Accounting is a professional industry that offers a variety of financial services to individuals and businesses. Two types of accounting exist in the business environment: financial and management. Financial accounting is often found in the public accounting industry; public accountants are responsible for reviewing a company’s financial information to ensure it is accurate and valid. Management accountants work for a company recording and reporting financial information. Ethics is an important element in both the financial and management accounting professions.
Accountants have the unique responsibility of working for a specific client while being responsible to the general public regarding a company’s financial information. While this situation seems to create a conflict of interest, many accountants are bound to ethical and professional behavior based on their professional certification. The two most common professional certifications are the certified public accountant (CPA) and certified management accountant (CMA). These certifications provide accountants with guidelines for acting ethically in the business environment.
Many accountants face ethical dilemmas involving integrity. Integrity requires accountants to report all financial information to owners, managers and the general public, regardless of the information’s impact on business operations. Accountants must ask themselves the question “Am I doing what a normal person of integrity would do?” This question is often posed when accountants come across negative financial or business information that can create difficult business situations for a company.
Objectivity and Independence
Objectivity and independence ensures that accountants do not conduct too many accounting services in a single financial department. Ethical dilemmas arise when accountants provide general accounting functions along with audit, tax or management advisory services. Public accounting firms or individual CPAs who complete too many accounting services for one client can face objectivity and independence issues. Failing to maintain an independent opinion may allow accountants to manipulate a company’s financial information.
Due care refers to the professional competence of accountants. Accountants must apply national accounting principles to a company’s financial information. Because many accounting rules are principles-based, companies often have a certain degree of latitude when applying these principles to financial information. Accountants should not attempt to apply these principles in a way that creates questionable financial situations. The inappropriate application of accounting principles may mislead company managers and the general public.
The American Institute of Certified Public Accountants (AICPA) established a code of professional conduct, defining principles and responsibilities. While the AICPA is a membership organization for licensed accountants, other accountants may also adhere to this code. The AICPA also offers an ethics course so accountants can stay abreast of various ethical situations or issues in the business environment.
- Photo Credit Hemera Technologies/PhotoObjects.net/Getty Images
Conflicts of Interest in Accounting
Accounting is the process companies use to record, report and analyze financial transactions. Companies can use internal or external individuals to help...
The Institute of Management Accountants' Code of Ethics
The Institute of Management Accountants' (IMA) code of ethics is a list of ethical standards of conduct for management accountants. Management accountants...
What Are the Benefits of Having a Code of Ethics in Accounting?
The accounting profession is known for its ability to accurately assess and report financial information for businesses. While opinions of the accounting...