Accounting Ethics

Accounting

The existence of today’s sophisticated and urbane civilization can be attributed to ethical values. It serves as the society’s foundation; hence, the civilization will topple and flounder without it. For instance, the United States of America was established based on ethical values and principles.

People acquire their characters and morals on religion, history, or one’s own experiences or ordeals. In almost every possible case, scenario, or situation, there exists a general ethical standard wherein everyone concurs. Ethics serves as the code of conduct in which the people involved comply to. This, in turn, promotes assurance and credence towards the person, product, or service.

In the field of accounting, different organizations such as the American Institute of Certified Public Accountants (AICPA), Institute of Management Accountants (IMA), and Institute of Internal Auditors (IIA) provide codes of ethics to their members.

Intentions of Ethics

The central element in creating a profession is the code of ethics. According to Dr. Katherine T. Smith and Dr. L Murphy Smith, “a profession is formed based on (1) a widely acknowledged body of knowledge, (2) an extensively identified measure of attainment, (3) and an enforceable code of ethics.”

AICPA, IMA, and IIA outlined the various duties, responsibilities, and functions of their members on the organizations’ accounting codes of ethics. In addition, the accounting ethics helps in situations that concern queries on ethics and where decisions ought to be made.  However, it should be noted that accounting ethics will not, and does not, provide answers on every issue and complication that may arise during the course of the accounting practice.

The three major accounting organizations’ codes of ethics are primarily centered on promoting integrity, objectivity, independence, due care, competence, confidentiality, and credibility. Moreover, through the accounting ethics, accountants and auditors are expected to exhibit professionalism and serve, honor, and protect the public’s interests.

  • Integrity

The AICPA described integrity as the “quality from which the public trust is derived and the reference point against which a member must eventually analyze and assess all decisions.”

For an accountant or auditor to retain and increase the public’s confidence, he/she must carry out all his/her duties and functions with integrity. At all times, the accountant or auditor must be trustworthy and candid, but not to the extent that the client’s confidentiality is sacrificed. With integrity comes trust, and this gives the basis for the confidence on accounting professionals’ judgment.

  • Objectivity

Probably one of the most distinctive characteristics of the accounting profession is objectivity. Accountants and auditors are expected to be, as AICPA put it, “impartial, intellectually honest, and free from conflicts of interest.”

Accounting professionals must demonstrate objectivity in all places and at all times. They are compelled to make a balanced evaluation in all auditing- or accounting-related circumstances.

  • Independence

Independence averts situations that may impair an accounting professional’s objectivity. While rendering accounting or auditing services, the accountant or auditor must be independent in both action and appearance. If the accounting professional cannot keep the outward aspect of being independent, he/she must have to at least remain objective.

  • Due Care

The bottom line of due care is the pursuit of superiority and greatness. Due care obliged accounting professionals to administer and carry out their duties and responsibilities with competence, vigor, and to the best of their abilities.

  • Competence

All accounting professionals have the duty and responsibility to perform services that adhere to the rules, policies, regulations, and standards; maintain and enhance their technical and professional know-how; and present information and make suggestions that are definite, coherent, terse, and are at the right time. Moreover, accountants and auditors are required to only get involved or perform services if they have the right skills, knowledge and experience.

  • Confidentiality

The principle of confidentiality is to uphold the importance and ownership of the information that accounting professionals acquire or obtain. They are expected not to divulge any of the information unless they are required by the law to do so. In addition, the information that accountants and auditors obtain should not be utilized for personal gains.

  • Credibility

Credibility means having the right skills to relate information adequately and impartially. Accounting professionals have to be honest in disclosing information that may have an effect on their client’s comprehension towards end reports, evaluations, and suggestions. Any setbacks or dearth’s in information, opportuneness, or processing when complying with policies, rules, or standards must also be fully disclosed by the accountant or auditor.