Managerial Accounting and the Code of Ethics

Managerial Accounting and the Code of Ethics

Austin Tyler Deese

Student ID: 25690614

Liberty University

Accounting 521

Dr. Phil Gilmore

October 24, 2014

Table of Contents

I. Introduction……………………………………………………………………........3

II. Managerial Accounting and the Importance of Ethics………………………….…..4

III. Managerial Accounting and the Role of the IMA...…………………………….…..5

IV. Managerial Accounting and the Role of the AICPA..…………………………..….7

V. The Sarbanes-Oxley Act and Ethics………………………………………….….….9

VI. Conclusion………………………………………………………………………….12

References…………………………………………………………………….…….13

I. Introduction

Ethics are critical for accountants to possess in the area of managerial accounting in order to ensure accuracy and reliability in financial reporting. Shareholders and investors make their investment decisions based on the financial performance of the company, which can be determined by reviewing an organizations financial statements. Over the past two decades, society has witnessed a rapid increase in the amount of corporate accountants who were caught falsifying accounting information on the financial reports so they could defraud shareholders out of millions of dollars. WorldCom and Enron were two of the largest corporate accounting frauds in our nation’s history and, as a result, shareholders, creditors, and employees lost hundreds of millions of dollars. In both of these situations, the principal executive officers of both companies were not acting in accordance with professional ethical standards, as they were reporting massive losses on the balance sheet as gains. Even though the executive officers and the accountants knew it was unethical and illegal to report the financial losses in a false manner in order to overinflate their assets and profits, they did it anyway to pad their own pockets.

Today, there are several organizations in place to monitor and emphasize the importance of ethics upon their member accountants,...