Accounting ethics is an important topic because as accountants we are the key personnel who access the financial information of individuals and entities. Such power also involves the potential and possibilities for abuse of information or manipulation of numbers to enhance company perceptions or enforce earnings management. The study of moral values and judgments as they apply to accountancy.
Ethics and the Code of the Conduct
Ethics and ethical behavior refer more to general principles such as honesty, integrity, and morals. The code of professional conduct, however, is a specific set of rules set by the governing bodies of chartered accountants.
Rules and Guidance
There are two forms of independence:
- Independent in fact – It refers to any factual information such as whether you, as an auditor, own any shares or other investments in the client firm. These facts are usually easy to determine.
- Independence in appearance – It is the absence of circumstances that would cause a reasonable and informed third party, having knowledge of the relevant information, to reasonably conclude that the integrity, objectivity, or professional skepticism of audit organization or member of the audit team had been compromised.
Threats to Independence
Ethical issues in Accounting
- Accounting ethics involving conflicts of interest
- Predicaments with client confidentiality
- Impacts of financial reporting
- Identify potential legal issues
- Take an outsider’s view
Benefit of Accounting Ethics
The purpose of financial accounting ethics is to ensure that certified public accountants (CPAs) conduct their duties objectively and with integrity. Financial accounting ethics form the basis for legal and regulatory requirements and include issues related to maintaining public trust.