Ethics in Accounting - Written by Harikrishnan

Ethics is a branch of philosophy that judge human being on wrong and right concerned with the nature of value and the standards by which human actions can be judged. Accounting ethics is a quality measures of accounting dept.

I can Explain the Benefits of Ethics in Accounting in Following Points :

1.  Logic in Good Direction

A good accountant must possess accounting ethics. Accounting ethics produces logic in the brain of accountant. It moves in good direction.  We can also learn to make financial report and every work is done by well planned and according to GAAP.

2.  Helpful for Taking Right Decisions 


Accounting ethics guides  to accountant for taking right decision. If we study accounting deeply , we find that accounting is like Gita book , Bible or all other holy books of world. Your ethical mind grows stronger every time you choose right over wrong.

3.  Misuse of Business's Fund is Unethical


Accountant accesses  most of the funds of the funds in the organization and it is unethical to misuse them. This can lead to the closure of the business and eventually leads to the loss of jobs and investments. Accountant should never misuse business funds and if they use it should be reported in the books of accounts and debited clearly.

One of the key issues with accounting ethics is that poor ethical behavior on the part of an accountant does not just potentially hurt a client, it can also hurt society.


4. Increase the Ethical Qualities in Accountant 

Accountants should be honest, straight and straightforward with a client financial information. Accountants should restrict themselves from personal gain or advantage using confidential information.
A company that provides a clear explanation of the accounting methods used to prepare its financial statements appears to be more ethical and trustworthy than companies that do not provide such information. Often, the more ethical and trustworthy a company appears, the more likely it is to attract new investors.

5.  To Bring Real Picture of Company in the Front of Investors 

The burden for public companies to succeed at high levels may place undue stress and pressure on accountants creating balance sheets and financial statements. The ethical issue for these accountants becomes maintaining true reporting of company assets, liabilities and profits without giving in to the pressure placed on them by management or corporate officers. Unethical accountants could easily alter company financial records and trick numbers to paint false pictures of company successes. This may lead to short-term prosperity, but altered financial records will ultimately spell the downfall of companies when the Securities and Exchange Commission discovers the fraud in USA and independent Auditors  in India.

Latest Issue Relating to Accounting Ethics 

1. A number of financial crises worldwide have shown that accounting ethics is not enough to stop accountants from behaving unethically. Some accountants and accounting organizations have clearly overstepped ethical lines for money, prestige, and other reasons. In reality, our accounting teachers and our society and our law  is responsible for this. Accounting teachers should show his own example of high moral character. Society should also support to ethical behavior. Every unethical accounting professionals should be criticized by society. Law also strict for the accountants who break the trust.


2. Finance is an extremely important resource. It is the backbone of any business and Govt. A strong and well-managed treasury is the heart of any organization and country. Your treasury is also your financial hub. Instead of Finance, I think, strong business ethics a top priority in their strategic plans. The improved results in some areas could also just be a symptom of the current economic situation, and leaders need to remain vigilant about emphasizing the importance of a strong ethical culture and living up to that vision.


3. Individuals in the accounting profession have a considerable responsibility to the general public. Accountants provide information about companies that allow the public to make investment decisions for retirement, a child’s education and major purchases such as a home. For the public to rely on the information provided, there must be a level of confidence in the knowledge and behavior of accountants. Ethical behavior is necessary in the accounting profession to prevent fraudulent activities and to gain public trust.


4. At the core of accounting ethics is the strict loyalty -- as much as is possible -- to generally accepted accounting principles (GAAP). These are the basic rules of accounting laid out by the Financial Accounting Standards Board, and their use ensures the reliability, comparability and integrity of financial statements. In some rare cases, business circumstances may require diversions from GAAP. In these situations, accounting ethics require that any departures are fully documented and clearly justified for investors or others reading the resulting financial statements.


5. To be competent, accountants and financial professionals must not only have secured education and practice that prepares them for their positions, but they must also continue that education by learning new information that can affect their practices. Among other things, they must stay up-to-date with GAAP.

How to Be Ethical Accountant

1. Follow the Accounting Rules 


Follow accounting rules help to highest ethical standards for your department. Stay updated on current federal reporting regulations and make sure your department has current regulatory updates. Immediately report non-compliance issues to management and follow through with the proper reporting requirements. Encourage employees to ask questions when they encounter irregularities and to clarify rules and regulations when they are in doubt. Respond in a timely manner to queries. Let your department know that violators of company and federal reporting requirements will be terminated and reported to the appropriate authorities.


2. Follow the Ethical Standards in Management Accounting 


The following ethical standards in managerial accounting: competence, confidentiality, integrity and credibility. Competence is an accountant ability to use professional expertise and develop his accounting knowledge and skills. Confidentiality requires accountants to disclose information only at their supervisor. Integrity prohibits managerial accountants from engaging in unethical conduct. Credibility refers to the accountant ability to communicate accounting information fairly and objectively to all business. Accounting ethics also ensures that each employee can be trusted with sensitive business information


3. Follow the Ethical Code of Conduct


If  any accountant wants to  become good accountant, accountant must possess an ethical code of conduct requires you to be fair and listen to your staff and clients. Through your own behavior, you can show the department how to cooperate with each other to achieve a harmonious workplace and keep customers satisfied.


4. Never Hide Your Accounting Mistakes 


Mistakes happens, but if you hide the mistakes or continue making them, it can lead to financial difficulties for your company that could prove disastrous. Mistakes do not constitute fraud, but how you handle a mistake reflects on your ethical beliefs and standards. Quickly correct errors and show new accountants and department employees where the error occurred and how it can be avoided. Provide a level of oversight so that mistakes are noticed and handled efficiently. When failure happened the leader took it up when the success came gives his team that is also great management ethics.


5. Follow the Ethics Relating to Confidential Information 


payroll accountants may have information about salaries in different departments, revenue accountants may learn of new products before others, and cost accountants may have inside information about profit margins. In some cases, accountants are some of the first to know about potential layoffs. Accountants should remember that they are bound by both their own ethics and professional standards to not disclose this information to anyone. This responsibility extends to disclosure to individuals within the company as well

Accounting department personnel often have knowledge of company finances that should not be shared with competitors, investors or other third parties except when ordered to disclose it by a court of law.


6.  Faith in Your Given Accounting Reports

Accounting ethics exist to ensure that financial statements are useful to their end users in their financial decision-making For financial statements to be useful, the information presented therein must be accurate, faithful to the financial circumstances and be produced in time to help the decision-making process.

7. Know the Social Benefits of Ethics 


Many people in the accounting a Often find it hard to recognize a serious ethical problem. it is not that they are unethical people, but frequently they are simply aware that an ethical problem is presenting itself. They should think long term social benefits of ethics. Nearly everything that you do in your line of work has an ethical side of things. You hold à very important role in each customer’s and company life, accounts play a key part in keeping the integrity and credibility of their clients & society.
Accountant must be great humanitarian. because some time some company management force to accountant for reducing or cut down workers end service benefit or overtime etc. if the worker is right get that any benefit a good accountant cleverly explain the situation to management and try to give maximum benefit to worker( If the worker is right to get benefit). I think may be this is also part of accounting ethics.


Accountant must be not only competent at his job like every other worker, but he must hold the knowledge and experience to keep his professionalism even at the most difficult times
Accountant is not only working for company management , he is also working for company whole success and also help country whole economic development.


References 

Note:-I studied this content( Accounting Ethics)from some management books or website like YouTube . if you need more details I will be ready to give any time .. once again i great thanks to you for giving such great Opportunity.


1.  4 Good Qualities of Accountant 

2. Accounting Ethics in Chron Resource 

3. Ethics in Accounting - simpleaccount1 Youtube Channel



About the Guest Teacher 

Harikrishnan is working as an accountant. He has over 7 year experience in the field of accounting.  He  likes accounting and also he always tries to proud of himself  that  he is an accountant.

Updated 6th Jan. 2016 : Thanks to  author for creating a page that has been read 455 times.