The Integral Role of Ethics in Accounting

Accountants are professionals; hence, they are expected to act like one. They’re the key personnel who can access the intimate financial information of individuals and businesses. With such a crucial responsibility, they must abide by the rules and values in the accounting profession known as ethics.

According to Oprah Winfrey, “Real integrity is doing the right thing, knowing that nobody’s going to know whether you did it or not.” It takes a lot to be honest and sustain integrity in the face of many temptations. For this reason, not all accountants can stay true to their moral duty and obligation.

In this article, we’ll tackle the role of ethics in the accounting profession and the common ethical challenges accountants face.

What Is Ethics?

First, let’s define what ethics is. Based on Merriam-Webster’s dictionary, “Ethics is the discipline dealing with what is good and bad and with moral duty and obligation.”

Ethics remains a significant aspect in conducting business practices, not just for accountants and auditors but also for other professionals. To preserve one’s reputation and demonstrate honesty and truth, the fundamental principles within the Code of Ethics must be upheld.

In 2018, the IESBA released the International Code of Ethics for Professional Accountants (including International Independence Standards), which has completely rewritten and revamped provisions. Adherence to ethical standards like this is an important professional obligation of accountants. It underpins their moral duty—from how accountants handle ordinary people’s financial statements to how they execute million-dollar transactions.

But unfortunately, not all professionals in the field sincerely value ethics. Some veer away from ethical standards, compromising their reputation in the end.

Common Ethical Challenges for Accountants

• Financial statement manipulation – Accountants are commonly placed in challenging situations where they’ll be asked to alter an individual or company’s financial records using creative accounting tricks. A client may request to distort the financial picture of a company and manipulate its actual financial performance. This situation is a tough test of the accountant’s ethical behavior.
• Turning a blind eye to dirty money – Accountants may do this for personal gain or to avoid trouble. With intimate access to financial information, they’re in the position to report illicit business activities to authorities. Instead, they may be asked to turn a blind eye and shut their mouth.
  Again, this is a situation that calls for a strong moral duty. A real professional knows the right thing to do and avoids anything that may lead him off the right course
• Confidentiality Issue – Misusing sensitive financial information and failing to protect it are ethical issues commonly faced by accountants. Like other professionals who manage sensitive information, accountants have a legal and moral obligation to keep them safe and protected. For instance, they must resist the temptation to share a company’s financial details with its competitors or outsiders to avoid civil and criminal liabilities.
• Misusing power – Like lawyers and politicians, accountants also find themselves in situations where they are requested to give out their stamp of approval on a financial transaction to favor one party. However, this unethical practice can cause serious legal troubles or bring one’s career to a sudden stop.

Upcoming Webinar: Understanding Ethics in the Accounting Profession: A Comprehensive Guide

The Knowledge Group presents highly experienced litigator Atty. Amir R. Tahmassebi (Konicek & Dillon, P.C.) to address the most relevant issues and challenges surrounding ethics in the accounting profession. He will also share critical insights and best practices to mitigate ethical pitfalls amid the shifting regulatory paradigm.

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Sources:

https://corporatefinanceinstitute.com/resources/accounting/accounting-ethics/

https://getonline.uwf.edu/business-programs/mba/accounting/ethics/#:~:text=Ethics%20require%20accounting%20professionals%20to,partners%20and%20others%20should%20expect

https://www.accountingedu.org/accountants-are-good-for-more-than-just-taxes/