Accounting Theory and Ethics

The provided assignment is a collection of research papers and articles related to accounting theory, ethics, and education. The papers cover topics such as the effectiveness of instruction in accounting ethics education, improving accounting ethics education, and the protective role of conservatism in public sector accounting. The document also includes discussions on integrating leadership topics into an accounting ethics course and ranking accounting scholars publishing ethics research in accounting and business ethics journals.

Running head: PROFESSIONALISM AND ETHICS IN ACCOUNTING
Professionalism & Ethics in Accounting and History of accounting
Name of the University:
Name of the Student:
Authors Note:

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Table of Contents
Question 1............................................................................................................................2
a) Ethical Issues Faced by Joey.......................................................................................2
b) Ethical Egoism Based Actions....................................................................................2
c) Advice Based on Utilitarianism...................................................................................3
d) Advice Based on Deontological Ethical Perspective..................................................3
e) Most Suitable Ethical Theory Based Action...............................................................4
Question 2............................................................................................................................5
a) Major Changes in Accounting Regulation and Practice..............................................5
b) History of Accounting and Changes in Related Practices...........................................7
References............................................................................................................................9

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Question 1
a) Ethical Issues Faced by Joey
From the case study it is evident that there are certain ethical issues that are faced by
Joey. It is observed that Tube needs considerable capital injection for modernizing its plant and
equipment. The machineries that are available are incapable of manufacturing new products
because of its poor quality level. There also has been certain prolonged industrial concern with
the labor union for which the business is performing below required level (Kelly, 2017).
Situation of the company is observed not to be fit enough to gain capital from the bank. Despite
such situation, Joey has been asked by Mary to lie about the financial condition of the company
to the bank. Joey has been asked to tamper the financial report of the company in order to gain
capital from bank. Mary pressurized Joey to mention false financial statements for the company
or else it might result in Tube Company’s insolvency.
b) Ethical Egoism Based Actions
Ethical egoism can be defined as normative ethical position which moral agents consider
to do that is in their individual self interest. It is different from psychological egoism that claims
that individuals can only act within their individual self interest. Based on this theory, Joey is
recommended that Joey acts as per Mary’s advice to overstate the financial statements of the
company. This is for the reason that such overstatement can help Tube Company to gain capital
from capital as it will show that it is producing new goods as per maintaining international
standard and is doing well in the global market (Mintz, 2016). Ethical egoism theory provides
with such recommendation for the reason that it does not take into account the aspects those are

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fair to all human beings. It focuses on a belief that people must act in the best interest to solve
the immediate situation faced by the company.
c) Advice Based on Utilitarianism
Utilitarianism ethical theory is focused on the aspect whether the action benefits
individuals more than it can harm them. In this theory the self-interests of the individual are set
aside and all the actions those are recommended are focused on improving the good of a huge
number of individuals (Marzuki et al., 2017). Recommendations based on this theory is leaned
toward the organizations which offers services and goods along with doing the least harm along
with that it condemns organizations that results in increased chain than benefit to the others.
Within this theory, the advantages of this ethical theory that can be attained by Joey includes that
she can make sure the greatest services for maximum pople. Through employing this ethical
theory, the person can also speed up the decision making process of the company towards taking
right decisions on raising capital in a situation where the company is facing losses (Marzuki et
al., 2017). Utility along with the increased happiness principles holds that the actions are correct
in proportion. This is because this is likely to promote contentment in the company environment.
This ethics theory is applicable to the accountants as it makes sure that they are truthful, have
integrity, follows advices on maintaining commitments and avoids harming other people. This
ethical theory can encourage Joey to make people work for them along with the consumers of the
company to do the same (Marzuki et al., 2017).
d) Advice Based on Deontological Ethical Perspective
Deontological ethics theory is focused on maintaining fairness and takes priority over all
the consequences that the actions might have. The major focus of this theory is to consider rights,
fairness, commitments and conducting the right thing. This theory is applicable in the case study

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situation as for avoiding any risk of legal actions that can be taken against the company for
reporting false financial statements (Boyce, 2014). To avoid such situation, Joey must apply this
ethics theory in order to maintain a fair and consistent relationship with all its users of financial
statements. Joey must also make sure that she is following through her commitments to attain
bank loan in an ethical manner. This is for the reason that if this ethical theory is not followed in
this case, all its consumers and investors will lose interest in the company. Moreover, following
this ethical theory can account for effective, cross cultural moral intuitions. This is deemed to be
the best selection for the people in accounting professions like Joey as it matches up with
“AICPA's code of conduct” (Ferrentino et al., 2016).
e) Most Suitable Ethical Theory Based Action
After explaining the above three ethical theories and related recommendations for Joey, it
is gathered that Deontological ethics theory is the most suitable ethics theory that can solve the
situation aroused in the case study. This theory is applicable in the case study situation as for
avoiding any risk of legal actions that can be taken against the company for reporting false
financial statements (Chawla et al., 2015). To avoid such situation, Joey must apply this ethics
theory in order to maintain a fair and consistent relationship with all its users of financial
statements. Joey must also make sure that she is following through her commitments to attain
bank loan in an ethical manner (Burns, Tackett & Wolf, 2015). This is for the reason that if this
ethical theory is not followed in this case, all its consumers and investors will lose interest in the
company. In this ethical theory, Joey can make sure that wrongful choices will not be made. She
can be able to take decisions on ethical financing statement reporting and its benefits that will
further confirm a moral norm. These norms are to be obeyed properly by the moral agent or Joey

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and these norm meetings are not to be maximized by the moral agent (Thompson & McCoy,
2016).
Question 2
a) Major Changes in Accounting Regulation and Practice
Major changes as been observed in the accounting regulation and practice that took place
after the years from 1800. Certain consequence of stock market crash resulted in a effective call
for accounting discipline in order to develop accounting information on which the interested
parties might depend (Rutherford, 2016). Certain changes are also observed in the information
that bore certain association with the economic reality along with uniformity of practice by the
practitioners. After 1800’s accounting practice undergone a drastic change and it became vita for
NYSE to restore some public confidence for investing within the organizations (Scott, 2015).
There are certain changes in the accounting perceptions over the decade of 1970’s. Major
changes in the accounting regulation also took place. This is for the reason that there was a
tremendous dissatisfaction with the operations of “Accounting Principles Board (APB)” that
emerged in 1959 in order to replace “Accounting Procedures Committee” (Jones, 2015).
This is because this committee was failing to generate any theoretical foundations based
on accounting. In order to address these emerging concerns, drastic changes in accounting
practice and regulation was observed after the year 1800s. For maintaining highly effective
accounting standards and ethics, FASB issued several kinds of publications that encompass
“Statements of Financial Accounting Standards or GAAP”. There are also certain anticipations
that clarify, explain and elaborate on the principles of GAAP. Such new accounting standards

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also went through a major project in order to maintain certain theoretical accounting foundation
considered as a conceptual framework.
Previous attempts within Australia for issuing the accounting principles mimicked the
ones those were those were previously developed by ICAEW. Certain accounting principles
were recommended and were developed by “Institute of Chartered Accountants in Australia
(ICAA)”. However, these have less effect on accounting practice and were observed to have a
great degree of non-compliance. Such situation resulted in another change in accounting practice
and regulation in Australia. Development of an ethical conceptual framework is observed to be
among an important change by FASB in 1973 (Lukka & Pihlanto, 2014). AASB developed
policy statement that had a diagram which indicates the building blocks of a conceptual
framework. It includes seven levels that results in accounting standards development along with
having a further level dealing with monitoring compliance in the accounting standards. These
days the accounting frameworks and practices are aptly focused on maintaining ethical
accounting regulation in the organizations. Considering the same, AASB’s framework has
identified that there are a great range of users.
Moreover, financial statements must comply with the characteristics that can make
information useful to all its users. This includes four aspects such as relevance,
understandability, comparability and reliability. With such framework being the foundation on
which the accounting standards remain devised there will be great consistency within the
accounting standards. In the previous years, the accounting standards were developed
individually and were highly ad hoc. Moreover, there were certain contradictions among
standards. The recently developed accounting regulations and framework explains the aspects of
the financial statements. This will make it simpler to associate the need of one standard with

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other standards. With several nations implementing IFRS along with “Framework for
Preparation of Financial Statements” there will be increased global accounting ethics and
uniformity.
b) History of Accounting and Changes in Related Practices
The accounting history can be observed as a pattern of continuous evolution along with
growth for the intention of addressing changing requirements of the users. Accounting is
observed to be progressive and relative. The phenomena that develop its subject matter are
changing regularly. Older methods of accounting turn out to be less efficient within changing
conditions. Previous ideas on accounting turn out to be irrelevant in emergence of new problems.
For this reason, the surrounding situations develop new ideas and stimulate the needs to develop
new accounting methods. Before 1970’s there were several divisions in the financial accounting
research, auditing along with managerial accounting (Christensen, Nikolaev & Wittenberg‐
Moerman, 2016). A great transformation took place after that that was characterized by a great
focus on numerical and positivist research. Accounting professions claim to serve the public
interest can be considered to focus on offering opinions and advice to the third parties.
With the changing needs of the users it has been observed that certain accounting
practices also changed. High quality accounting standards is deemed necessary with the passing
years that are important for development of a superior quality international financial reporting
structure. Distinct accounting traditions have emerged all through the world with the changing
needs of users for whom the financial information is developed (Baxter, 2014). For instance, in
certain nations accounting standards have been developed depending on the requirements of
private creditors. On the other hand, in other nations the requirement of tax authorities or
planners is deemed to have a drastic impact. In United States, accounting standards have been

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developed for addressing the needs of the participants within the capital markets. The constantly
modifying accounting regulations and standards offers a framework for reporting that intends to
offer transparent, comparable, consistent along with reliable financial information.
Developing along with sustaining superior quality accounting standards are deemed to be
important for the Australian approach to regulation of the capital markets. This further relies on
offering superior quality information in order to support informed investment decisions. In the
past years, distinct views on the function of financial reporting made it complex to encourage the
accounting standards convergence (Glöckner, 2016). However, with the passing years there are
increasing international consensus that must be provided by the financial reporting. This must
offer high quality financial information that can be compared, is transparent and consistent as per
the requirement of the investors. From the past history of accounting it has been realized that
foreign organizations take their decisions regarding whether to provide or list securities in the
nation for numerous financial, political, economical and other causes. Most of these causes are
observed to be associated with the nation’s regulatory needs (Level & Schöndube-Pirchegger,
2014). For this reason, accepting financial statements developed employing IASC standard
without the need of reconsolidation that might be an inducement to cross-border offerings.

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References
Baxter, W. T. (2014). Accounting theory (Vol. 3). Routledge.
Boyce, G. (2014). Accounting, ethics and human existence: Lightly unbearable, heavily
kitsch. Critical perspectives on accounting, 25(3), 197-209.
Burns, D. J., Tackett, J. A., & Wolf, F. (2015). The effectiveness of instruction in accounting
ethics education: Another look. In Research on Professional Responsibility and Ethics in
Accounting (pp. 149-180). Emerald Group Publishing Limited.
Chawla, S. K., Khan, Z. U., Jackson, R., & Gray III, A. W. (2015). Improving Accounting Ethics
Education. IMA Management Accounting Quarterly, 16(2).
Christensen, H. B., Nikolaev, V. V., & Wittenberg‐Moerman, R. E. G. I. N. A. (2016).
Accounting information in financial contracting: The incomplete contract theory
perspective. Journal of accounting research, 54(2), 397-435.
Ferrentino, A. L., Maliga, M. L., Bernardi, R. A., & Bosco, S. M. (2016). Ranking Accounting
Scholars Publishing Ethics Research in Accounting and Business Ethics Journals.
In Research on Professional Responsibility and Ethics in Accounting (pp. 163-215).
Emerald Group Publishing Limited.
Glöckner, A. (2016). New development: The protective role of conservatism in public sector
accounting. Public Money & Management, 36(7), 527-530.
Jones, S. (Ed.). (2015). The Routledge companion to financial accounting theory. Routledge.

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Kelly, P. T. (2017). Integrating Leadership Topics into an Accounting Ethics Course–Preparing
Students for a Challenging Profession. In Advances in Accounting Education: Teaching
and Curriculum Innovations (pp. 141-180). Emerald Publishing Limited.
Level, E. M. M., & Schöndube-Pirchegger, B. (2014). Accounting theory.
Lukka, K., & Pihlanto, P. (2014). The developer of Finnish accounting theory. Twentieth
Century Accounting Thinkers (RLE Accounting), 34, 60.
Marzuki, M., Subramaniam, N., Cooper, B. J., & Dellaportas, S. (2017). Accounting academics’
teaching self-efficacy and ethics integration in accounting courses: A Malaysian
study. Asian Review of Accounting, 25(1), 148-170.
Mintz, S. (2016). Giving voice to values: A new approach to accounting ethics education. Global
Perspectives on Accounting Education, 13(1), 37-50.
Rutherford, B. A. (2016). Articulating accounting principles: Classical accounting theory as the
pursuit of “explanation by embodiment”. Journal of Applied Accounting Research, 17(2),
118-135.
Scott, W. R. (2015). Financial accounting theory (Vol. 2, No. 0, p. 0). Prentice Hall.
Thompson, J. H., & McCoy, T. L. (2016). An Analysis of Ethics Articles Published between
2000-2015 in the Journal of Accountancy and the Accounting Review.