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The Importance of Ethical Accounting

by Jul 9, 2020Accountants, Accounting, Virtual Accountant

“Ethics is knowing the difference between what you have a right to do and what is right to do.”- Potter Stewart

Ethics is an integral part of an individual that defines his/her professional ethics. And accounting is one such profession that affects the lives of millions of people each day which makes ethical accounting practices even more important. An accountant’s one mistake (be it intentional or unintentional) can wreak havoc in people’s life. 

Enron scandal of 2001 is one such example that is cited as the biggest audit failure and left the Accounting profession questionable. 

Therefore, ethical accounting practices are very important as businesses are counting on them to be fair and also it influences the lives of ordinary people to a great extent. Here’s what Ethical Accounting incorporates:

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Ethical Accounting and How to Practice it:

We are living in a globalized marketplace where Accounting services can be carried out from all around the world. Fair and transparent accounting practices define the honesty and integrity of an Accountant and make sure that they are positively affecting the lives of others. Here are a few reasons to practice Accounting:

  1. Accounting deals with sensitive financial information 
  2. Accounting mistakes can affect many and can prove to be very costly
  3. Ethical Accounting ensures healthy and long-term business relationships with your clients
  4. It allows you to build a reputation and grow your professional network 
  5. Practising Ethical Accounting will help you avoid any legal repercussions 

Here the 5 common Ethical Accounting codes

Integrity

There have been examples in the past where the Accounting profession can be driven by illicit gains, however, integrity towards the profession is a must to keep the profession ethical. Accounting firms and accountants should feel morally obliged to keep their reporting accurate and transparent.

Confidentiality

Practising confidentiality restricts Accounting firms to share sensitive information with third-parties including unauthorized personnel of the organization. Sharing information either intentionally or unintentionally is against the ethical accounting code. However, if any information that goes against the public interest should be shared after seeking a professional lawyer’s help.

Also Read – 5 Bookkeeping Issues That are Solved By Outsourcing it to Experts

Independence and objectivity

Objectivity is an ethical code that concerns an individual accountant’s whereas Independence is an Accounting attribute. Objectivity is an accountant’s mental state to be unbiased in his/her judgment and shouldn’t be driven by personal gains or someone else’s influence. Independence is what defines the objectivity of the Accounting profession as a whole.

Competence

Accounting firms and accountants should be well-aware of the latest technology trends while they adopt the best industry practices by continuously upskilling. Accounting professionals should be trained well to keep up with the industry norms and carry out their responsibilities while following the ethical code of competence.

Professional Behaviour:

No profession is ever complete without the commitment to practice professional behavior while respecting the profession and complying up with the laws and regulations of their profession. Accounting Services need to ensure that they don’t negatively impact the profession.

Wrapping Up:

Accounting profession is a sophisticated profession where mistakes can be costly. Also, professionals might get distracted to move up the ladder quickly by practicing illegal means, however, following ethical accounting is always the right way to be successful in the long-run while you don’t put your reputation at stake.

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