0. Unit 6 Additional Accounting Topics
Chapter 27 Introduction to Partneships
Chapter 28 Financial Statements and Liquidation of a Partnership
Chapter 29 Ethics in Accounting
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1. Chapter 29 Ethics in Accounting
What You’ll Learn
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.
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

2. Chapter 29 Ethics in Accounting
What You’ll Learn
Describe the Sarbanes-Oxley Act.
Define the accounting terms introduced in this chapter.
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

3. Chapter 29, Section 1 The Nature of Ethics
What Do You Think?
What difference do you think it makes if businesses act ethically?
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

4. The Nature of Ethics Main Idea You Will Learn
SECTION 29.1
Main Idea
All elements of society benefit from ethical behavior.
You Will Learn
what is meant by the term ethics.
who benefits from ethical behavior.
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

5. The Nature of Ethics Key Terms ethics business ethics code of ethics
SECTION 29.1
Key Terms
ethics
business ethics
code of ethics
ethics officer
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

6. The Nature of Ethics Ethics
SECTION 29.1
Ethics
Ethics is the study of our notions of right and wrong. A person’s ethics can provide guidelines for action when facing ethical dilemmas.
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

7. The Nature of Ethics How Are Business Ethics Determined?
SECTION 29.1
How Are Business Ethics Determined?
Business ethics refers to the policies and practices that reflect a company’s core values such as honesty, trust, respect, and fairness. This can be seen in the way a company treats its employees and customers.
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

8. The Nature of Ethics The Law As a Guide
SECTION 29.1
The Law As a Guide
Law attempts to formally define the general public’s ideas about what makes something right or wrong. It describes a minimum acceptable level of correct behavior.
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

9. The Nature of Ethics Statements of Company Values
SECTION 29.1
Statements of Company Values
A business should set good examples of ethical behavior and must state a well-defined framework of ethical concerns and core values.
A code of ethics is a formal policy of rules and guidelines that describes the standards of conduct that a company expects from its employees.
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

10. The Nature of Ethics Training and Outreach
SECTION 29.1
Training and Outreach
A company must communicate its policy properly. This can be done by
distributing written code, along with
providing formal training.
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

11. The Nature of Ethics Ethics Committees
SECTION 29.1
Ethics Committees
Ethics committees help develop and enforce ethical processes. An ethics officer is responsible for creating conduct programs, evaluating performance, and enforcing standards of conduct.
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

12. The Nature of Ethics Enforcement
SECTION 29.1
Enforcement
To enforce ethical behavior, businesses can use penalties including
performance appraisal notes,
probation,
suspension,
demotion, and
termination.
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

13. The Nature of Ethics What is the Accountant’s Role?
SECTION 29.1
What is the Accountant’s Role?
Accountants may face ethical dilemmas while involved in the operation, management, and development of a business. Accountants should focus on the following goals:
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 Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

14. The Nature of Ethics Ethical Behavior
SECTION 29.1
Ethical Behavior
Ethical behavior benefits individuals, businesses, and society.
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

15. The Nature of Ethics Individuals
SECTION 29.1
Individuals
Acting ethically can increase self-esteem, contentment, and self-respect. Society rewards and honors an individual’s ethical behavior.
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

16. The Nature of Ethics Businesses
SECTION 29.1
Businesses
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.
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

17. The Nature of Ethics Society
SECTION 29.1
Society
Society is the sum of all social relationships between humans and is only as ethical as the individuals and business that make it up.
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

18. The Nature of Ethics Key Terms Review ethics
SECTION 29.1
Key Terms Review
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.
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 Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

19. The Nature of Ethics Key Terms Review ethics officer
SECTION 29.1
Key Terms Review
ethics officer
The employee directly responsible for creating business conduct programs, evaluating performance, and enforcing standards of conduct.
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

20. Chapter 29, Section 2 Ethics in the Accounting Profession
What Do You Think?
Why do you think school dress and behavior codes are created?
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

21. Ethics in the Accounting Profession
SECTION 29.2
Main Idea
The accounting profession requires its members to follow a code of ethics.
You Will Learn
the key principles an accountant is expected to observe.
the guidelines that accounting organizations provide for decision making.
the impact of the Sarbanes-Oxley Act on the accounting profession.
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

22. Ethics in the Accounting Profession
SECTION 29.2
Key Terms
integrity
objectivity
independence
competence
confidentiality
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

23. Ethics in the Accounting Profession
SECTION 29.2
Key Principles
Accountants should follow certain principles including:
integrity
objectivity
independence
competence
confidentiality
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

24. Ethics in the Accounting Profession
SECTION 29.2
Integrity
Integrity requires that accountants choose what is right and just over what is wrong. To operate with integrity, an accountant should ask these questions:
Is this what a person of integrity would do?
Have I made the right decision?
Have I maintained the spirit of ethical conduct?
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

25. Ethics in the Accounting Profession
SECTION 29.2
Objectivity
Objectivity requires accountants to be impartial, honest, and free of conflicts of interest. They should not be influenced by personal interests or relationships with others.
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

26. Ethics in the Accounting Profession
SECTION 29.2
Independence
Accountants who audit public companies must maintain independence; the CPA should not have a financial interest in the company.
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

27. Ethics in the Accounting Profession
SECTION 29.2
Competence
Competence refers to knowledge, skills, and experience needed to complete a task. Accountants must complete only those services that they are competent to provide.
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

28. Ethics in the Accounting Profession
SECTION 29.2
Confidentiality
Accountants who work with information in the course of work must maintain confidentiality. This information should not be used for personal gain.
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

29. Ethics in the Accounting Profession
SECTION 29.2
Codes of Ethics
Accounting organizations provide guidelines to assist in ethical decision making.
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

30. Ethics in the Accounting Profession
SECTION 29.2
American Institute of Certified Public Accountants
The American Institute of Certified Public Accountants (AICPA) is the national organization of certified public accountants whose members voluntarily accept the standards described in its Code of Professional Conduct. These standards are much stricter than the law requires.
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

31. Ethics in the Accounting Profession
SECTION 29.2
Institute of Management Accountants
The Institute of Management Accountants (IMA) is devoted to management accountants and financial managers. IMA members have the responsibility to maintain professional competence, uphold professional standards of confidentiality, avoid conflicts of interest, and communicate information fairly and objectively.
Institute of Internal Auditors
The Institute of Internal Auditors (IIA) expects members to demonstrate competence and follow the principles of integrity, objectivity, and confidentiality.
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

32. 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 Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

33. Ethics in the Accounting Profession
SECTION 29.2
Key Terms Review
integrity
The principle that requires accountants to choose what is right and just over what is wrong.
objectivity
The principle that requires accountants to be impartial, honest, and free of conflicts of interest.
independence
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

34. Ethics in the Accounting Profession
SECTION 29.2
Key Terms Review
competence
The principle that requires accountants to have the knowledge, skills, and experience needed to complete a task.
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.
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

35. Chapter 29 Review Question 1
What are five items that could be included in a business’ code of ethics?
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

36. Chapter 29 Review
CHAPTER 29
Answer 1
Answers will vary and might include the following:
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 Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

37. Chapter 29 Review Question 2
What is the foundation for ethics in accounting?
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

38. Chapter 29 Review
CHAPTER 29
Answer 2
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 Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

39. Resources Glencoe Accounting Online Learning Center English Glossary
Spanish Glossary
Glencoe Accounting Unit 6 Chapter 29 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.