THEORETICAL FRAMEWORK

Making factual decisions and courage to act with that decision can be achieved through ethics. Dellaportas et. al. (2005) explains that ethics encompasses a thorough examination of principles, values, duties and norms, and the consideration of available choices or alternatives. Kohlberg (1958) as cited by {} defined ethical development as the cognitive moral development (CMD) of the individual, governing the thought processes involved in making a decision concerning right or wrong. He also mentioned having high level of ethical development can result more ethical behavior. McPhail and Walters (2009) summarizes that traditionally the idea of professionalism has included, among other things, a commitment to the public interest; a coherent body of knowledge supported by a rigorous system of education; independence and an implied or explicit professional code of conduct. However, within the context of accounting, it would seem that the profession does not always correspond to this ideal type. There is some concern that professional codes of ethics seem geared towards protecting the profession and also that they engender rule following, a rather stilted way of approaching ethical dilemmas. Finally, there is significant concern over the nature of the public interest claims of the profession. McPhail and Walters further suggests that accountants and accounting students do not seem to be as morally developed as we might expect them, or at least like them, to be. The failure of Enron initiated the investigation of many accounting issues that were then undiscovered. The Permanent Subcommittee on Investigations of the Committee on Governmental Affairs of the United States Senate in its report (2002) enumerated several ethical issues such as Fiduciary Failure, High Risk Accounting, Inappropriate Conflict of Interest, Extensive Undisclosed Off-The-Books Activity, Excessive Compensation and lack of Independence. Imad Faour (2008) cited in his research that there are unresolved issues in the accounting profession and identified them as Auditor independence, Responsibility

for detecting fraud, Reporting on internal controls, Public participation in standard setting, Timeliness and relevance of accounting standards, Maintaining independence of the FASB.

The cornerstone of developing an ethical climate resides with the corporate code of conduct and the commitment to the code by senior management (Dellaportas et. al.,2005).
The Committee on Governmental Affairs of the United States Senate (2002) made the

following recommendations: Strengthening Oversight and Strengthening Independence. According to James Rest as cited by Faour (2008), there are four components of ethical behavior: ethical sensitivity (spotting the issues), ethical reasoning (thinking it through), ethical motivation (desire to act ethically) and ethical behavior (carrying through).