by Accounting is a representation of the business processes with numbers. In order to provide stakeholders with an accurate picture of the business operations from a financial perspective, the bookkeeping needs to be honest and accurate. While accountants adhere to ethical guidelines, the topic of ethics has become more important than ever as the corporate world has been littered with financial scandals from Enron in 2001 to Satyam Computer Services in 2009. As accountants, it is our responsibility to represent the information in a way that truly shows what is going on in the company. Failure to do so can lead to serious consequences for the company and its stakeholders.
Financial planning
It is the duty of the accountants to provide information that helps facilitate planning for the future of the business. In addition to accuracy, the information needs to be provided in a timely manner so that the company can make sound judgments based on the numbers. Failure to do so can result in missed opportunities and higher costs for the organisation.
The Code of Ethics helps companies ensure that there is no misrepresentation of the numbers or information provided to the stakeholders in the company. The rules and regulations stated on the document by the governing body need to be followed by every accounting process in the organisation to ensure that accurate and reliable information is presented to the users of the information. Decision-making doesn’t always come down to a ‘yes’ or ‘no’ and there is always a grey area. Ethics gives accounting companies more clarity in this area of doubt.
The company’s reputation
The code of Ethics states that accountants need to abide by all the rules and regulations listed by the governing body. This will help the company maintain professionalism and ensure that the financial statements are a fair and accurate representation of the company’s position. Failure to comply with the Ethics code can affect the reputation of the company and could even land them in legal trouble.
In the U.K companies need to comply with the U.K GAAP which is a regulatory body that states how financial statements should be prepared in the U.K. The goal of the GAAP is to standardise accounting practices and ensure that all companies maintain integrity and professionalism when it comes to preparing financial statements.
The integrity of the employees
The Ethics code ensures that all members of the company demonstrate integrity and honesty in their work with clients and other professional relationships. The ethics code also prevents accountants from associating themselves with any information that could be misleading or damaging to the client or the organisation.
The European Union has regulations to protect the privacy of the clients with the General Data Protection Regime (GDPR). This is a set of privacy regulations that is applicable to all companies that store or process the client’s personal information. The policies include the right to receive a copy of the information retained by the company, data breach notifications and the requirement of each company to name the individuals who are in charge of protecting the client’s personal information. This helps ensure that the integrity of the client’s personal information is retained and there are no unsolicited leaks. If companies or individuals fail to comply with the rules and regulations listed under GDPR, it could result in serious consequences. Therefore, it is essential for companies to maintain the integrity of the employees and ensure that they abide by GDPR rules.
It is inherent to the accounting profession
Accounting and ethics go hand in hand with the accounting profession. As accountants, it is important that we make neutral, unbiased decisions that help the client. If the company benefits from the sale of one financial product over another, it could lead to bias and misrepresentation of information for the client. As part of the ethics code, it is important that the information provided is not subject to any external influence.
In India, companies have to comply with Ind AS which stands for Indian Accounting Standards. These policies provide companies with principles for recognition, measurement and treatment of accounting transactions in the financial statements. The goal of Ind AS is to bring consistency to the accounting principles and practices followed by companies.
Tax payments
All companies have a legal obligation to represent accurate financial information on their tax forms. Some companies can provide inaccurate information to the tax authority to reduce their financial burden. However, they can face perjury and high fines if they get caught. The Code of Ethics ensures that accurate information is provided when filing taxes and keeps you in the clear.
Professional ethics:
Independence and Objectivity
Ethics and independence go hand in hand in the accounting profession. A critical component of trust is making unbiased decisions and recommendations that benefit the client. Conflicts of interest, for example, demand exposure under independence guidelines. Benefiting from the sale of one financial product over another could lead to a bias that skews financial advice to a client.
To remain objective and independent, it is also necessary to ensure that recommendations are not subject to outside influence. An accountant’s professional judgment is compromised if they subordinate their judgment to someone else’s.
Confidentiality
Disclosure of financial information or revealing the disposition of a potential merger by an accounting professional without express permission violates the trust that is the foundation of a professional relationship unless there is a legal or professional reason to do so.
Professional Behavior
Ethics require accounting professionals to comply with the laws and regulations that govern their jurisdictions and their bodies of work. Avoiding actions that could negatively affect the reputation of the profession is a reasonable commitment that business partners and others should expect.
Integrity
Demonstrating integrity means being straightforward and honest in all business and professional relationships. Upholding integrity requires that accountants do not associate themselves with information that they suspect is materially false or misleading or that misleads by omission.
Professional Competence
As technology, legislation and best practices change, a professional accountant must remain up to date. To exercise sound judgment, an accountant must stay abreast of developments that could affect a decision’s outcome.
Practicing due care means recognizing your skill level and not suggesting that you have expertise in an area where you do not. Consulting with other professionals is a standard practice that helps to bond a network of individuals and generate respect.
Similar guidelines also apply to accounting professionals who supervise others. These accountants must ensure that the subordinates receive proper training and guidance as they carry out their responsibilities.
