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Learning Activity: Ethical behavior: Students apply professional standards of ethics to determine whether a proposed business

Learning Activity:


Ethical behavior:  Students apply professional standards of ethics to determine whether a proposed business action is ethical or unethical.


Learning Objectives:


  1. Students will understand how ethics enters into the decision-making process of professionals, accountants, and CPAs.
  2. Students will understand the characteristics embodied in actions that are deemed ethical actions.
  3. Students will use the characteristics of ethical decision-making to determine whether business actions are ethical or unethical.





Ethics are principles of good conduct that help people decide whether an action or decision is morally right or morally wrong. The most fundamental ethical principle is: Do unto others as you would have them do unto you.  Known as the Golden Rule, this rule implies that ethical people are concerned not only with themselves, but also with the well being of others.


Despite the notion that the sole consideration is the bottom line, businesses are concerned with ethics. At a minimum level, businesses are concerned with acting in an ethical manner in order to protect themselves, avoid scandals, and stay free of government intervention, which, in turn, can avoid the levying of fines and the assessment of penalties, if not imprisonment. At a higher level, however, businesses pay heed to the notion of proper ethical conduct since such conduct often defines another bottom line, which is not what you earn financially, but who you are. In light of todays image conscious public, proper ethical conduct may add more to the bottom line than price hikes and cost-cutting measures.


Another common misconception is that laws and ethics are the same: If its legal, its ethical. Quite the contrary.  In fact, an individual can be dishonest, untrustworthy, unfair, and uncaring without ever breaking the law. Laws rules of society only outline minimum standards of what is proper.  Laws do not always define or address proper ethical actions or behavior.


Proper ethical behavior is founded on the belief that it is imperative to distinguish between right and wrong. A Certified Public Accountant (CPA) abides by a code of ethics that all members of the profession must observe.  The principle source of information concerning the CPAs professional ethical standards is the AICPAs Code of Professional Conduct (Principles and Rules), which has been in existence for more than 100 years. Additionally, each state has its own regulatory body that sets professional and ethical standards that govern CPAs licensed to practice in that state.


Proper ethical behavior can be defined according to three basic characteristics: independence, objectivity, and integrity.


With regard to independence and objectivity, CPAs must be free of conflicts of interest both in appearance and in fact when providing public accounting services to clients. CPAs provide multiple services- auditing, financial planning, consulting, international, and technology services- to a variety of clients in a multitude of industries. Therefore, it is imperative that CPAs continuously assess their client relationships and public responsibilities.


Maintaining the highest degree of integrity is necessary to sustain and broaden the publics confidence in CPAs and the accounting profession. Integrity requires CPAs to be honest and candid in their work and to maintain client confidentiality without seeking personal gain. Measured in terms of what is right and what is wrong, integrity is the benchmark against with all decisions and actions by a CPA must be assessed.


In order to act ethically, a CPA must be independent, objective, and act with the highest degree of integrity.  If a CPA violates any one of these characteristics, the action is deemed to be unethical.


Compliments of AICPA.