Advertisement

Journal of Business Ethics

, Volume 99, Supplement 1, pp 49–59 | Cite as

It’s Time for Principles-Based Accounting Ethics

  • Albert D. SpaldingJr.Email author
  • Alfonso Oddo
Article

Abstract

The American Institute of certified public accountants (AICPA) has promulgated a Code of Professional Conduct, which has served as the primary ethical standard for public accountants in the United States for more than 20 years. It is now out of date and needs to be replaced with a code of ethics. Just as U.S. generally accepted accounting principles are being migrated toward “principles-based accounting” as part of a convergence with international financial reporting standards, a similar process needs to occur with ethics. This article organizes the primary rules of the AICPA Code around five essential virtues: objectivity, integrity, inquisitiveness, loyalty, and trustworthiness. These virtues correspond to the general principles set forth in the Code of Ethics for Professional Accountants of the International Federation of Accountants (IFAC). From this virtue ethics perspective, various rules of the AICPA Code are critiqued as being inadequate at best, and poorly crafted at worst. The article concludes with the proposition that principles-based ethics serves the profession and the financial reporting process better than the current rules-based approach.

Keywords

Ethics Accounting standards Rules-based Principles-based International accounting 

References

  1. AICPA. (2007). Exposure draft proposal of professional ethics division: proposed interpretation 102-7, other considerations: meeting the objectives of the fundamental principles, and proposed framework for meeting the objectives of the fundamental principles, pp. 1–12. http://www.aicpa.org/download/ethics/May_15_2007_Exposure_Draft.pdf. Accessed January 23, 2010.
  2. AICPA. (2008a). AICPA professional standards: code of professional conduct and bylaws, pp. 4269–6210. http://www.aicpa.org/download/about/code_of_conductbylaws.pdf. Accessed January 23, 2010.
  3. AICPA. (2008b). Guide for complying with rules 102–505, pp. 1–6. http://www.aicpa.org/download/Guide_for_Complying_with_Rules_102_Through_505_11_10_08_Edited.pdf. Accessed January 23, 2010.
  4. AICPA. (2009). PRP section 1000 AICPA standards for performing and reporting on peer reviews, pp. 1001–2048. http://www.aicpa.org/download/practmon/2009_stds.pdf. (Accessed January 23, 2010).
  5. Arjoon, S. (2000). Virtue theory as a dynamic theory of business. Journal of Business Ethics, 28(2), 159–178.CrossRefGoogle Scholar
  6. Bennett, B., Bradbury, M., & Prangnell, H. (2006). Rules, principles and judgements in accounting standards. Abacus, 42(2), 189–203.Google Scholar
  7. Benston, G. J., Bromwich, M., & Wagenhofer, A. (2006). Principles- versus rules-based accounting standards: The fasb’s standard setting strategy. Abacus, 42(2), 165–188.CrossRefGoogle Scholar
  8. Bertland, A. (2009). Virtue ethics in business and the capabilities approach. Journal of Business Ethics, 84, 25–32.CrossRefGoogle Scholar
  9. Blackburn, M., & McGhee, P. (2004). Talking virtue: Professionalism in business and virtue ethics. Global Virtue Ethics Review, 5(4), 90–122.Google Scholar
  10. Dawson, D., & Bartholomew, C. (2003). Virtues, managers and business people: Finding a place for macintyre in a business context. Journal of Business Ethics, 48(2), 127–138.CrossRefGoogle Scholar
  11. Fülbier, R. U., Hitz, J.-M., & Sellhorn, T. (2009). Relevance of academic research and researchers’ role in the IASB’s financial reporting standard setting. Abacus, 45(4), 455–492.CrossRefGoogle Scholar
  12. Gaumnitz, B. R., & Lere, J. C. (2002). Contents of codes of ethics of professional business organizations in the United States. Journal of Business Ethics, 35(1), 35–49.CrossRefGoogle Scholar
  13. Graafland, J. (2010). Do markets crowd out virtues? An aristotelian framework. Journal of Business Ethics, 91(1), 1–19.CrossRefGoogle Scholar
  14. IESBA. (2009). Code of ethics for professional accountants, http://web.ifac.org/media/publications/f/code-of-ethics-for-professi-1/code-of-ethics-for-professi-2.pdf. (Accessed January 23, 2010).
  15. Neill, J. D., Stovall, O. S., & Jinkerson, D. L. (2005). A critical analysis of the accounting industry’s voluntary code of conduct. Journal of Business Ethics, 59(1/2), 101–108.CrossRefGoogle Scholar
  16. Nobes, C. W. (2005). Rules-based standards and the lack of principles in accounting. Accounting Horizons, 19(1), 25–34.CrossRefGoogle Scholar
  17. Preston, A. M., Cooper, J., Scarbrough, D. P., & Chilton, R. C. (1995). Changes in the code of ethics of the U.S. accounting profession 1917 and 1988: The continual quest for legitimation. Accounting, Organizations and Society, 20(6), 507–546.CrossRefGoogle Scholar
  18. Schwartz, M. S. (2002). A code of ethics for corporate code of ethics. Journal of Business Ethics, 41(1/2), 27–43.CrossRefGoogle Scholar
  19. Whetstone, J. T. (2001). How virtue fits within business ethics. Journal of Business Ethics, 33(2), 101–114.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media B.V. 2012

Authors and Affiliations

  1. 1.Associate Professor of Legal StudiesWayne State University, School of Business AdministrationDetroit, MichiganUSA
  2. 2.Professor of AccountingNiagara University, College of Business Administration, Niagara UniversityNYUSA

Personalised recommendations