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Ethics in accounting: How important are they?

Written on Sep 5, 2022
Ethics in accounting

                 (Amy Hirschi / unsplash)

Would you ever expose your client’s or firm’s financial information?

Seems like a cut-and-dry answer, doesn’t it? “No.”

What if you knew of an exciting merger in the works between your client and another big company? Would you need to tell somebody?

What if you received a subpoena to surrender personal or financial data?

As an accounting professional, you make regular judgment calls based on a code of ethics you promise to adhere to. The most outright and scandalous “no-nos’” are easy judgment calls. But the majority of your ethical dilemmas are just that because they are not blatant and obvious. They require expertise and detective work to decide your best course of action.

As an Ohio CPA, your job can look like anything from overseeing retirement funds of city sanitation crews to executing million-dollar transactions. CPAs are tasked with various jobs involving the confidential financial details of organizations and people.

Without your trust, honesty and fairness, the entire CPA profession, and capitalism itself, are vulnerable and shaky. Your high ethical standards of integrity, objectivity, independence and due care preserve a lot more than your reputation.

Protect your integrity, and avoid legal troubles

On a personal level, suspicious accounting methods can lead to regulatory agencies, like the IRS or SEC, investigating you and your client. As an accountant, the buck literally stops with you. You are responsible for what you do with misleading or deceptive information, and can face costly fines or sanctions.

If a business fails to report all its income, that’s an example of corporate malfeasance. If you, the accountant, accept any additional money to produce a particular outcome or to look the other way, you are guilty of accounting malfeasance. Accounting fraud is punishable by fines and jail time. Not to mention, your loss of reputation and income would affect you for years.

Keep your client in business to maintain yours

Since the well-publicized accounting scandals at the start of the new millennium, the public has become ever aware of and concerned with the accounting practices and transparency of companies. They place higher trust in companies that seem forthcoming with financial information and appear more ethical.

Deceptive or unethical practices can lead to a company’s loss of revenue due to a lack of trust by investors and shareholders. In the most severe scenarios, it can lead to corporate collapse.

A trustworthy and ethical company will earn more investors, allowing it to grow. Your client’s success will lead to your own as they’ll need more accounting services and tout your performance to people in their inner circles.

Stabilize the market

So far, we’ve discussed some consequences of unethical practices that would affect you and your client personally. However, the implications of false accounting reach wider than the two of you.

As mentioned above, a company under regulatory investigation or public suspicion will lose investors. Sell-offs of their stocks will drive their stock performance to plummet and eventually bottom out.

The company will be delisted from its stock exchange when the stock price is low enough for long enough. Their credit rating will plummet. They won’t be able to obtain the loans they need to grow and function. Creditors will start to call their loans, and bankruptcy and corporate collapse will follow.

If enough accountants threw their ethical standards out the window, think of how that would impact every company in the nation. Before long, no company could be trusted. Without public trust, there’s no investing and no way for a company to raise the capital needed. Built on trust, capitalism couldn’t work without it.

Integrity is essential

Without ethical accounting, investors cannot hope to trust businesses. Without people’s trust in them, companies cannot wish to obtain the investors they need to stay alive. It’s the circle of Wall Street life.

For that reason, professional associations and regulators like AICPA, IMA and OSCPA exist to ensure that the accounting profession and the capitalist system continue to co-function.

The ethical standards you uphold

Many states enforce their own codes of ethics and require CPE in ethics courses to ensure CPA practitioners and candidates understand the principles and regulations.

As a CPA, you uphold integrity when you refuse to support information that seems false, misleading or omitted.

You show objectivity when you expose any conflicts of interest you might have in performing a job, and you pass that job onto someone else who can be more objective.

You practice due care when you don’t pretend to have the knowledge and expertise you don’t have for a project. As a senior accountant, you practice due care when you properly train your team.

Ohio CPA ethics courses

The accounting field is ever-changing to keep up with new technology, abilities, information and security needs. CPAs must stay up to date with current events and skills to make the best decisions for their clients and themselves. After all, those ethical dilemmas are often puzzling because they are mired in intricacies.

Legislation and best practices are also updated regularly to reflect new technologies and security concerns, making it vital that accountants stay current on new developments that could affect their decisions and the outcomes of those decisions.

Quality CPE courses and current events await you with your accounting membership subscription to The Ohio Society of CPAs. The OSCPA is dedicated to equipping Ohio CPAs with the skills and knowledge necessary to make the best decisions for Ohio businesses. Check out our accounting ethics courses for CPAs so that you’re ready to serve your clients and reflect the high standards of your industry.

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