The integrity requirement of CPAs affects a controller of a corporation, the internal auditor of a company, and the external auditor by encouraging them to perform their professional responsibilities with the highest sense of incorruptibility and objectiveness (Neiman, 2013; Floyd et al., 2013). From the point of view of business ethics, all CPAs including a controller of a corporation, the internal auditor of a company, and the external auditor have to comply with the following standards: incorruptibility when it comes to resolving tax service inconsistencies; incorruptibility in terms of confidential client information disclosure; incorruptibility in terms of taking commissions for referral of services or products of a client; incorruptibility in case of conflicts of interests occurrence; and incorruptibility as for knowledgeable misinterpretation of facts (Floyd et al., 2013). In addition, the integrity requirement implicates making unpopular decisions when such ones are based on fair facts consideration (Franks & Spalding, 2013). To illustrate, a controller of a corporation may face a situation when his or her integrity is challenged in the event of developing inappropriate relationships with the representatives of a client or any other individuals involved in client’s business affairs because this type of unprofessional behavior may blur one’s professional judgment and create a conflict of interests. Next, an internal auditor of a company may face an integrity challenge in case one directs or allows an employee in the client company to sign a document with false or inaccurate information. Further, an example of a situation where an external auditor’s integrity may be challenged is when he or she suggests a client to invest in a project in which he or she has financial participation.
From an ethical perspective, the actions of Raben and Borchard who used insider information are qualified as unprofessional behavior. According to Neiman (2013), the use of insider information with an objective to gain material profits is highly inappropriate for CPA professionals, since it corrupts normal business practices and inhibits business processes, as well as it ruins the reputation of auditor organizations (Franks & Spalding, 2013). Such behavior is commonly referred to as insider trading in the business world. In recent years, insider trading has laid to the crisis in the accounting industry. The most remarkable case proving the negative impact of insider trading on the accounting industry and business in general and demonstrating the highest significance of the ethics of finance is the collapse of Enron (Franks & Spalding, 2013). Disclosure of Enron’s unprofessional behavior has had such a negative impact on stakeholders that the whole accounting industry suffered considerable loss after the event had taken place. This situation brought into focus the need to stick to the ethical code by all the CPAs as never before. Analysis of cases such as Enron’s one and the PricewaterhouseCoopers LLP case suggests a conclusion that from an ethical point of view, insider trading is wrong because it ruins trust among the stakeholders. CPAs have a moral obligation to take responsibilities according to their roles and therefore, their primary obligation is to define the rules of business justice among stakeholders and make sure that these rules are followed by all the stakeholders. In the event of failing to execute their ethical obligations in terms of integrity and objectives when performing their duties, CPA professionals lose the very essence of their presence at the market (Floyd et al., 2013).
The advantages of establishing one set of accounting standards (IFRS) to be followed by all companies around the world include the following points: (1) IFRS stimulates global economy growth; (2) IFRS conduces to comparability of information on public companies around the globe which promotes data transparency at the market; (3) IFRS provides a basis for making more reasonable choices to investors due to the increased comparability of companies; (4) IFRS increases transparency and loss recognition and thus it promotes the efficacy of contracts between companies; and (5) IFRS triggers the removal of trading barriers (Kim, Shi & Zhou, 2014). In addition, as IFRS is principles-based rather than rules-based, companies using it have the freedom to adapt it in their particular conditions to prepare more viable statements. Furthermore, IFRS implementation promotes cost-effectiveness in the multinational companies which allows saving considerable funds in the long run; however, this is not the case for minor businesses (Kim et al., 2014). As for the disadvantages, since IFRS is not commonly used around the world, foreign companies working in the countries not using it face the necessity to prepare financial statements based on two standards and this is not cost-efficient (Kim et al., 2014). Next, adoption of IFRS by small companies is quite problematic because it requires high-cost education for the staff and thus, switch to it of a new country may lead to considerable problems in the small business. Finally, the use of IFRS requires implementation of fair value as the foundation of liability measurement and therefore, it may result in increased volatility while reporting assets (Kim et al., 2014).
References
Floyd, L. A., Xu, F., Atkins, R., & Caldwell, C. (2013). Ethical outcomes and business ethics: Toward improving business ethics education. Journal of Business Ethics, 117(4), 753-776.
Franks, R. A., & Spalding, A. (2013). Business ethics as an accreditation requirement: A knowledge mapping approach. Business Education & Accreditation, 5(1), 17-30.
Kim, J., Shi, H., & Zhou, J. (2014). International financial reporting standards, institutional infrastructures, and implied cost of equity capital around the world. Review of Quantitative Finance and Accounting, 42(3), 469-507.
Neiman, P. (2013). A social contract for international business ethics. Journal of Business Ethics, 114(1), 75-90.