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Given the need for auditors as explained earlier, it would not be difficult to understand the importance of code of ethics for the professionals or public accountants who will discharge the power and functions of said audit. As a way to understand the need of ethical requirements for auditing or public accounting profession, one needs to view auditing compared with other professions to determine any similarity. Since there is no universally accepted definition of what constitutes a profession, it sounds interesting to know how certain types of activities had been recognized as professional over the past generations.
A keen observer may see the developments of medicine, law and engineering as examples of the disciplines that had long accorded professional status. These profession appear to have evolved because of human need. Public accounting can also be categorized as having evolved to human need and although it relative new compared with other professions, but it may earned a place already a widespread recognition in the recent decades given the effects of the absence of extent of their influence in the big world of business (Whittington & Pany, 1995).
It can be noticed and observed that all of the recognized professions possess several common characteristic which include the following: (a) responsibility to serve the public (b), a complex body if knowledge, (c) standards of admission for its members , and (d) a need for public confidence (Whittington & Pany, 1995). The concept of responsibility to serve the public implied that the certified public accountant (CPA) is a representative of the public.
The word public generally refers to the broad groups of people in business like the creditors, stockholders, consumers, employees and others in the financial reporting process. To become therefore a representative to these groups of people, one would have to require that the independent auditor must ensure that the financial statements are fair to all of these parties and not biased to benefit one group at the expense of the other.
The responsibility to serve the public interest by being fair to all concerned must be made as a basic motivation for the professional, hence a force greater the individual professional must be there to demand responsibility for the performance of such great role (Whittington & Pany, 1995). To say that the public is the only client of public accountant may sound as an oversimplification, given the fact that the entity being audited pays the auditor’s fee.
In an employer-employee relationship, one could hardly imagine an independent employee from the employer because the employee depends much from the employer for financial resources to sustain the employees need. The view therefore of a professional-client relationship must be considered as different from an employer-employee relationship. It is for this reason that public accountant must have a broader than survival view of the economic world, in that losing a client would be the same as losing an employment in an organization.
Since the profession will benefit is the public because of the presence of the professionals, the stature and respect accorded to professionals must be consistent and essential with the long-run professional status of public accounting. Public accountants need to maintain a high degree of independence from the clients if they are to be of service to the larger community must therefore be supported by the personal values of the professional which must be more than satisfying one’s economic need.
As such independence assumes one of the most important concepts if not the most important concept that must be embodied in the public accountant’s Code of Professional ethics as the same is the most critical requirement (Whittington & Pany, 1995). Complex body of knowledge as a characteristic of a profession is supported by the continuous pronouncement of standard setters both in the accounting principles as basis of reporting and in terms of auditing standards that must govern the requirement of financial audit.
One can also prove this reality that is in taking place very fast in an increasingly complex environment. With the changes mostly affected the changes in the technology and business relationships because of new levels of knowledge in many field that have connection with the world of business, the accounting and auditing principles and practices must adapt. This is also the reason that professional accountants under the ideal of “common body of knowledge” are mandated to update their knowledge and skill for them to be effective practitioners and keep their professional standing current.
This common body of knowledge also correlates with the requirement for technical competence and familiarity with current standards and practices in accounting and auditing (Whittington & Pany, 1995). Standards of admission to the profession as characteristic of profession comes as a result of the need to bestow only the power to practice public to those who can discharge the function competently and ethically. Thus, for one to attain a license to have public accounting practice or engage in financial audit, a certified public accountant (CPA) must first meet the minimum standards for education and experience.
In addition, the individual must also pass the pass the uniform CPA examination which contains a way to determine mastery of the body of knowledge described above. Once licensed, the CPA must continuously adhere to the ethics of the profession or risk disciplinary action including possible expulsion or disqualification to engage in financial audit (Whittington & Pany, 1995). The need for public confidence as a characteristic of a profession must come as result of the purpose of serving the public by doing what is fair to all concerned.
This public confidence like those found in physicians, lawyers and engineers, is normally equated with credibility of the product of the profession. Accountants can therefore be considered as prophets or advocates of truth in order to deserve the public confidence. Remove the public confidence and the attest function serves no useful purpose (Whittington & Pany, 1995). Professional ethics in public accounting have developed been gradually and the process is continuous in relation to changes in the business world.
Often times, there are new concepts that are added as the result of unfortunate incidents that would call for more responsive standards to address the growing concern for more effective decision-making in the use of economic resources by individual and entities (Whittington & Pany, 1995). Given now the nature of the required expectation and standard from the auditor, there is basis to consider that any negligent work or lack of integrity on the part of any CPA would be reflection upon the entire profession (Whittington & Pany, 1995).
Consequently, the members or professional in public accounting profession needed to act as one through a professional called the American Institute of Certified Public accounts (AICPA) in devising a code of conduct. The professional code of conduct which is administered by AICPA contains practical guidance to the individual member in maintaining a professional attitude. Similarly, this code should assure the clients and the public that accounting or auditing profession do have maintain high standards that the professional body could enforce compliance of individual members (Whittington & Pany, 1995).
The public accounting profession may prove itself by having indeed achieved the status of a profession by the willingness of its members to accept voluntarily standards of conduct more rigorous than those imposed by law which start when new CPAs take their oath of office. These standards of conduct thus provides for the basic responsibilities of external auditors to the public, to their clients and to their peers in practice.
To attain effectiveness and validity, a body of professional ethics should be attainable and enforceable and not remain as merely of abstract ideals. The public or any affected party can file complaint with PICPA for any disciplinary action against a CPA , who committed something actionable under the code. Such possibility to demand performance would show that the rules of discipline for external auditors are attainable goals and that practical working rules are capable of being enforced (Whittington & Pany, 1995).
Stated otherwise, the restraints imposed on the practicing CPA who may perform personally or thorough an auditing firm, by a body of professional ethics sound as if to impose some burden or hardship. But it the price of power is responsibility. Thus, looking from a long-term point of view, it can be asserted that the individual practitioner, the profession as a whole, and the public all the benefit from existence of a well-defined body of professional ethics in regulating professional auditors (Whittington & Pany, 1995).
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