What does ethics have to do with Accounting? Everything. Accounting is a representation of the business processes with numbers. The nature of the work carried out by CPAs — including auditing, accounting, and tax services — requires a high level of ethics because Current and potential shareholders, investors, lenders, regulatory agencies, and other users of an entity’s financial statements rely heavily on those financial statements in order to make informed decisions about the entity. If CPAs cannot be trusted to be ethical, then the worth of their services is extremely little.
WHAT IS ACCOUNTING ETHICS ?
Accounting ethics refers to following specific rules and guidelines set by governing bodies that every person associated with accounting should follow to prevent misuse of the financial information or their management position. No business is exempt from ethical behavior and practices. However, those dealing with money and sensitive personal and company information must adhere to strict ethics and integrity standards. This is imperative to gain and retain the trust of clients, co-workers and business partners.
ETHICAL RESPONSIBILITIES & IMPORTANCE OF ETHICS IN ACCOUNTING
Even though the AICPA has an official code of professional conduct, there are still accounting professionals that fail to follow the code. When CPAs demonstrate a lack of self-discipline, it affects businesses, clients, stakeholders and fellow accountants. So in order to avoid issues like these, what are some of the things accountants should keep in mind when it comes to ethics? According to the AICPA Code of Professional Conduct, here are the requirements you must consider at all times.
According to the American Institute of Certified Public Accountants (AICPA), accountants have a duty to serve the public interest and uphold the public trust in the profession. Accounting professionals are expected to continue the profession’s traditions by maintaining a collaborative environment with colleagues, valuing confidentiality agreements and acting in the best interest of accounting.
2. The Public Interests
The AICPA defines the accounting profession’s public as consisting of clients, credit grantors, governments, employers, investors, the business and financial community, and others who rely on the objectivity and integrity of CPAs to maintain the orderly function of commerce. Every action taken by the CPA should work towards serving the public interest.
Integrity is an important fundamental element of the accounting profession. Integrity requires accountants to be honest, candid and forthright with a client's financial information. Accountants should restrict themselves from personal gain or advantage using confidential information. While errors or differences in opinion regarding the applicability of accounting laws do exist, professional accountants should avoid the intentional opportunity to deceive and manipulate financial information. Public accounting firms or private companies often develop a code of ethics or conduct for accountants. These ethics and conduct rules ensure all accountants act in a consistent manner.
4. Objectivity and Independence
Because the accounting profession provides the opportunity for financial gain stemming from client relationships, maintaining objectivity and independence is crucial. CPAs must be independent in both fact and appearance when providing auditing and other attestation services. Being objective is not letting any biased opinion affect a decision. Independence, on the other hand, is not letting any personal relationships affect the professionalism of the CPA. The accountant should always avoid conflicts of interest that could affect their objectivity.
5. Due Care and Competence
CPAs are expected and obligated to practice accounting and provide professional services to the best of their abilities. This is achieved through continuing education, seeking consultation when needed, ensuring adequate planning and supervision, performing annual performance evaluations, and cultivating experience with inter-firm mentoring relationships. It is also important for accountants to keep improving in their education to keep up with the latest trends and best practices that will allow them to perform in an adequate level.
WHAT ETHICAL ISSUES AND SITUATIONS ARE ACCOUNTANTS LIKELY TO ENCOUNTER?
"A large part of success comes with the individuals who prove themselves to be good decision-makers and make good ethical choices rather than people who are technically sharp"
When people think they don’t have time to follow CPA ethics best practices—whether in continuing education reporting or in being duly diligent about client review—they sometimes look for shortcuts that can wind up jeopardizing their career and the success of their firm. The ethical conundrums accountants face includes things like:
- Fraudulent or illegal activity
- Possible conflicts of interest
- The confidentiality of payroll data
- Intense pressure from upstairs to paint a rosier earnings picture
- Dishonest clients asking for distorted financial statements
Every month, myCPE presents a variety of free ethics webinars can help you stay on top of the CPA code of ethics. You can get started with our free ethics courses today.