Accounting Ethics

Accounting ethics need to be defined and then followed without exception in every business in America. Ethics are more than just morals, in some cases when ethics are ignored, it can be criminal or career ending.

First, let's determine what accounting should accomplish in a business and the situations that should be avoided:

  • Business accounting should accurately capture all financial related events occurring or related to a certain period of time.
  • This financial information must then be honestly and accurately reported to management, the company's stakeholders and to the government.
  • Omissions or misrepresentations of financial events must be avoided.
  • Notes to the financial statements need to explain events that may affect the finances of a business. 
  • Written guidelines of appropriate conduct in matters of accounting should be provided by the business and known by those that influence the financial statements. 
  • GAAP (financial guidelines from the Financial Accounting Standards Board) accounting should always be followed.
The management of a business needs to lead the moral and legal accounting ethics of a business. Clear guidelines for appropriate conduct by accounting personnel must be established and conveyed. But, even more important, management must always set the example and lead the way in right conduct.

If management wants to misrepresent the financial results, then the accounting personnel must be strong enough to refuse to corrupt the information. This is where the business guidelines can be pointed out by accounting. You can see why these guidelines are so important to have in writing.

Let's face it. There are many managers that want to "doctor" the financial results and make the company appear better that it really is. There is tremendous pressure on management to do so, and just as much pressure from management to accounting personnel.

One way to avoid these problems is to decide how you are going to act before these issues ever arise. If you haven't firmly decided how you will act if asked to do something unethical, then you need to do it now. In an intense pressure situation, you need answers from a time when you were thinking clearly and not under pressure.