Why Are Ethics Important in the Field of Accounting - Research Paper Example

?Running Head: Ethics in Accounting Ethics in Accounting [Institute’s Ethics in Accounting Introduction Ethics is derivative from an ancient Greek word ‘ethikos’ that is referred to traditions and lifestyles. The ethics is the right and the wrong that relates to the behavior and approach of an individual law-biding citizen to act accordingly in their professional capacity when desirable. Ethics have a very serious bond with legality as sometimes mortality differs as it lacks certainty. If fulfilling and implementing a legal thing might turn to be unethical in behavior, as each individual perceives morality differently (Souster, 2011). The right and the wrong is determine by the proximity of application of laws and moral values of the society and thus it becomes important to not only enforce ethics in professional capacity but also to safeguard the sanctity of the independence of the professions like medicine, law, military and even accountancy. The unethical behavior and lack of confidentiality in accounting profession and services will terminate the independence and integrity of the accountants, organizations and even the public at large. The ethical dilemmas especially the grey areas which need to be assessed by the accountants for the organization as well as the services they provide through firms which enables them to not jeopardize their professional values over the familiarity with the client or not doing their job with professional due care (AICPA, 1998). Ethical Approaches and Behavior The ethical approaches are notable by Absolutism or dogmatism, which highlights the importance of believing in universally accepted codes of conducts. The right is certain and accepted in every corner of hemisphere e.g. to murder a person is wrong and to tell the truth is always right which leads to the ethical behavior of deontological approach. Another ethical approach divulges Relativism or pragmatism that argues over the circumstances or consequences that if to murder is justice and to tell a lie for a notable cause than it is ethically right (Souster, 2011). Ethical code of conduct is label by proximity of duties and responsibilities of the professional accountants in the organizations. The ethical behavior is express in relative consequential approach that is term as teleological, derived from a Greek word ‘telos,’ which means ‘the end’. The action is right if the resultant of those actions is acceptable depending upon the ethical stances. The ethical stance of Utilitarian depicts that the action is deem right if it benefit the majority in large. This might rapture the considerations of the minorities’ ethical morals but here pluralists views to account for actions that benefits both the majority and minority. Lastly, egoistic stances favor only the action that is right for them being a selfish approach to ethical morals. The ethical approaches by consequential and role based leads to different ethical norms and decision by the organization. The personal capacity and the professional life has a strong connection in consequential approach and is deemed to be right or wrong if one goes wrong or right (Souster, 2011). Code of Ethics in Professional Accountancy Ethical standards and codes of conduct are mandatory in practicing accountancy as this profession has a wide range of services from statutory audit, taxation, financial services etc that needs specialized skills and knowledge to encounter the international standards of accounting and finance. The ethical code of conduct are define by the International Federation of Accountants (IFAC) and other professional bodies such as ACCA, CA on Integrity, Objectivity, Confidentiality, Professional behavior and Professional competence and due care. Integrity is steadfast and transparency is voluntary for accountants in their business and professional relationship. Objectivity and biasness should not arise due to any familiarity or personal issues conflicting with the professional judgment. If the accountant is being over familiar and favorable privileges derived from the client, it could turn out to be falsification or window dressing of financial accounts. Confidentiality and privacy is essential in the ethical code of practices as it is the dutiful behavior not to disclose any information obtained during the course of their employment and business acquaintances for any personal advantage. Professional competence and skills is required by statutory law to act diligently with professional due care (Souster, 2011). Importance of Ethics in Accountancy Accountancy regulates international accounting standards and its implementation with the rapid changing financial environment. It is a vast field and diverging industry that is self-regulated or by employment in a firm or companies, that are adhere to different ethical environment and code of conducts. The emergence of Enron Ltd, Arthur Andersen, and BCCI scandals have emerge the importance of regulations and ethics in accountancy profession with strict code of conducts. It evolves practices to safeguard the transparency of financial accountability and true picture of the organizations instead of falsification of accounts due to over familiar relations of the accountants or firms with the organizations and the third parties. Therefore the professional accounting bodies have set ethical standards and principles for the accountants and failure to adhere can result in serious charges and dismissal from the profession as well (Calle, 2009). Ethical dilemmas arise due to over familiarity with the client or conflict of interest by personal or business advantages. Accountants should try to mitigate the conflicts by assessing the possibilities and the consequences arising through those conflicts in either case act in their professional capacity or disclose the matter to the relevant third parties incase of serious consequences. The serious ethical situations occurs when the accountant is force to remain silent or not disclosing the relevant information by his seniors that could have a severe impact on the financial accounts. Advising on financial matters and finding out dispensaries on an old client financials that happen to be close friend as well can lead to jeopardizing objectivity and professional competence due to bond of friendship. The ethical conflicts in respect to the dutiful approaches, the decision should evaluate the situation, the extents of ethical principles involve in the conflicts, and the consequences occurring from the actions performed or not deemed (IMA, 1997) Ethical conduct has become a major principles adoption by the top management to devour their employees in maintaining the business ethical practices both by training the staff and by investing money in workshops by the consulting firms. The top management dwell the principles of ethical code of conduct in business environment to safeguard the interest of the entity, stakeholders and the public at large as ethics is a personal capacity practices that matters if the person cannot keep honesty and fair judgment in course of actions. The recent development of professional international bodies’ regulations and code of ethics is the cold ice between the federal statutory laws and the international accountancy bodies such as ACCA, AICPA, IMA, IIA etc (Souster, 2011). The enforcement of strict regulations on non-compliance of ethical standards and code of conduct by the accountants and auditors could lead to termination from the professional body and in serious cases disciplinary action leading to rupturing the reputation of the accountant’s profession as well by the state laws (Calle, 2009). Conclusion The world is a global communication village that had lead to the awareness of ethical issues and conducts by the accountants in scandalous bankruptcy and falsification of accounts that needs to be safeguard by imposing barriers of ethical conduct. Ethical behavior and morals are necessary in accountancy profession so that true and fair view of the financial accounts are accessible for the customers so they could perform their professional responsibilities out of the familiarity threats. References AICPA. (1988). Code of Professional Conduct. American Institute of Certified Public Accountants. Calle, J. (2009). Ethics in Business. Smartpros Ltd. IMA. (1997). Statements on Management Accounting: Objectives of Management Accounting, Statement No. 1B. Institute of Management Accountants. Souster, B. (2011). A question of ethics. ACCA Student Accountant Technical Article. Read More