Ethics in Accounting

Ethics in Accounting

Introduction

Ethics in the accounting profession plays a critical role in defining how such professionals perform their duties. Accountants have an obligation to be competent, reliable, and objective in their practice. Those who perform accounting tasks are not only expected to employ integrity but are also expected to portray a high degree of professionalism. The performance of an accounting professional has a huge impact on the decision making process of an organization or firm (Duska et al. 2018).

Similar to societal levels, general ethical standards are applied in various professions, including medicine and accounting. However, the members of the society place high expectations on accounting professionals since their performance has an impact on the development of an organization as well as the actions of decision-makers within the organization’s scope. The high expectations from the public compelled accounting professionals have developed codes of ethics that govern the procedures involved in the profession. As such, the code of ethics adopted by professionals exceeds the standards required by laws and regulations.

In the United States, the American Institute of Certified Public Accountants (AICPA) is responsible for ensuring accountants employ ethics in their accounting professions. The AICPA governs the codes of conduct of accounting professionals when reviewing sensitive accounting information. The organization is aimed at enforcing the accounting policy that requires accountants to exercise sound moral judgment when undertaking accounting activities..

Accountants are responsible for offering professional assistance to clients while providing an accurate evaluation of the organization’s performance. The primary objective of performing accounting activities is to provide stakeholders and the public about the company’s financial health, thus creating awareness for the necessary adjustments to be performed.

Importance of ethics in Accounting

Today, many business entities rely on financial statements to perform sound business resolutions. As a result, inaccurate financial reports caused by immoral accounting practices can result in revenue loss and unsound business decisions. Besides assisting decision-makers in shaping an organization, financial reports help ion maintaining public trust. As such, applying ethics in the accounting profession helps create a sense of trust among the company’s stakeholders (Hartman et al. 2014).

The first role of accounting ethics, therefore, is to reassure the public that accountants perform their duties and tasks impartially and objectively. The rising claims of fraud related to accounting practices have raised the need for revisiting ethics in the accounting profession. In recent years, transparency has played an important role in shaping the company’s image to the public. As such, many organizations have developed codes of ethics that ensure their employees act in the best interest of the public.

Today, investors consider accounting reports to make sound decisions on investing their money in the organization. Given this, it is essential for firms to develop accurate financial reports to cultivate public trust. Amid the current economic stance, companies that perform regular financial evaluations are considered more ethical and trustworthy by the public than companies that do not offer financial reports. Therefore, proper accounting statements are essential in gaining public trust and attracting new investors to the company (Shafer, (2015).

The most important aspect of accounting ethics is to ensure the overall efficiency of the accounting staff. This approach ensures that the accounting professionals are equipped with the necessary knowledge to lead the organization in the right direction towards achieving its objectives. Additionally, ensuring overall efficiency motivates every employee to practice good moral standards while focusing on maintaining the ethical standards of the company. Often companies that hold high ethical standards have a higher chance of attracting investors than companies that have low standards of ethics. Overall, an accounting professional is required to be neutral and sincere when performing his duties.

Ethical issues in Accounting

Accounting professionals are responsible for ensuring that financial reports are structured according to the recognized ethical standards of the profession. Unethical accounting occurs when an accounting professional presents false financial reports with the aim of portraying a favorable image of the company’s financial status. For instance, an accountant may opt to hide the liabilities of the organization to increases their chances of landing a loan or selling the business (Bampton  & Cowton, 2013).

Further, the accounting profession may be faced with the issue of increasing figures in financial statements. A good example of such a practice is where an accountant indicates a higher price than the actual price of an item. In this scenario, the practice may lead to the loss of revenue, particularly due to fraud committed by the accountant.

On the other hand, the pressure on a company to scale new heights may compel the management to collaborate with the accounting department to create unwarranted budgets and financial statements. The ethical obligation of accountants is to portray the accurate image of the company in terms of assets, liabilities, and profits without succumbing to the manipulation of the management. Given this, it is considered unethical for accountants to alter the company’s financial records with the aim of portraying a good image of the organization (Bampton  & Cowton, 2013).

Conclusion

Ethics plays a major role in shaping the performance of accounting professionals. Today, stakeholders rely on accounting reports to make sound decisions. As such, accountants are required by the public to portray professionalism while carrying out their accounting practices. Given this, accounting professionals opt to abide by ethical codes with the aim of promoting public trust and demonstrating fairness and honesty.

Besides the general laws and regulations, accounting practices are guided by codes of ethics designed by organizations to ensure transparency and honesty in the profession. As a result, accountants are not only required to serve their purpose for the company but are also expected to practice ethics in their duties. In this regard, accounting professionals have a huge responsibility to both the organization and the public.

The most common cause of unethical practices in the accounting profession is the drive to portray a good public image of the company. As a result, many organizations collaborate with accountants to manipulate the actual financial figures with the aim of misleading the users of financial statements. By doing so, accounting professionals compel the public and other stakeholders to make the wrong decisions.

Reference

Bampton, R., & Cowton, C. J. (2013). Taking stock of accounting ethics scholarship: A review of the journal literature. Journal of business ethics, 114(3), 549-563.

Duska, R. F., Duska, B. S., & Kury, K. W. (2018). Accounting ethics. John Wiley & Sons.

Ethical climate, social responsibility, and earnings management. Journal of Business Ethics, 126(1), 43-60.

Hartman, L. P., DesJardins, J. R., & MacDonald, C. (2014). Business ethics: Decision making for personal integrity and social responsibility. New York: McGraw-Hill.