CORPORATE ETHICS

Corporate Ethics

Corporate Ethics

Introduction

Throughout 2001 and 2002, the financial scandals in the USA and some other nations, such as Australia, spectacularly illustrated how the effectiveness of financial markets is founded on assumptions of trust and ethical demeanour of business managers. The collapse of companies such as Enron, WorldCom and Global traversing in the USA, HIH protection and OneTel in Australia, and Parmalat in Italy has led to a loss of self-assurance by the buying into public in the system of financial reporting and accountability. Amajor component in this decrease of self-assurance was the unprecedented implosion of one of the then “Big 5” accounting firms, Arthur Andersen, with the decrease of 85,000 jobs worldwide and the decrease of public believe in the accounting occupation that escorted it. These developments commanded to the promulgation of the Sarbanes-Oxley Act of 2002 in the USA and alike legislation such as the business Law Economic Reform Program (Audit Reform and business revelation) proceed 2004 in Australia.

The globalization and diversification of accounting services, blended with market competition and high profile business collapses has drawn attention to the accounting occupation and its perceived ethical standards (Ponemon, 1995; Ashkanasy and Windsor, 1997; Armstrong et al., 2003; Leung and Cooper, 2005). Commentators are now questioning, whether the value systems of accounting professionals are strong enough to withstand client and economic pressures that potentially compromise professional judgment (Douglas et al., 1995; Jennings, 2004).

Accounting learning is examined as one promise remedy to address the profession's ethical crisis. Extensive discussion about the function of accounting educators in teaching ethics has been undertaken in the US informative context, including exceptional matters on professionalism and ethics in accounting learning (Gaa and Thorne, 2004). Humphrey (2005, p. 342) has demonstrated that “there remains genuine scope for reviewing how the worldwide academic accounting profession has answered to such scandals …” In specific, there is scope to recognise the role of expert accounting bodies in providing pre qualification [1] education on ethics, as well as ongoing expert development. Regardless at what stage ethics education takes location, the post-Enron era has presented an opening for critical advances in ethics education and one in which professional accounting bodies should to have a role.

In July 2003, the International Federation of Accountants (IFAC) [2] released a research report entitled, Rebuilding public confidence in financial reporting - an international perspective. The report identified several key weaknesses in organizations from a review of a number of corporate collapses worldwide. The findings of the study included a recommendation for more effective corporate ethics codes as well as the provision of training and support for individuals within organizations to better enable them to face difficult ethical questions (IFAC 2003a, p. 2). Following on from this report IFAC requested in 2004 a international research task on approaches to the development and maintenance of expert standards and ethics in accounting learning programs.

Literature review

The relevant publications underpinning this research concerns to former research on ethical matters, possible leverages on ethical malfunction and the influence of ethics ...