Accounting Ethics stands for “A set moral principles”. Ethical problems are frequently happening in the accounting and business world. Ethics is considered a a fundamental business concept. Accountants face ethical dilemmas such as:
- Will my decision after my performance?
- Will my colleagues be unhappy with me?
- Will my boss be dissatisfied?
- Whether the decision is right or wrong?
- Accounting Ethics
Accountants have GAAP ans IAS (international Accounting standards) to save their skin from any trouble. But these set guidelines cannot give them proper direction when such type of ethical decision involves their judgment and professional competence. The ethical decision in accounting gets critical and crucial due to some pressure namely.
- Job pressure itself
- Client pressure
- Personal pressure
- Peer pressure
- Political Pressure
- Time Pressure or
- Any other technical pressure
So Accounting and management should handle the ethical problems by applying their judgment and technical competence. Because doing the right thing and making the right decision is not always easy.
An Enterprise has appointed an auditor for financial statements. he has access to confidential information. He passes this confidential information to another enterprise. This is not ethically fair.
Many organizations provide incentive bonus on the profit they make. managers can show the inflated profit (by manipulating accountants) to get the bonus more. Is this ethical? it is not.
Internal accounting use confidential information for their personal gain. This is also unethical. The ethical approach to accounting theory places emphasis on the concepts of justice, truth and fairness. In this regard,
- Financial accounting procedures must provide equitable treatment to all interested parties
- financial reports should present a true and fair statement without misinterpretation.
- Accounting data should be fair, unbiased and impartial and must not serve any special interests.
With the passage of time, accounting in the modern days face few challenges due to sheer growth and increasing complexities of business all over the world. These are as follows:
- Non-financial measurement need to be developed and reported
- More information needs to be provided regrading soft assets (intangibles)
- forward-looking information,in addition to historical information, must be provided
- Statements may have to be prepared on a real time basis (and not just periodically)