The Importance of Ethics to Professional Accountants
Professional accountants are expected to practice a high level of ethics in their business. They owe transparency to clients, business partners, government regulators and other people whose business interests are impacted by their activities. Professional ethics for accountants are essential to maintaining society's respect for this occupation.
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Professional Code of Conduct
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Accountant organizations such as the American Institute of Certified Public Accountants (AICPA) maintain a professional code of conduct for their members. The importance of ethics to this organization is found in Section 50 Principles of Professional Conduct. By publishing a professional code of conduct and expecting members to follow it, an accounting organization sets a standard for the profession. This is important for establishing and maintaining credibility, or otherwise accountants would not have an incentive to join the professional association.
Impact on Corporations and Shareholders
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The importance of ethics to professional accountants is in the role they play in financial markets. Accountants must use a professional code of ethics to avoid any biased reporting of the finances of publicly traded corporations. Without independence and bias-free reporting, accountants would create reports about these large corporations that have many negative spillover effects for shareholders. For example, if an accountant hides evidence of financial losses in a publicly traded company, its shareholders would not get the information they need to unload stocks.
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Impact on Federal Government and Taxpayers
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The Internal Revenue Service relies in part on accounting professionals to provide objective and independent services so that taxpayers will pay their appropriate amount of tax. Without accountants and other professional tax preparers, some consumers would not be able to compute their taxes correctly. From a business standpoint, the government needs to continue to rely on accountants to accurately report client earnings, both businesses and individuals, and to collect taxes on those earnings.
Impact on Risk
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An accounting firm also bears a certain amount of risk for every accounting report it issues to a client. Because an accountant must maintain independence and objectivity, he must assess using a risk-based approach whether there are any risk factors that could cloud his professional judgment in performing an independent auditing or accounting activity. The firm's reputation rests on each independent report being bias-free and reliable.
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