The Sarbanes-Oxley Act Of 2002 (SOX)

The professional ethics become a priority in today’s business world. The improvements and regulations towards accounting ethics have been made for the last fifteen years. Since early 2000s, regulators have issued the Sarbanes-Oxley Act of 2002 (SOX), Sections 302 and 404 to oversee the financial reporting, review audit requirements, and impose sanctions for inaccurate disclosure and violation of ethical standards. Following SOX, AICPA, PCAOB, and COSO together with the Institute of Management Accountants, the American Institute of Certified Public Accountants, Financial Executives International, the Institute of Internal Auditors, and the American Accounting Association developed models and themes that guide companies on accounting ethics and

Shafer (2002) indicates the reason of accounting wrongdoings is materiality. Moreover, the management rationally and intentionally misrepresents financial statements, misleads investors, and commits the fraud for the personal gain (pp. 243-244). The regulatory changes promoted an aggressive financial reporting. The pressure of mandatory reforms and financial markets affects CFO’s personal financial interests and interests of corporation that management can manipulate with. Beaudoin, Cianci, and Tsakumis (2015) investigate the influence of incentive conflict and earnings management ethics on financial reporting. The authors view ethics and financial incentives as keys of earnings management. The low ethical standards and personal financial targets increase the issues of CFO’s earnings management behavior (pp. 505-507). The motivations of executives and accounting managers set the ground for

Ionescu (2009) names morality, trust, and fair expectations as the most essential values for ethical relationships with a client (p. 121). The researcher states auditors, companies, and suppliers should be committed to moral engagement with clients, stakeholders, and customers (pp. 121-123). The ethical audit should consider meeting the company-clients’ ethical objectives and account for the transparency with stakeholders. The external auditors should possess the professional judgment, integrity, and objectivity. David, Kantor, and Greenberg (1994) discuss the growing number of legal proceedings due to ethical issues. The researchers believe the implementation of ethics code will help accounting professionals maintaining the independence and great performance (p.