The Importance of Ethics in Public and Private Accounting - Research Paper Example

Ethics in Public AND pRIVATE Acounting The paper discusses the need of ethics in the profession of accountancy and the importance of ethics in the profession especially the public and private accounting firms which are involved in the audit and other accounting related tasks. Ethics Ethics is defined as the set of rules and conduct which is acknowledged with regards to a certain group of people and their actions within their circle which is acceptable and appreciated. (Dictionary) The ethics also embody the best practices and the behavior which are undertaken for the benefit of the people at large.

Accounting Ethics The theme of ethics in accounting is concerned with the moral values and judgmental decisions which involve people in the profession of accountancy or working with an accounting agency that has to deal with it daily during their practice. (Hald) The profession of accountancy can be put to use as a means of studying the reasons that a business might succeed or be unsuccessful, however the foremost importance is when it comes up to the public services; people who work as accounting professionals must make decisions based on their judgments which can from time to time surpass the welfare of their clients and the profession as a whole in agreement of the welfare of the public.

Importance of Ethics Ethics are significant all through the world of business; however they are particularly essential for the people involved in the profession of accountancy as well as the practices of accounting. Generally, it is due to the fact that accounting and the related tasks such as the audit involve dealing a lot more with figures, facts and data compared to any other area of the business. This means that there is little room for perception and the consequences of unethical actions are much more extensive. (Lacoma) Ethics in the profession of accounting are of greatest significance.

At the present, as the business world is adopting global accounting practices and other standards of auditing, it has become more essential to stick to certain Codes of Ethics and Principles based on the best practices as approved by both the global and national bodies of accountancy. Public and Private Accounting There is a distinction between the basic kinds of the accountants which are grouped in to two broad categories i.e. the public and private accountants. Certified or Chartered Accountants such as CPA or CA are referred as public accountants who present their services to the public at large and due to that fact the lumber of ethics is greater for the public accountants, as the work they perform is used by several others and therefore it should be upright.

Accountants who occupy positions in managing or financial positions stick to some guidelines based on ethics arranged by Institute of Management Accountants, and such accountants who are employed for the internal management in a particular corporation adhere to code of ethics provided by the Institute of Internal Auditors. Importance in Public Firms It is of the extreme significance that the public trust the accountants and the accounting which is conducted by them is the financial future of the investors and other people associated with the finances, and their business or families, could be threatened. (Hald) Accountants working in the public firms are independent advisors of the business of which the public are the general stakeholder.

They usually present widespread services to the companies. They can also be auditors and can be involved in setting up the accounting systems of the client or involved in providing advisory services regarding tax planning, or even a frauds and error detector. He can also be involved in analysis of financial statement and making budgets, advising their clients regarding financial decisions and providing expert information on maintenance of environment based in best practices of ethics. Hence, the need to be objective as well as independent comes from the following of the code. (Saeed) Public Accountants working in the audit and other consultancy firs have to follow the code of ethics in order to ensure the compliance with norms of public reporting as the public relies upon the information which is certified and audited by them.

Importance in Private Firms The private firms can be private companies that are stakeholders are not the public at large and therefore not a lot is at stake for the public. However, the ethics and the ethical practices are equally important as the product or services offered are to be used by the public nonetheless. The private firms or companies should follow the ethical standards and the best practices with regards to their accounting and the accountants should present a true and fair picture of their accounting record.

Even though the private companies are not accountable to the public directly but they still have to adhere to the ethics and ethical principles when it comes to the accenting as the shareholders, being private individuals, have put their trust on the accountants to provide them the true picture of their financial statements and their accounts to ensure accountability and profitability. Consequences of lack of Ethics in accounting When the ethical standards fail to apply to accounting it gives the chance for exploitation of facts and figures which, if employed to delude, may result in a person investing under forged presumptions, or a company to fraudulently characterize its finances in front of its shareholders and other users of their financial date.

Not only the general public is at stake but the private individuals who are stakeholders of the private firms and companies may also be mislead through deceitful use of accounting. Conclusion Ethics in accounting is not merely significant for private companies or persons for trustworthy information regarding the relevant states of finances but it is also accountable to the public at large for provision of clear assessment of business entities which are held publicly. Ethics in accounting can aid in elimination of the issues which are raised as partial or untrue information about business is spread and saves money and helps to increase steadiness in the financial markets.

Bibliography Dictionary., 2012. "Definition". Dictionary.com, 2012. Web. May 3, 2012. . Hald, Tim H. "Accounting Ethics." Ezine, 2008. Web. May 4, 2012 Lacoma, Tyler. "Why Are Ethics Important in the Field of Accounting." eHow. Demand Media, Inc., n.d. Web. May 3, 2012 Saeed, Ghazala. "Ethics For Professional Accountants." Ezine, 29 May 2010. Web. May 4, 2012