Importance of Ethics in Accounting: Maintaining Trust and Integrity

This essay examines the critical role of ethics in the accounting profession, emphasizing the need for accountants to adhere to a code of ethics to maintain public trust, promote fairness, and ensure transparency in financial reporting. It highlights that while technical skills are essential, an accountant's self-discipline and moral judgment are paramount in resolving conflicts of interest and making ethical decisions. The essay underscores the growing significance of ethics due to the increasing complexities of businesses and the potential for unethical practices like earnings management, which can mislead stakeholders. The Enron and WorldCom scandals serve as examples of why merely abiding by technical regulations is insufficient, and accountants must uphold moral principles to ensure the integrity and reliability of financial information, thereby fulfilling their responsibilities to society and capital holders. Breaching ethical codes can lead to severe penalties and damage the profession's reputation, reinforcing the need for accountants to observe all moral principles and values in their professional services.

Running Head: Role of Ethics in Accounting Profession
Accounting Ethics

Role of Ethics in Accounting Profession 1
Do accountant need to be ethical?
Ethics are the codes that provides a criteria to a person to evaluate what is morally right
and what is wrong. Code of ethics for the accounting profession are its fundamental
principles which accountants must abide in order to respect their profession and to gain and
maintain the trust of public and also to promote honesty and fairness in their professional
engagement. To act in the best public and professional interest an accountant must follow
ethical accounting practices so as to make value based judgements as far as possible.
As accountants are responsible for preparation of financial statements of the entities and
to review the financial reporting practices undertaken by their clients, they must maintain the
transparency in their professional services to serve the basic purpose of professional
engagement. The users of financial reports, i.e. the stakeholders of the company are generally
not involved in the internal operations of entity’s operations and hence they require reliable
information to understand the company’s performance so as to take various decisions
regarding the reporting entity. Therefore, they rely on the accountants to carter their
information needs in the most transparent manner. Though the knowledge and skills of
accounting are the key aspects of this profession, but the degree of self-discipline possessed
by an accountant marks his true identity as professional accountant. This helps the
accountants to make the ethical decisions and in exercising the moral judgements while
performing their professional duties (Duska, Duska & Ragatz, 2011). In the daily practice
practise of professional engagement, an accountant has to deal with several issues where
there are conflicts of interest between the employing entity and the public in general. These
situations puts accountants in the ethical dilemma where he has to choose the course of action
that is ethically right and allows him to balance the consequences of actions against the

Role of Ethics in Accounting Profession 2
primary and moral values of the accountants. There can be various issues like complexity of
the financial transactions, disagreement between the client entity and accountant regarding
the treatment of various elements of financial statements that may require to pursue the moral
duties i.e. the code of ethics towards his profession. As, under these complicated
circumstances, technical competence remains insufficient to resolve the conflicts of interest
and hence the accountant needs to behave ethically to deal with the matter in accordance with
the professional obligations (Lo, 2012). Therefore, accounting profession ethics has assumed
greater significance in today’s world. With the growing complexities of the businesses it has
become easy for the managers of the business organisation to indulge in the unethical
practices like earnings management to mislead the stakeholders of the companies for their
personal benefits at the cost of hurting the stakeholder’s interests thereby providing them
incorrect or untrue financial reports. These reports are used by the stakeholders to base their
decisions to maintain the business relationships with the reporting entity. A misleading
financial report may cause an investor suffer a significant loss due to incorrect decision
making. The Enron and World scandals have proved that the only abiding with the technical
regulations is not enough to fulfil the professional responsibilities of an accountant (Zadek,
Evans, Pruzan, 2013. Therefore, to achieve the integrity and fairness of such information
accountants needs to perform their professional obligations in the highly ethical manner
(Khani, 2014).
Therefore, the role and responsibilities of accountants towards the society and capital
holders of the entity requires them to observe all the moral principles and values in the
conduct of their professional services. The breach of ethical codes in the corporate financial
reporting practices would be unfair and such actions jeopardizes the prime objective of
financial reporting because of delivery of falsified and unreliable financial reports to the
stakeholders. Poor ethics does not only hampers the public interest but it also hurts the

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reputation and dignity of profession The non-abidance of ethical codes of accounting may
also invite several penalties and fines on the accountants.

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References
Khani, H., 2014. THE ROLE OF PROFESSIONAL ETHICS IN ACCOUNTING AND
AUDIT, Indian Journal of Fundamental and Applied Life Sciences, 4(S1), pp. 208-2015.
Duska, R., Duska, B.S. and Ragatz, J.A., 2011. Accounting ethics. John Wiley & Sons.
Zadek, S., Evans, R. and Pruzan, P., 2013. Building corporate accountability: Emerging
practice in social and ethical accounting and auditing. Routledge.
Lo, B., 2012. Resolving ethical dilemmas: a guide for clinicians. Lippincott Williams &
Wilkins.