Ethical Perspectives in the Accounting Profession

Accountants have a significant responsibility to the public. This responsibility exists because outside shareholders, creditors, employees, and others rely on financial statements in making various business decisions.

Internal accountants are employed by businesses to prepare financial statements. These financial statements are then audited by an independent CPA company. Both internal accountants and external auditors are accountable for carrying out their responsibilities with honesty and due diligence.

Numerous accounting organisations advocate for high ethical standards of conduct. The American Institute of Certified Public Accountants (AICPA) is one such organisation. It is a professional association for CPAs who work in public accounting firms or for other organisations (such as corporations). Its Code of Professional Conduct highlights CPAs’ need to serve the public interest, as well as their obligation to operate with honesty, objectivity, independence, and appropriate professional care.

In this article, we have discussed ethical perspectives in the accounting profession using two of the frameworks, utilitarianism and deontology

Utilitarianism

Utilitarianism, a philosophical theory that emphasizes the greatest good for the greatest number, has implications for the accounting profession. Accountants, as gatekeepers of financial information, hold a position of significant power and influence. Their decisions can have far-reaching consequences for businesses, investors, and society as a whole.

Maximizing Overall Welfare: Accountants can apply utilitarian principles by considering the potential impacts of their decisions on various stakeholders, including shareholders, employees, customers, and the broader community. For instance, when faced with a decision about revenue recognition, an accountant might choose the method that best reflects the underlying economic reality, even if it means sacrificing short-term profits in favor of long-term sustainability.

Balancing Competing Interests: In many cases, accounting decisions involve balancing competing interests. For example, a company may be under pressure to inflate earnings to meet market expectations, but this could mislead investors and lead to financial distress in the long run. A utilitarian approach would weigh the potential benefits of inflated earnings against the risks of misrepresentation and choose the option that maximizes overall welfare.

Social Responsibility: Utilitarianism can also encourage accountants to consider the social implications of their work. For instance, accountants can play a role in promoting sustainability and ethical business practices by ensuring that companies disclose their environmental and social impacts.

Deontology

The proponents of deontology argue that the results of an action do not determine whether or not it is morally correct. They feel that the fundamental character of the act itself has an impact on whether or not it is proper. Deontology, on the other hand, is divided into two distinct views. Some deontologists believe that the nature of an act is the only factor that should be considered when determining whether or not it is morally right.

Among other things, they believe that murdering and lying are both ethically reprehensible under any condition. Alternatively, other deontologists argue that both the essence of an act and its repercussions within a certain context must both be taken into account.

To illustrate these approaches, imagine you are in the process of filling out an expense report after having just completed a business trip. Your employer does not reimburse child-care costs while away from home, yet most of your colleagues (including your immediate supervisor) feel that child care is a legitimate expense. They recoup this expenditure by overstating the cost of meals (most restaurants provide you with a blank receipt). Is it ethically correct for you to overstate your meal cost?

Falsifying an expense report, according to many deontologists, is the ethically reprehensible act of lying. Instead of looking at the immediate consequences of an activity, utilitarians consider the long-term effects. It is unclear whether utilitarians would arrive at the same result. The impact of the fabrication on you vs. the stockholders would have to be evaluated.

To develop a strong personal code of ethics, each of us must understand how we think about ethical situations. We suggest that you consider how utilitarianism and deontology can be used to analyze ethical situations and that you assess which of those approaches, if either, is consistent with your own moral framework.

Here are some key ethical principles that guide the accounting profession:

Integrity: Accountants must act with honesty, truthfulness, and fairness in all their dealings. They should avoid conflicts of interest and disclose any potential biases that could influence their professional judgment.

Objectivity: Accountants should be impartial and unbiased in their professional judgments. They should avoid making decisions that are influenced by personal interests or relationships.

Independence: Accountants must be independent in their professional judgments and should not be influenced by external pressures or incentives. They should maintain a professional distance from their clients and avoid situations that could compromise their objectivity.

Due Care: Accountants must exercise professional competence and due care in carrying out their duties. They should stay up-to-date with accounting standards and regulations and should perform their work with the diligence and skill expected of a professional accountant.

Confidentiality: Accountants must maintain the confidentiality of sensitive information that is entrusted to them. They should not disclose confidential information to unauthorized individuals or use it for personal gain.

Professionalism: Accountants must maintain high standards of conduct and behaviour. They should be courteous, respectful, and professional in their interactions with clients, colleagues, and the public.

Public Interest: Accountants should act in the best interests of the public. They should uphold the public trust in the accounting profession and should not engage in activities that could harm the public interest.

These ethical principles provide a framework for accountants to make sound judgments and act in a responsible manner. By adhering to these principles, accountants can help to maintain the integrity of financial reporting and contribute to a fair and transparent economy.