions (Spalding & Oddo, 2011). The accounting profession has not fared well with rules-based accounting because the companies would find the loopholes in the rules which defeat the purpose of the rules. With principles-based accounting, the principle gives guidance where a decision can be made without any loopholes. To compare the two codes, let’s look at one of the five cardinal virtues: loyalty. Loyalty, as described in AICPA’s Code of Professional Conduct and IFAC Code of Ethics for Professional Accountants, to your audience (client, employer, or public) “can be set aside in some circumstances, such as when an accountant responds to a court subpoena or testifies in open court under oath” (Spalding & Odda, 2011). The IFAC code takes it one step further by giving guidance as to specifics that can be disclosed while taking into consideration all the

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