Accounting Ethics - Importance of Accounting Ethics

What is the importance of accounting ethics?

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Category :Accounting

Maintaining ethical standards are necessary in every business entity that intends to survive successfully in the market and improve total organizational competencies and efficiencies.

Developing total efficiencies of the employees is essential for leading a business entity in the direction of success continuously. This necessitates training and guiding the employees in such a way as to build their efficiencies in all the aspects of business while stressing on maintaining ethical standards effectively at all times. Understanding and upholding business ethics is essential for overall business activities. So it goes with the accounting profession as well.

Ethics is synonymous with morality, honesty and integrity. Ethics means the basic concepts and fundamental principles of right human conduct, which involves differentiating between good and bad, right and wrong, so that an accounting professional follows what is principally right for him to do.

Since the accounting profession involves various functions of accounting, such as, recording of all business events that are of financial character, classifying and summarizing them and present them in the form of profit and loss statement, balance sheet and cash flow statement, the way these activities are performed is very important and it has a lot do with maintaining accounting ethics of accountants.

One of the most important things that shows ethical behavior of an accountant is that he needs to remain impartial and loyal to the business organization while performing the related activities sincerely and in all honesty. Since the accounting information drawn from the financial statements is of great value and significance to be relied upon and upon which the success or failure of a business immensely depends, an accountant should not manipulate the accounting figures in order to hide any information.

In terms of balance sheets, the information concerning, cash, receivables, inventory, prepaid expense, long term receivables etc must be presented accurately.

Similarly, the activities pertinent to the components of income statements, such as, revenues and expense are to be carried out efficiently. An accountant should not change the accounting figures to make profits look better on income statement. In this way, accounting professionals are supposed to provide the accurate information to the top management without changing the figures showing less expenses or greater revenues.

Hence, the accounting ethics should be applied to each and every activity of the process of accounting, so that the complete, accurate and reliable information can be presented to the desired users of financial statements in a business organization.

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FAREED SIDDIQUI

I am an Individual Member of Institute of Management Consultants of India. I am a Professional with a high creative capability based on Business, Management, Financial Accounting, Management Accounting, Finance and Management Consulting Field. I impart part time training and development programs. I write professional articles on business & management, business English and Software Engineering.