What is ethical accounting? The idea of accounting ethics deals with the moral and values-based judgments and decisions that an accountant or accounting agency faces daily in their practice. Due to the nature of their work as communicators of financial information to company managers, shareholders and the general public, as well as the accounting and auditing of business entities, accountants and accounting agencies are held to the highest standards of transparency and morality when it comes to their investigations and the information they transmit. Accounting can be used as a way to study how and why a business can succeed or fail, but above all it is a public service; those who practice it must make judgments and decisions that can sometimes prevail over the interests of their clients in favor of the interests of the general public.
Failure to apply ethical standards to accounting creates the opportunity for the manipulation of facts and information that, if used to mislead, could cause an individual to invest under false pretenses, or a company to misrepresent its financials. before its shareholders. It is extremely important that the public can trust accountants and bookkeepers, because their financial future, and that of their family or business, could be at stake.
Why is it important for accountants and accounting firms to be ethical?
Over the years, there have been several major accounting scandals in the United States and the world at large, causing private investors and public shareholders to lose billions of dollars and giant corporations and accounting firms to go bankrupt due to falsified or incorrect information. about the companies in which the money was invested. The Enron scandal is perhaps the most recent and flagrant example of unethical accounting causing widespread negative effects, including the loss of $25 billion in shareholder assets, the closure of the auditing firm Arthur Anderson, and the subsequent loss of 85,000 jobs when unethical practices were reported and the company was dissolved.
Ethical accounting is not only important for private companies or individuals to obtain reliable information about their respective financial statements, but has a responsibility to the public to provide transparent assessments of publicly traded business entities. Ethical accounting can help eliminate the serious problems that arise when incomplete or incorrect information about companies or individuals is disseminated, saving money and jobs and helping to increase stability in financial markets.
