Ethical Framework in Accounting


Ethics deals with human conduct in relation to what is morally good and bad, right and wrong. It is the application of values to decision making. These values include honesty, fairness, responsibility, respect and compassion. It is usually believed that accountants should be responsible enough to take care of the interests of those they serve. The professional ethics guide accountants to follow a code of conduct so that their services provided can gain public confidence.

The conduct of an accountant is considered ethical if

  • It is legal
  • It is in line with professional rules and guidelines
  • It is in line with business’ policy
  • The accountant is comfortable with the decision
  • The accountant could justify the decision

In order to help accountants make ethical decisions, accounting bodies have developed a set of fundamental principles to underlie ethical behaviour in accounting profession:

Integrity

Accountants must also possess a high level of professional integrity (act with honesty, fairness and truthfulness). They should not indulge in any actual or potential conflict.

Independence and Objectivity

Users of accounting information expect accountants to produce reliable financial information free from all forms of prejudice, bias, subjectivity and partiality.

Compliance with Accounting Standards

Accountants should follow generally accepted rules and practices like international accounting standards as they are more important than individuals and their organisations.

Confidentiality

An accountant must keep information given by the client confidential unless authorised or legally required to make it public.

Professional Behaviour

In all aspects of work, the accountant should behave with courtesy and consideration

An accountant could be legally or professionally penalized for not following agreed rules and practices. Some of the consequences which result from poor ethics in accounting practices are as follows:

  • Prosecution
  • Professional disciplinary action
  • Professional disciplinary warning
  • Demotion or Dismissal