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What is Accounting Ethics?

Mary McMahon
By
Updated May 16, 2024
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Accounting ethics is a field of professional ethics which pertains specifically to accounting. Whether accountants work in public or private practice, they are expected to adhere to ethical standards which are designed to ensure that accountants behave in a way which is ethical and consistent. In some regions, in order to be certified as an accountant, one must indicate agreement to comply with an ethical code, and people can be stripped of their certification if they fail to abide by ethical codes. For most professional organizations of accountants, in order to be members, people must agree to and uphold ethical standards, and they will be removed from the organization if they fail to do so.

The earliest documented discussions of accounting ethics appear to date to the 1400s, and many of the ethical issues which pertain to accounting continue to be the same, even if the financial world of today would be unimaginable to a 15th century accountant. One of the key issues with accounting ethics is that poor ethical behavior on the part of an accountant does not just potentially hurt a client, it can also hurt society. If, for example, an accountant colludes in falsifying financial statements, this hurts investors in a company, taxpayers who may be caught up in government bailouts or regulatory efforts pertaining to the company, and the workers at the company.

Accountants are supposed to use due diligence in their work, confirming that the records they work with are accurate and are fairly presented. They are also supposed to avoid conflicts of interest which could compromise their work, to avoid illegal activity, and to report suspected illegal activity on the part of clients. Accountants are also expected to behave responsibly towards their clients by billing them accurately, fully disclosing information, protecting their financial documents, and so forth.

Accounting schools usually dedicate classroom time to instruction in accounting ethics, expecting students to complete ethics courses which include essay writing about ethics as well as the completion of other assignments. These courses promote high ethical standards, familiarize students with the expectations found in accounting ethics codes, and make students aware of the consequences of failing to abide by ethical standards.

A number of financial crises worldwide have shown that accounting ethics is not enough to stop accountants from behaving unethically. Some accountants and accounting organizations have clearly overstepped ethical lines for money, prestige, and other reasons.

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Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments
By anon207331 — On Aug 19, 2011

What happens when an accountant says you took over $1 million of company that you owned 99 percent of the company but did not know it until you filed for divorce.

My accountant did K-1 for seven years showing this when in fact, all monies went to the 1 percent owner: my husband.

I did not find this out until my ex's lawyer asked for my K-1's and I said I did not know what he was talking about as I had never seen a K-1 in my life.

We had no joint accounts so I never saw any of this money or received any info from my accountant.

By YogurtPark — On Jun 26, 2011

@SuperJD - I totally agree with you. Taking an accounting or business ethics class is not enough to prevent people from committing corporate crimes. But, I do think that requiring students to take such classes can better train future business leaders in making the right decisions.

I graduated with a business degree a few years ago. In my school, ethics was one of the favored classes amongst me and my classmates. It was informative, practical, and engaging. The best thing about the class is that it was mostly based on case studies. We would look at real world examples of how businessmen would commit corporate crimes. Most of the time, these crimes not only affected the company, but the entire market that the company was in.

If I could only take one thing away from that class, it would be that crime does not pay off. That class was successful in showing me and my classmates that the potential consequences of unethical accounting behavior far outweigh any benefits it could bring.

By SuperJD — On Jun 25, 2011

I just took an ethics in accounting class for my undergraduate business school curriculum. The class consisted mostly on the theory of ethics in accounting, and there were a few writing assignments. Honestly, it was a joke of a class, and most students hardly went to lecture because it was so boring.

Although I understand the importance of accounting ethics, I do not think taking a class is going to be enough to stop someone from making an unethical decision when it comes to accounting. In fact, no laws or regulations can every stop unethical behavior all together.

I think the only way to crack down on accounting fraud, and other corporate crimes in general, is to have stronger punishments for those who commit these crimes. Additionally, the courts need to prosecute these individuals more aggressively. Too many people get nothing but a slap on the wrist when they get caught up in corporate fraud.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

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