Importance of Accounting Ethics

Categories: Accounting Business Ethics

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Ethics is a branch of philosophy that judge human beings on wrongs and rights concerned with the nature of value and the standards by which human actions can be judged .The term is also applied to any system or theory of moral values or principles. Accounting is the mechanism that offers information regarding the financial position of the organization or business. This type of information is critical to investors as it provides them with important and detailed information that could turn out to be the determining factor as to their decisions to invest or not to invest in a particular organization.

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Accounting in business is one of the most important departments. Ethical and professional accounting forms a clear financial image of a business, and allows managers to make informed decisions, keepsinvestors abreast of developments in the business, and keeps the business profitable. (Osanyin, 2008) In accounting, there is the professional ethics that guides the accounting profession.

Accountants are expected to adhere to the set ethical standards which are designed to ensure that they behave in a way which is ethical and consistent.

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For most professional accounting organizations, accountants are certified in order to comply with ethics and they are stripped off their certificates if they fail to abide with ethical codes. Therefore, it is common to find unethical behavior in accounting profession.

Some of the forms of unethical behavior in accounting are, Providing erroneous information regarding expenses incurred in business Giving out false information on expenses purposely is unethical. In accounting profession, the accountant should always provide the correct information regarding any expenses as failure to do so make the financial status of the business to be false.

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This affects the profit and loss reports of the business and consequently affecting the performance of the business in the long run.

Exaggerating business revenue

In accounting practices, all revenue in the business should be reported correctly as this can hurt investors in the company, the tax payers who may be caught up in governments bail outs and the workers at the company. By showing the correct revenue generated, this reflects the true financial position of the company.

Misuse of business funds

Accountants access most of the funds in the organization and it is unethical to misuse them. This can lead to the closure of the business and eventually leads to the loss of jobs and investments. Accountants should never misuse business funds and if they use it should be reported in the books of accounts and debited clearly. Some of the reasons why ethics is important in accounting are;- Confidentiality: People need to have confidence in accountants and the services they provide. Failure to do so leads to uncertainty in investors, shareholders and the work force in the organization. If the quality of the accounting is unprofessional this leads to low confidence with the stakeholders of the organization.

Professional Competence: Ethics in accounting ensures that the accountants maintain professional knowledge and skills at the level required to ensure that a client or employer receives competent professional service. This is exhibited by acting diligently and in accordance with applicable technical and professional standards when providing professional services. So as to maintain law and regulations governing the accounting profession, accountants should always observe the professional ethics in their profession.