Overview of Ethical Issues in Accounting - Coursework Example

Author’s name Instructors’ name Course Date The Еthiсаl Issues For Ассоuntаnts Overview of Ethical Issues in Accounting Apparently, with the necessary skills and right instincts, accountants can be sleuths (Hoque, 56). Under all considerations, an accountant working for either private or public organization or institution must always be impartial and loyal to ethical considerations and guidelines especially when reviewing individual or organization’s financial records for reporting purposes. Notably, an accountant comes across ethical issues no matter the industry (Blake, 63). Therefore, one is expected to be vigilant in order to reduce chances of manipulation of financial records by any outside force, which may result to both criminal and ethical violations. Accounting ethics involve principles that guide an accountant in making moral and good choices in relation to the presentation, preparation, and disclosure of financial information of an institution, department, organization, or an agency. In the 1990s and 2000s, there were increased levels of financial reporting scandals, which made accounting ethics to be brought into the forefront (Gowthorpe et al., 52). In most of the scandals, accountants were either directly or indirectly involved to create malpractices. In this respect, it is prudent for accountants to know some of the issues that surround them in relation to ethical behavior. Most importantly, accountants have the responsibility of understanding how they are expected to behave in their profession. Ethics in accounting profession is one of the key issues that are closely monitored by stakeholders in this area of practice (Mintz et al., 47). At any time, accountants are expected to respect the confidentiality of their clients, either at individual or organizational level. In this respect, accountants play a critical role in ensuring that corporates report their financial performance that determines their competitive levels and reputation from the public. In this regard, accountants must realize there are always repercussions of their financial reporting. In every jurisdiction, there are bodies of accountancy that monitor the professional conduct of accountant including taking disciplinary action if code of conduct is breached. At the same time, such bodies are tasked with developing ethical values for professional accounting. Consequently, professional accountants are required to act responsibly especially when they engage in accounting services and when reviewing sensitive information on finances. Further, accountants are expected to always exercise and practice sound moral judgment in activities in accounting. Accountants have the unique responsibility of providing their clients with professional services while at the same time presenting accurate and a truthful assessment of an organization’s financial health to the stakeholders and the public (Heinz et al., 35). Therefore, there are general and main values that accountants should respect while carrying out their responsibilities. Key Ethical Values in Accounting As noted above, integrity is one of the key values that are emphasized in the accounting profession. Evidently, integrity is one of the most important elements in all professions. In accounting, integrity expects accountants to be candid, honest, and forthright with their clients’ financial information (Patel, 65). Under all situations, accounts need to restrict themselves from having personal gain or take advantage of a situation such as using the confidential information. In both corporate and individual levels, there are differences and errors in opinion on the applicability of laws regarding accounting. However, despite having such differences in views, professional accounts should avoid creating intentional opportunity in order to either deceive or manipulate any financial information. Admittedly, private and public accounting firms also develop code of conduct or ethics for the accountants. The objective of these conduct rules and ethics is to ensure that all professional accountants behave and act in a consistent manner (Duska et al., 29). However, in the absence of specific standards or rules, accountants are required to review their actions in to make sure that they follow the accepted principles. Independence and objectivity is another value that should guide ethical conduct of an accountant (Patel, 66). The two values are important in ethical considerations in the accounting profession. In this view, accountants should ensure that they remain free from conflicts of interest as well as any other questionable relationships in business when they carry out accounting responsibilities and services. Critical to note is that in a professional accountant’s point of view, all types of conflicts of interest should be of great concern. Any actual conflict of interest should be taken seriously by an accountant especially where there are clear indications showing intentions to manipulate accounting or auditing process. Although apparent conflict of interest may not be as clear to an accountant as the actual conflict, it is advisable to take necessary steps as it ay mature to be significant problem in the accounting process. The key to avoiding manipulation and conflicts of interest for accountants is to ensure that they remain independent and objective. Failure to observe objectivity in accounting may harm the ability of an accountant in providing an honest view about financial information of an organization. Independence and objectivity are critical ethical principles for auditors as well. In most jurisdictions, the accounting industry usually limits the number of services that should be offered by public accounting firms as well as individual public accountants. Notably, accounting services include auditing, tax, and general accounting and management advisory services. Accordingly, accountants who decide to perform two or more of these services may find themselves compromising their independence and objectivity (Heinz et al., 74). For example, an individual who handles general functions of accounting and audits this information is essentially reviewing his own work. In this kind of situation, an accountant may find himself hiding negative financial information of a corporate. Further, due care is also one of the main values that should be considered in ethical accounting (Duska et al., 55). Notably, due care refers to an ethical value that requires accountants to observe both ethical and technical accounting standards. On regular basis, professional accountants are expected and required to review generally accepted accounting principles (GAAP) while at the same time applying this framework in specific financial information of a corporate. Under due care, accountants should exercise diligence, competence as well as proper understanding of an institution’s financial information. Critical to note is that an individual competence is dependent upon personal experience as well as education. Therefore, due care may force senior accountant to not only supervise but also direct other professional accountants with less experience in this industry. Despite understanding the key values and ethical considerations in accounting, it must be underlined that accountants face pressure from corporates’ management that wish to take disciplinary action if they fail to follow the interests of an institution (Heinz et al., 36). Understandably, the demand for public institutions and firms to succeed at high levels, in most cases, may lead to undue pressure as well as stress on accountants who create financial statements and balance sheets. In this kind of situation, the ethical issue of an accountant should be to maintain true reporting of corporate is liabilities, assets, as well as profits without succumbing to pressure exerted by the corporate officers or management. However, if an accountant is unethical, the circumstances could easily make one to alter the financial records of the company and maneuver numbers in order to create false impression about the company’s success. The result such ethical actions could lead to short-term success of an institution (Gowthorpe et al., 72). However, the altered financial information ultimately spell downfall of an organization especially if the commission on Securities and Exchange discover the fraud. Main Ethical Issues Facing the Accounting Profession On daily basis, ethical issues facing accounting industry continue to increase. One of the main ethical concerns in this profession is the “Omission of Financial Records” (Gowthorpe et al., 41). In some instances, an executive such as a corporate officer may ask an accountant to leave or omit certain financial figures from a financial statement or balance sheet with the aim of avoiding to paint an organization in a bad light to the stakeholders or the public. In this context, to an accountant, an omission may be seen as a less breach of ethics in accounting since it may not include direct manipulation of records or numbers. Therefore, an accountant should ensure that he remains extra vigilant in order to avoid falling into such tricky trap in an organizational setting. Fraudulent financial reporting is another ethical issue where most scandals in accounting are based (Duska et al., 10) over the last two and half decades, accounting scandals have been centered on fraudulent reporting of financial information. Briefly, fraudulent financial reporting refers to the misstatement of financial information of an institution by its management. In most cases, this unethical act is done with the intention of misleading the investors as well as maintaining the share price of a company. Although such practices may lead to short-term boots of the stock price, there are always long-term effects that may become disastrous and irreversible. Further, accountants may be directly or indirectly involved in the misappropriation of assets (Gowthorpe et al., 53). Misappropriation of assets is the utilization of resources of a corporate for any other issue or purpose than the interest of a company. Also known as embezzlement or stealing, misappropriation of assets can take place at any level of an institution at varying degree. If accountants are involved in the embezzlement of an institution’s assets, then that is unethical behavior. Disclosure, which is also an unethical conduct, is an error of ethical omission. Notably, the failure to provide or disclose information about a financial performance of a company in order to help investors make well informed decisions about steps to take is in itself a fraudulent financial reporting. Although it prudent for executives of a corporate to walk a fine line and protect the proprietary information, it is unethical to keep this information from the stakeholders such as investors especially if it relates to a significant event. Therefore, accountant should avoid such temptations, which may soil their reputation as professionals. Conclusion In reference to the above brief analysis of ethical issues in accounting, it is clear that accountants have the moral obligation of ensuring that all principles and values enshrined in code of conduct should be followed and respected. In their own way, accountants should as well try to avoid instances where corporates, agencies, or individual clients may compromise their profession. Works Cited Blake, John .Background Issues to Ethics in Accounting: Being Proceedings of the First National Conference on Ethical Issues in Accounting. Kano, Nigeria: Department of Accounting, Bayero University, 2003. Print. Duska, Ronald F, Brenda S. Duska, and Julie Ragatz. Accounting Ethics. Chichester, West Sussex, U.K: Wiley-Blackwell, 2011. Internet resource. Gowthorpe, Catherine, and John Blake. Ethical Issues in Accounting. London: Routledge, 1998. Internet resource. Heinz, Philip, Chris Patel, and Andreas Hellmann. Ethical Issues in the Context of Earnings Management. , 2014. Print. Hoque, Zahirul. Methodological Issues in Accounting Research: Theories, Methods and Issues. London: Spiramus Press, 2006. Print. Hoffman, W M. The Ethics of Accounting and Finance: Trust, Responsibility, and Control: from the Tenth National Conference on Business Ethics. Westport, Conn: Quorum Books, 1996. Print. Mintz, Steven M, and Roselyn E. Morris. Ethical Obligations and Decision Making in Accounting: Text and Cases. , 2016. Print. Patel, Chris. A Comparative Study of Professional Accountants' Judgements. Amsterdam: Elsevier JAI, 2006. Print. Read More