Why are Accounting Ethics Important?
Why are ethics important in accounting?
The answer to this question might seem obvious, but the damage to dishonest accounting goes beyond the white collar elites. So few of us know, even if they’re, not aware of it.
Most people’s. Everyday lives are affected significantly by the work of accountants, and we look at the pervasiveness of an invisible problem. You don’t, hear much about accounting ethics. These days, in fact, really public debates on the topic have decreased over the last several years.
Now, this lack of attention probably began when memories of the Enron and world comp scandal started to fade from our collective memory. Now, if you throw in you know the persistent criticism of Wall Street’s, much maligned indulgences, you know during the most recent financial crisis and it really it’s, easy to see that the perceived dullness of accounting ethics has dropped out Of the public consciousness, this lack of attention is unfortunate.
Even it’s, not as dramatic as the huge scandals that necessitated the Sarbanes-Oxley Act in 2002. Ethical accounting practices are more important now than they’ve ever been before in the globalized markets of today.
The sheer complexity of corporate dealings demands that accountants act in a fair and transparent manner. Among other things, this entails accurate assessments of liabilities and assets involved in these massive transactions.
Now, why are Ethics important in accounting, and how does it affect me?
How the need for principled, accounting methods is the fact that you know people all over? The world are affected on a daily basis by the actions of people that they’ve never met.
So this includes individuals who contribute to retirement funds, investment in the stock market or have become you know, company stakeholders in some other way. They make a vital contribution to the world economy and the ethical obligations that they have are readily apparent.
Accounting ethics are currently on the verge of a sea change. In the United States. We’re gradually shifting away from the homegrown standards you know, mandated by the GAAP or generally accepted accounting principles, and you know they’re starting to embrace the International Finance reporting standards or IFRS now, while both systems provide a strong Ethical framework, GAAP rules offer direct guidance while the IFRS emphasizes the need for sound professional judgment, that’s, flexible enough to apply to an ever-changing financial world and what temps accountants to bend or even break the rules.
There are many reasons that accountants are tempted to break the rules of ethical accounting practices. Needless to say, these temptations are usually of a financial nature. Now, with the access they have to sensitive financial data, accountants can steal vast amounts of money through unethical actions.
From stock price manipulation, you know brazen embezzlement schemes now many corporate financial scandals result from the unethical actions of small groups or individuals who are driven by a thirst for illicit gains.
Now the examples of Enron and world Comm, I mean they are emblematic of this unfortunate tendency. There are other occasions when accountants are driven to break the rules by a desire to make their company seem like it’s performing better than it actually is.
However, when you know, accountants discard their ethics. For reasons like this, the ultimate motive is still a financial one, accounting regulations who’s actually in charge here. Accountants have their own national trade organizations and most of them work to codify enforce professional standards.
One such organization is the American Institute of Certified Public Accountants or aicpa. Their ethics committee works diligently to enforce accounting standards at the national level, while analogous agencies oversee accounting practices in individual states.
Now these organizations have the power to suspend accountants for dishonest behavior and have their official designations taken away outside their set of personal values. The consequences that these agencies can mete out and really determine accountants from engaging in unethical behavior, because their livelihood depends on their designation now.
Government agencies, such as the SEC, also regulate accounting practices in the United States. One possible flaw in this regulatory system is that accountants are effectively policing themselves. On the other hand, the desire to maintain the profession’s integrity encourages accountants and their trade organizations to enforce strict ethical standards.
Now it might seem, like you know, a dull subject, but accounting ethics play really a key role in the modern world. When accounting professionals, you know choose to defy ethical standards, their behavior has tangible, real-world implications.
Unethical accounting practices can wreak havoc on people’s, financial and personal lives. This fact alone should answer the question: why are ethics important in accounting? This information has been brought to you by UC PAA