Accounting Course work
Code of Ethics for Accountants
Typically, ethics simply refers to the accepted codes of conduct. Ethics plays an integral role in dictating the moral behaviors and setting direction in any field or discipline. There is a definite distinction between professional and personal ethics. Despite every person having a belief in some form of ethics, diverse opinions are personally held. The moral values held by an individual play an essential role in one’s personal career development. When an individual can sustain certain principles of ethics in their personal life, then they will be able to uphold similar moral principles in their professional life. It is based on this background that this paper seeks to examine the ethical codes and standards that play a key role in developing accounting standards. It will also investigate the impact of further advancement of the ethical codes and standards on a professional discipline of accounting. The importance of ethical codes as well as ethical standards in accounting will be examined.
Ethical Codes and Standards
Hansen, Mowen, and Guan (2009) define ethical standards as a set of principles that, when implemented, promotes values such as kindness, trust, fairness or good behavior. There is no clear set standard that all business organizations adhere to or follow. However, organizations are at liberty to develop ethical standards that suit them best. In most cases, ethical standards are hard to implement since majority of the values are vaguely defined and are always open to diverse interpretation. However, there are some standards that are more distinct, for instance, “Do not disclose any corporate information outside the organization” (Klein, 2015). Similarly, a code of ethics is a set of guidelines established by an organization for its management or employees to guide them in their actions.
Accountant’s Professional Ethics
There has been an increase in complaints regarding misconduct on the side of accounting professionals. Several cases have been reported of the types of behavior that is unethical and against the accounting principles. Multiple accountants have been found to engage in corruption and fixing figures to create an illusion that the company is performing well, when in reality the organization might be financially unstable. There is thus an urgent need to instill appropriate ethics in the accounting profession. Furthermore, based on the current mega-bankruptcies, there has never been an appropriate time to focus on ethics of professionals and individuals in business. The common phrases used by the Financial Executives International Group include “acting with integrity and honesty” and “avoiding conflicts of interest in personal and professional relationships.” “Complying with the set rules and regulations of the government, state or federal authorities”, and also “providing information that is complete, accurate, timely, and objective” are other commonly used phrases (Klein, 2015).
There are basic principles that guide the normal operation of a professional accountant. One of these basic principles is integrity. This means that an accountant should be honest and straightforward in both business and professional relationships. This will make the firms served by particular accountants to receive a high level of trust from their partners. Another important virtue that should be embraced by all accountants is due care. This means that accountants should develop and enhance their skills and knowledge to ensure provision of qualified service. This will make the accountant act diligently and by professional standards during the provision of professional service. Objectivity is another code of ethics principle that can help accountants to grow and emerge successful in their career. To achieve objectivity, a professional accountant should not let the conflict of interest, bias or undue influence from others override business judgments or professional decisions. Confidentiality is also an essential element in accounting ethics that all professional accountants must comply with to ensure success of their activities. A professional accountant must recognize that the nature of their work requires some level of confidentiality. This means that they must make very wise decisions regarding whom to disclose specific accounting information to in order to avoid frauds that can be caused by corrupt officials in a particular firm. A professional accountant must receive permission before disclosing information to any third parties. Professional behavior is another ethical principle that must be observed by all professional accountants. A professional accountant should be observant of appropriate regulations and laws to avoid engaging in activities that can discredit their profession.
Importance of Ethics in Accounting
Every firm has internal regulations that are aimed at maintaining the internal peace of the firm. They consist of the prescribed rules of conduct which are known as codes of ethics. These codes are essential to accountants as well as the overall practice of accounting. It is in the accounting department that ethics is most applied, which can be explained by the fact that ethics deals mostly with hard data, figures, and facts than other departments within an organization. The results of unethical behavior in the accounting department have the most notable effect.
Ethics in Accounting and Financial Decision-Making
Ethics in itself is an environmental factor that not only affects accounting but also the general performance of the company. There are some companies, such as Enron, Tyco, and WorldCom, that had accounting scandals due to financial reports falsified by their upper management and the external auditors not detecting those falsifications. As a result, those companies incurred losses because of corrupt officials in the accounting management. Accounting rules and the outcome information are made to capture and reflect the fundamental performance of a firm.
As can be seen from this paper, when discussing the issue of ethical standards and codes in the accounting department, there are numerous areas that can be explored. Throughout the issues examined herein, it is clear that ethics is essential in the accounting profession. If ethics is not considered in the area of accounting, there would be numerous fraud cases and large portions of financial assets would disappear with no trace. It is, therefore, crucial for any individual who aspires to be an accountant to be well familiar with the rules of the position, to realize the long-term impacts of personal behavior, and accept responsibility for the foreseeable effects of personal actions on the accounting industry. An accountant should at all times conduct themselves with dignity, integrity and respect for their position in the industry.
Hansen, D. R., Mowen, M. M., & Guan, L. (2009). Cost Management: Accounting and control. Mason, Ohio: South-Western.
Klein, G. L. (2015). Ethics in Accounting: A decision-making approach.