The accounting profession requires its members to follow a code of ethics. Glencoe Accounting Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

Explain the meaning of ethics Describe the components of business ethics. Identify the role of the accountant in business ethics. Discuss how ethical behavior benefits individuals, businesses, and society. Explain the key principles an accountant is expected to follow. Identify the accounting organizations that establish codes of ethics for the profession. Describe the Sarbanes-Oxley Act. Glencoe Accounting Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

Key Terms ethics business ethics code of ethics ethics officer Section 29.1 The Nature of Ethics Key Terms ethics business ethics code of ethics ethics officer Glencoe Accounting

Business ethics are not very different from ethics in general. Section 29.1 The Nature of Ethics Business ethics are not very different from ethics in general. ethics The study of our notions of right and wrong; a set of basic principles. business ethics The policies and practices that reflect a company’s core values such as honesty, trust, respect, and fairness. Glencoe Accounting

How are business ethics determined? Section 29.1 The Nature of Ethics The Law Company Values How are business ethics determined? Training and Outreach Ethics Committees Enforcement Glencoe Accounting

Ethics What is a code of ethics? code of ethics Section 29.1 The Nature of Ethics What is a code of ethics? code of ethics A formal policy of rules and guidelines that describes the standards of conduct that a company expects from all its employees. Glencoe Accounting

Distribution of a written code Ethics Section 29.1 The Nature of Ethics Distribution of a written code Training and Outreach Formal training Glencoe Accounting

Evaluates Performance Ethics Section 29.1 The Nature of Ethics Ethics Officer ethics officer The employee directly responsible for creating business conduct programs, evaluating performance, and enforcing standards of conduct. Creates Programs Evaluates Performance Enforces Standards Glencoe Accounting

Performance Appraisal Notes Ethics Section 29.1 The Nature of Ethics Performance Appraisal Notes Termination Probation Enforcement Demotion Suspension Glencoe Accounting

Ethics The Accountant’s Role Avoid harm to stockholders. Section 29.1 The Nature of Ethics The Accountant’s Role Avoid harm to stockholders. Optimize the interests of the public. Adhere to universal standards of what is right. Respect the human rights of all people. Glencoe Accounting

Ethical Behavior Individuals Businesses Society Section 29.1 The Nature of Ethics Acting ethically can increase self-esteem, contentment, and self-respect. Individuals A DePaul University study found that companies that made commitments to an ethics code provided twice the value to shareholders than those that did not. Businesses Society is the sum of all social relationships between humans and is only as ethical as the individuals and business that make it up. Society Glencoe Accounting

Key Terms integrity objectivity independence competence Ethics in the Accounting Profession Section 29.2 Key Terms integrity objectivity independence competence confidentiality Glencoe Accounting

Key Principles Key Principles integrity The principle that Ethics in the Accounting Profession Section 29.2 Integrity integrity The principle that requires accountants to choose what is right and just over what is wrong. Confidentiality Key Principles Objectivity Competence Independence Glencoe Accounting

Key Principles Key Principles objectivity Ethics in the Accounting Profession Section 29.2 Integrity objectivity The principle that requires accountants to be impartial, honest, and free of conflicts of interest. Confidentiality Key Principles Objectivity Competence Independence Glencoe Accounting

Key Principles Key Principles independence Ethics in the Accounting Profession Section 29.2 Integrity independence The principle that requires accountants to have no financial interest in the company being audited. Confidentiality Key Principles Objectivity Competence Independence Glencoe Accounting

Key Principles Key Principles competence Ethics in the Accounting Profession Section 29.2 Integrity competence The principle that requires accountants to have the knowledge, skills, and experience needed to complete a task. Confidentiality Key Principles Objectivity Competence Independence Glencoe Accounting

Key Principles Key Principles confidentiality Ethics in the Accounting Profession Section 29.2 confidentiality The principle that requires accountants to protect and not disclose information acquired in the course of work unless they have the appropriate legal or professional responsibility to do so. Integrity Confidentiality Key Principles Objectivity Competence Independence Glencoe Accounting

Codes of Ethics American Institute of Certified Public Accountants Ethics in the Accounting Profession Section 29.2 American Institute of Certified Public Accountants Institute of Management Accountants Institute of Internal Auditors Glencoe Accounting

Sarbanes-Oxley Act (SOX) Ethics in the Accounting Profession Section 29.2 Sarbanes-Oxley Act (SOX) Effective 2002, SOX protects investors after several corporate scandals failed to be identified and prevented by auditors. SOX requires CEOs, financial officers, accountants, and auditing firms to comply with new regulations and procedures. SOX established an accounting board to oversee and investigate the audits and auditors of public companies. Glencoe Accounting

Question 1 What are five items that could be included in a business’s code of ethics? Answers can include: Conflicts of interest Product quality and testing Customer relations Employee relations Suppliers and consultants Expense reports Security Political contributions Environmental actions International business Workplace safety Technology Whistle-blowing Glencoe Accounting

What is the foundation for ethics in accounting? Question 2 What is the foundation for ethics in accounting? Certain principles provide the framework for rules of conduct that an accountant is expected to follow. The principles include integrity, objectivity, independence, competence, and confidentiality. Glencoe Accounting

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