What Every Student Needs to Know About Accounting Ethics

Quick Highlights:

• Ethical accounting ensures accurate financial reporting.
• Accountants with ethics avoid fraud and maintain integrity.
• Ethical behavior helps investors understand companies better.
• Violating ethics can ruin reputations and lead to legal issues.

When you choose to study accounting and finance, learning about ethics is very important. Ethical accounting makes sure financial reports are accurate and prevents fraud. It helps maintain trust and helps investors understand a company’s finances. Breaking these ethical rules can harm reputations and lead to legal trouble. This article explains key ideas like honesty, fairness, skill, and keeping information private. By reading this, you will learn why these principles matter and how to use them in your accounting career.

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The Importance of Ethics in Accounting

Once you make the decision to study accounting and finance, you will be expected to take classes on the importance of ethics. Learning accounting ethics matters for a few key reasons. 

• Ethical accounting practices ensure the integrity of financial reporting and the overall financial system. 
• Accountants who are committed to ethics are less likely to engage in fraudulent activities. 
• Ethical behavior increases the integrity of audits. 
• By behaving ethically, accountants help investors understand the health and financial situation of a company. 
• Accounting ethics promotes trust and accountability. 

When accountants don’t behave ethically, it damages their company’s reputation. The accountant can lose their license and face legal repercussions. The business may also face fines or legal issues as well. 

Key Ethical Principles in Accounting

As you work toward your degree, you will gain a better understanding of professional ethics for accountants. For example, your professors will likely spend time discussing:

• objectivity
• integrity
• confidentiality
• professional competence

When you get a degree in accounting, you will be expected to learn about the following ethical accounting principles. 

Integrity 

Integrity doesn’t just mean that you act with honesty and fairness in your accounting practices. It also means ensuring the integrity and accuracy of your financial reports. To act with integrity means that you closely adhere to the accounting standards that are set by the profession. For most American accountants, this means that you should follow GAAP accounting principles.   

Objectivity

In your accounting education program, you will learn about the importance of objectivity in accounting. This term means that you must be impartial as you do your job. You should avoid conflicts of interest or anything that would cause you to have a bias. 

Instead, accountants must be dedicated to creating accurate, reliable information. By doing so, accountants can develop objective, credible reports.

Professional Competence and Due Care

Professional competence and due care must be a part of your accounting ethical framework. These terms refer to the idea that you should use all of your skills and knowledge to provide the highest level of quality in your work. 

As a part of this mission, you should take classes and sign up for continuing education programs. By building on your existing knowledge, you can improve your professional competence and work quality.  

Confidentiality

When you work as an accountant, you have an obligation to maintain your client’s confidentiality. Unless you are legally obligated to disclose something, you should not share private information with other people. 

This is one of the most important ethical standards for accountants because confidentiality is necessary for building trust with clients. There can also be legal consequences if you don’t keep confidential information private. 

Common Ethical Dilemmas in Accounting

As you will discover in your accounting ethics courses, there are many ethical dilemmas that you may face as an accountant. From handling conflicts of interest to dealing with pressure to change financial reports, the following list includes some of the most common dilemmas and how to handle them.

Conflicts of Interest 

In accounting, a conflict of interest happens when someone has a vested interest that is counter to their role as an accountant. For instance, an accountant may have a business that competes with their employer’s company. Alternatively, they may recommend an investor buy a company that is owned by a family member or friend.

With accounting ethical dilemmas, there are different frameworks you can use to determine the best course of action. For example, the International Federation of Accountants has set up a model for determining what to do if you are faced with a dilemma. In most cases, the best idea is to avoid working as an accountant for any client that may involve a conflict of interest. 

Pressure to Manipulate Financial Results 

Sometimes, a manager or executive officer may pressure you to change financial results to achieve a specific goal. At large organizations, there is typically a whistleblower hotline or HR department you can turn to in order to file a complaint. Because changing financial results can lead to legal consequences, it’s important to report any questionable behavior. 

Ethical Frameworks and Standards

Depending on your location and the company you work for, the type of ethical decision-making in accounting that you use can vary. For example, the American Institute of CPAs (AICPA) and the International Ethics Standards Board of Accountants (IESBA) are two of the most common frameworks. No matter which ethical framework you use, it’s important to use them as a guide for your professional behavior.  

Teaching Ethics in Accounting Education

Ethics training is often one of the first experiences that students have with accounting ethics. While accounting ethics for students can be taught as a standalone course, it is also frequently incorporated into other accounting courses. 

Depending on the ethics in accounting education program your school uses, you may learn through different methods. For example, many programs use case studies so that students can roleplay ethical dilemmas and find constructive ways to solve them. During many classes, students will discuss the case of Arthur Andersen LLP, which was Enron’s accounting firm. The professor will review the ethical lines that were crossed and best practices for avoiding these kinds of difficulties in your own career. 

If you are pursuing a career as an accountant, it is important to take accounting ethics for students as early as possible. This kind of class helps you gain a solid grounding in ethics before you intern as an accountant or continue your studies. Once you’ve gained an understanding of accounting ethics, you can use it as a framework for the rest of your learning. 

The Role of Professional Organizations

When it comes to professional ethics, there are a handful of organizations that play a key role in promoting ethical practices. Through professional organizations, you can meet your certification requirements and access continuing education on ethics. 

Professional organizations are particularly important because of their role in promoting and enforcing ethical behavior. For instance, the professional organization may require all members to disclose potential conflicts of interest.   

Take the Next Step in Starting a Career in Accounting

By studying accounting ethics, you can learn ethical accounting practices early on in your career. Ethical standards for accountants are important because they help you have a successful career. More importantly, you can use ethics in accounting education as the foundation of a career based on integrity, objectiveness, and honesty.

If you are interested in learning more about accounting ethics, there are many resources you can check out. To get started, try joining student chapters of professional organizations. Other than increasing your understanding of the field, your membership can also help you network with other accounting professionals.