The present century has seen an upsurge of numerous disheartening scandals, meaning blatant failure in the reporting and management oversight processes of accounting despite the upgrade of professional ethical standards designed and implemented by the Institute of Management Accountants (IMA) (Jaijairam, 2017). In light of these failures, it has become perceptible to most enterprises that the critical review of the association between the role of accounting and its profession is tenable. Current organizational structures are developing and re-examining ethics within the profession of accounting with a replenished interest in the development and training of individuals to portray virtuous ethical behavior and principles.
Due to the sensitive nature of enterprise financials, the study of accounting ethics is of utmost significance and represents essential aspects within the roles of both accountants and auditors, predominantly, while preparing statements of finance. Banerjee and Ercetin (2014) define ethics as morals or a code structure, which offers pertinent standards for differentiating right and wrong. Ethical dilemmas remain commonplace within workplaces and originate from having conflicting ideas or decisions between two options, whereby, the answer is uncertain. As such, for managers, small-business owners, and even investors, the learning and comprehension of accounting ethics, including their functions, is of utmost importance. This paper discusses the ideal ethical decision-making model of the accounting profession, expounding on its four main elements: ability, benevolence, integrity, and professional judgment.
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Ability
From an ethical standpoint, accountants are required to portray immense ability and skill in their work. Ethically, one cannot identify as a professional yet struggle with mundane daily tasks imperative to the dispensation of worthwhile mandates within a job setting. Therefore, as a measure of ethical discipline, accountants are required to display useful and practical skills in business, whether big or small. In essence, accountants have aptitudes in logical thinking, in-depth analysis, and are detail-oriented, which implies that their propensities are not attuned to mathematics only. Through logic and analysis, accountants should be able to synthesize and organize information due to the classification and reporting nature of accounting. Ethically, therefore, accountants should display technical skills in both financial statements and bank reconciliations. Such skills range from the comprehension of the nature of bank reconciliations to becoming familiar with concepts such as outstanding checks and deposits in-transit.
Ethically, it remains imperative for accounting students to comprehend that decision-making abilities and strategies do not rest upon intuition or personal feelings, which stem from a lack of ability. Such decision-making, based on feelings, represents a blatant unethical action as opposed to a course of action attuned to the criterion of sound and skillful judgment stemming from factual information. Since accountants are in a position requiring utmost trust from clients, it remains extremely imperative for them to display ethical sense in their practice. What is disheartening is the fact that even in Ivy League universities, the ethical sense of ability greatly eludes scholars due to numerous cases of inappropriate collaboration or cheating in exams (McDonald, 2015)
Benevolence
Fundamentally, benevolence represents the ethics of care, alternatively termed as care ethics or simply EoC. It refers to a normative ethical theory whereby action considered moral should be the focus of care and interpersonal relationships even in professional settings. According to the American Institute of Certified Public Accountants (AICPA), the dispensation of due care entails the observation of ethical as well as technical standards that continually augment competence and service quality, commensurately, discharging professional conscientiousness to the best of the accountant’s ability (AICPA Code of Professional Conduct, 2018). Moreover, the charter states that the continual quest for excellence remains the epitome of due care, which in turn reflects benevolence.
Therefore, ethically, benevolence is at the core of competence synthesized through the amalgamation of experience and education. To effect proper decision-making through benevolence or due care, the accountant begins with the mastery of the common knowledge body needed for the designation as a certified public accountant (AICPA Code of Professional Conduct, 2018). Pertaining to the ability step, the would-be public accountant should maintain a commitment to professional improvement through continual learning throughout their professional careers. Such maintenance of constant knowledge improvement results in ethical decision-making. Moreover, to dispense benevolence as an ethical goal, accountants should display utmost diligence while dispensing their duties to employers, clients, and the public. Diligence in pursuing day-to-day accounting activities inevitably compels the conscientiousness of prompt as well as cautious service rendering through thorough observations of applicable standards in relation to ethics and technical skills.
Integrity
In accounting, integrity remains to be a significant principle of professional conduct as well as sound decision-making propensities. According to AICPA, the principle of integrity lies upon the fact it maintains and widens the confidence of the public ensuring the performance of professional duties with the most elevated levels and sense of integrity. Integrity remains as a hallmark and element of character elementary to professional recognition and the decision-making process of the accountant (Abend, 2013). As such, integrity requires attributes such as candidness, honesty, and the predisposition of being forthright, especially regarding client financial information. It is decidedly imperative for accountants to limit their inclination to personal gain or the leveraging of sensitive and confidential information.
This notwithstanding, differences or errors in opinion stemming from the use and implementation of laws in accounting should be the accountant’s objective and not the manipulation of financial data for personal gain. In most settings, public accounting institutions as well as private companies often come up with ample code of ethics or conduct to govern the actions of accountants in a manner deemed consistent with ethical expectations. The absence of such codes of ethics undoubtedly stifles the decision-making process in accountancy resulting in retrogressive actions as well as unaccepted principles. Moreover, maintaining objectivity is at the core of integrity. As such, biases, as well as aptness to conflicts of interest including dubious business relations while transacting accounting services is not part of accounting integrity. The failure to preserve objectivity and independence in accounting hampers various aspects of the accounting job.
Professional Judgment
In accounting, professional judgment encompasses various decision-making circumstances, which include the selection of proper accounting strategies, decisions on materiality, and the making of accounting estimates among others. By definition, professional judgment refers to the application of accumulated experience and knowledge obtained through proper accounting or auditing training and through the implementation of ethical standards, thereby, resulting in the actualization of informed decisions concerning proper courses of action.
Therefore, professional judgment remains at the core of ethical behavior in accounting. Most times managers rely on satisfactory financial statements to create favorable images of their companies, especially relating to their economic realities while complying with accounting principles and ethics as mentioned above. This disposition and a fundamental part of this objective remain the engagement of individuals with ample experiences and knowledge bases to ensure the application of relevant skills while dispensing critical judgments or decision-making.
Overall, accountants have the mandate of making use of germane information, including the balance of intuition, experience, and knowledge to make ample judgment regarding particular accounting challenges. Nonetheless, what is ethically disturbing is the fact that majority of accounting firms do not have an in-depth process of making judgment calls; thereby, they fall into judgment traps. On the other hand, while making judgment calls, many of these judgments end up being nothing more than shortcut options that are detrimental to not only personal careers but also business clients. To assure proper decision-making, the judgment process has to reflect proper adherence to the law, top-notch training, and consistency in the process of implementing judgment calls. By doing this, ethics remains upheld, which in turn reflects upon implementable decisions.
Conclusion
Accounting ethics are at the core of proper accounting processes, which translate into business success. Essentially, there are virtually no businesses exempt from practicing ethical behavior. Nonetheless, individuals dealing with money are at the most sensitive part of the scale, especially, considering their involvement with both company and personal information. As such, accountants are required to adhere to austere integrity standards and ethics, which should be imperative to attain and retain. Clients’ trust most often emanates from the aforementioned ethical elements, thereby, making their maintenance an absolute necessity.
In addition to the mentioned ethical standards, professional competence and confidentiality are significant to the maintenance of ethics within accounting. Under confidentiality, it is true that accountants view the good, bad, as well as ugly within a company. Owing to the sensitive nature of finances, the attribute of confidentiality should be upheld and pursued vigorously as an ethical stance among accountants. Failure to keep sensitive information confidential leads to bad publicity and a commensurate defamation of companies or persons, which in turn affects the entire decision-making process.
In regards to professional competence, within any profession, the making of blatant mistakes is a gross breach of ethics. Similar to ability, professional confidence is a great determiner of the decision-making process within accountancy, thereby, should be held in high esteem. Overall coupled with integrity standards, professional judgment and integrity, the ethical framework of accounting becomes complete, guiding the ethical accountant into a gratifying career.
References
Abend, G. (2013). The Origins of Business Ethics in American Universities, 1902–1936. Business Ethics Quarterly , 23 (02), 171-205. doi: 10.5840/beq201323214
American Institute of Certified Public Accountants. (2018). AICPA Code of Professional Conduct [Ebook]. Retrieved from https://pub.aicpa.org/codeofconduct/ethicsresources/et-cod.pdf
Banerjee, S., & Ercetin, S. (2014). Chaos, Complexity and Leadership 2012 . Dordrecht: Springer Netherlands.
Jaijairam, P. (2017). Ethics in Accounting. Journal Of Finance And Accountancy , 1-13.
McDonald, M. (2015). Dartmouth Accuses 64 Students of Cheating in Sports Ethics Class. Retrieved from https://www.newsmax.com/US/dartmouth-sports-ethics-cheating/2015/01/08/id/617356/
