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    The Importance and Exemplification of Safeguarding and Promoting Ethics in Accounting Practices in Organizations

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    Accountant nee to adhere to the code of professional conduct is paramount to safeguarding ethics in accounting practice. Brown (2007) notes that having the professional code of conducts does not amount to ethical decisions. As such, he notes that as accounting professionals, we have a duty of providing an environment and culture that rewards those who act ethically. Moreover, Brown (2007) notes that ethics promotes order and helps safeguard the image of the profession.

    An accountant may face several circumstances that may compel him or her to manipulate the standards. Working in unethical environments where those actions are rewarded may be a significant influence (Brown, 2007). Such was the case in Satyam where top managers paid accountants for making paper profits in an attempt to mislead shareholders. According to Brown (2007) due professional care is the call for auditors to apply care and skills that are a characteristic of a reasonable and prudent accountant. In GAAS, it requires auditors to exhibit skills and care while carrying out an audit.

    According to Datar et al. (2013), the cost method only accounts for stock ownership totaling less than 20 percent in a particular company (150). On other hand, equity method primarily accounts for stocks ownership totaling more than 50 percent in one company. However, the process also accounts for stock ownership ranging between 20 and 50 percent if the ownership has significant influence (Datar et al., 2013).

    Brealey (2012) notes that under the equity method, a company records investee’s dividends as a reduction of the investment subsidiary balance sheet account (130). The method mainly accounts for an organization investment in another company. On the other hand, the cost method records investee’s dividends as income on the investor’s statement of operations. Cost method mainly applies when the investor has limited influence over the investee and has no determinable value (Brealey, 2012, p.133).

    From the 2014 10-k form, Apple had three types of investments. First, stocks are the significant investment in Apple Inc. as of October 2014; the company had over 26 thousand shareholders. However, institutions were the largest holding of three billion shares. Shareholders own up to 60 percent of the enterprise (Sanchirico, 2014). Secondly, mutual funds also provide investment opportunity at Apple. In 2004, mutual funds amounted to over $2,531 million. Lastly, the company offered mortgage and asset-based securities amounting to $12,907 million as of September 2014 (Sanchirico, 2014).

    Apple uses the equity method to account for its types of investments. The 2014 form 10-k plan lists shareholder’s equity as a liability to the company. The method is in line with the equity method that accounts for an institution’s investment in another company. The majority of shareholders in Apple are influential organizations that influence significant decisions made by the corporation. Therefore, the company chooses to use equity methods of accounting.

    References

    Brown, P. A., Stocks, M. H., & Wilder, W. M. (2007). Ethical Exemplification and the AICPA
    Code of Professional Conduct: An Empirical Investigation of Auditor and Public Perceptions.
    Journal of Business Ethics, 71(1), 39-71.
    Fitzgerald, D., & Wakabayashi, D. (2014). Apple Quietly Builds New Networks. Wall Street Journal.
    Sanchirico, C. W. (2014). As American As Apple Inc.: International Tax and Ownership Nationality. Tax Law Review, 68(1), 14-5.
    Brealey, R. A. (2012). Principles of Corporate Finance. Tata McGraw-Hill Education.
    Datar, S. M., Rajan, M. V., Wynder, M., Maguire, W., & Tan, R. (2013). Cost accounting: a managerial emphasis. Pearson Higher Education AU.

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    The Importance and Exemplification of Safeguarding and Promoting Ethics in Accounting Practices in Organizations. (2022, Dec 09). Retrieved from https://artscolumbia.org/the-importance-of-safeguarding-and-promoting-ethics-in-accounting-practices-in-organizations/

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