Paper Outline
Introduction 3
How to Follow/Maintain Ethical Standards in Accounting 3
How to deal with Unethical Situation in accounting 4
Conclusion 5
References 6
Introduction
Ethical standards in accounting entails rules and procedures that professional accountant must follow whenever preparing financials statements in order to disclose the true states of affaires as represented on the ground. Incase such financial statement are audited by an independent body, the body should come up with the same findings arrived by a professional accountant. The professional accounting standard board requires all accountants to observe code of ethics when preparing financial statement to avoid disclosing information that may mislead the user (Lister & Media.2013). This study will provide an insight on how to maintain ethical standards in accounting as well as how accountants can deal with unethical situations.
How to Follow/Maintain Ethical Standards in Accounting
Professional accounting bodies such as Financial Accounting Standards Board (FASB) helps to ensure that professional accountants maintain high ethical standards. For example, the generally accepted accounting standard (GAAP) was established to provide professional accountants with the guiding principles when preparing financial statements. Connectively, the professional code of ethics established four major principles that may help accountants to maintain high ethical standards namely; credibility, confidentiality, competence and integrity principle (Morley & Media, 2013).
Credibility principle requires accountants to be impartial by communicating accounting information objectively and in a fair manner. Confidentiality principle asserts that professional accountants should maintain the privacy of both the company and the customers. Additionally, competence principle requires accountants to keep updating themselves with new skills and competencies so that they can remain relevant. Finally, in accountants should observe integrity principle by avoiding engaging themselves in activities that may create a conflict of interest between them and company owners (Hauge, 2013).
How to deal with Unethical Situation in accounting
Accountants who encounter unethical situation may deal with such situation in numerous ways. For instance, an accountant can be forced by top management to report high profits and fool the public that the company is performing exceptionally well so that senior managers can issue their share at a price above the market price and earn supernormal profits at the expense of shareholders. In such a situation, accountants may refuse to participate in such act by remaining impartial irrespective of the consequence because it is against their code of ethics. In addition, accountants should equip themselves with ethical knowledge. The knowledge may help them to deal with ethical dilemmas. An ethical dilemma may involve accountants who have been promised a promotion /pay rise if he or she manipulates the book of accounts. Whereby, incase an accountant refuse to carry out such manipulation he or she may get fired. Therefore, proper ethical knowledge may act as a guide when dealing with such ethical situations. Strict legal action should be taken by the accounting professional bodies against accountants who participating in creative accounting. For instance, they should have their licenses canceled (Maher, Stickney & Weil, 2012).
On the contrary, organizations can deal with unethical situation by conducting regular audits. Whereby, auditing exercise should be done by an independent body in order to prevent impartiality and address unethical issues. Connectively, internal control measures should be put in place. Whereby, duties should be assigned to different people in order to eliminate the chances of unethical acts. Additionally, physical control mechanisms should be established to prevent unethical acts. There should be regular inventory evaluation to prevent unethical practices. In addition, documents should be numbered in an orderly sequence to identify any missing document that could have been stolen (Maher, Stickney & Weil, 2012).
Conclusion
Therefore, accountants should deal with ethical situation by abiding to their professional code of ethics as well as through equipping themselves with ethical knowledge. In addition, they should observe the principle of; confidentiality, credibility, integrity and competence. The study has put forth measures that can be utilized to deal with unethical situation. In addition, strict legal actions should be taken against those accountants who participate in unethical practices. Internal control mechanism should be established as well as ensure regular performance evaluation has been carried out to prevent unethical practices. Documents should be numbered in an orderly manner to identify any stolen documents. This may help to take legal actions against those accountants who participate in unethical acts.
References
Hauge.B. (2013).Ethical Issues in Accounting. Retrieved :< http://hauge222.wordpress.com /2013 /02/27/ethical-issues-in-accounting/ on 13th July 2013.
Lister.J. & Media.M. (2013).Ethical Issues Facing Professional accounting Profession. Retrieved :< http://smallbusiness.chron.com/ethical-issues-facing-accounting-profession-18307.html> on 13th July 2013.
Maher, M., Stickney, C. P., & Weil, R. L. (2012). Managerial accounting: An introduction to concepts, methods and uses. Mason, OH: South-Western Cengage Learning.
Morley.M. & Media.D. (2013).Accounting Principles and Generally Financial Ethical Standards. Retrieved :< http://smallbusiness.chron.com/accounting-principles-general-financial-ethical-standards-36283.html> on 13th July 2013.
