With the recent financial turmoil in the U.S. economy and beyond, there has been a lot of talk about bad accounting. First, fair value came under fire after mortgage-based securities took the first painful hit in a long line of economic beatings and again when Congress was mulling over the $700 billion TARP bailout package. Just this past week, bad accounting was back in the headlines after the arrest of former Nasdaq Chairman and veteran investment banker Bernard Madoff in a $50 billion Ponzi scheme.
There have always been unethical people in all areas of industry, not just accounting, manipulating loopholes and stealing what is not rightfully theirs.
CPAs, of course, are of a unique ilk charged with the task of handling others' financials with the utmost due care.
Certified Public Accountants are not only required to meet certain educational and experience requirements but are also expected to follow by a strict code of conduct after passing the CPA exam. Some of these include but are certainly not limited to independence, integrity, objectivity, competence, and due diligence. Think of the CPA designation as a collective title; all CPAs are expected to maintain trustworthiness for the greater good of the industry. If CPA were a brand, CPAs would be the marketing team hard at work making sure the public holds that brand in high regard.
Professional conduct is very clear as to what is appropriate for accountants and what is not.
Unfortunately, though the rules are clear, adherence to those rules is not guaranteed. The story of Madoff's $50 billion Ponzi scheme is a perfect example of what happens when someone chooses to blatantly ignore the rules of professional conduct. So while bad accounting is getting all the bad press these days, the real problem is a debit on the personal balance sheet of the offending parties.
Which is why ethical accountants are more important than ever in our changing world.
Sarbones-Oxley was only the beginning and as the financial crisis continues to unravel, it is highly likely that more unethical behavior will be brought to light.What accountants should keep in mind that ethics don't end when you finish the exam; it should be a way of life for practicing CPAs.