Blog

An Overview Of Accounting Ethics

Written by Curt Mastio | Sep 2, 2024 11:18:20 PM


A financial accountant is in a unique position; they have access to the financial information of people or companies. With power comes responsibility, which leads to the importance of accounting ethics.
There’s always the possibility of an accountant manipulating numbers to improve the perception of a company. Ethics also come into play when financial audits come around. 

Definition of accounting ethics

Accounting ethics refers to the set of principles or rules that guide the behavior and decision-making for accountants. It’s an all-encompassing set of standards that focus on fairness, honesty, objectivity and responsibility revolving around financial services and information. A professional financial accountant is aware of these ethics and puts them into practice in every task that they execute. 

Why are accounting ethics important?

Ethics are integral in building trust with creditors, stakeholders, investors, creditors and customers. One example is when an accountant is putting together a financial report. This document reflects the business’ financial health and is used in different applications. Ethical behavior also refers to protecting sensitive financial information from unauthorized parties. 

Ignoring ethical guidelines and best practices can have severe consequences. Missteps can result in not only significant financial losses but a tarnished reputation that’s nearly impossible to rebuild.

Principles of accounting ethics

Together, the principles of accounting ethics cultivate an environment of transparency and trust. 

Confidentiality

Accountants have access to information that not many other parties do. This means that a financial accountant needs to keep all of this sensitive information confidential. Confidential information can include personal information, business strategies, trade secrets, financial information, research data, passwords, IT information and more. To help uphold integrity, accountants can regularly back up data, use both physical and digital methods to store financial records, review and update access privileges often and use secure communication channels, to name a few.

Integrity

Integrity refers to adhering to ethical and moral principles. This means that accountants who have integrity are always truthful in their work and don’t succumb to pressures to manipulate figures or fail to represent financial data accurately. As a result of this ongoing transparency, stakeholders can have confidence that the financial statements and analyses are accurate.

Compliance

There are certain rules and regulations that a financial accountant must follow when it comes to reporting. All reporting needs to be accurate with the existing laws and regulations in accordance with Generally Accepted Accounting Principles (GAAP) and government accounting laws. For example, if there’s a company involved in a lawsuit, the accountant needs to disclose this information in the financial statement notes.

Accountability

In accounting ethics, accountability refers to the responsibilities that accountants undertake for their actions, decisions, and overall outcomes. If a stakeholder makes a decision based on a certain piece of financial information that was disclosed to them and it results in disaster for the company, the accountant must take accountability for this mistake. 

We’re here to help

Founder’s CPA is proud to offer modern accounting services for startups at every stage, and you can rest assured that our team takes accounting ethics very seriously. Our personalized services are both flexible and scalable to take your company to new heights. We serve industries including SaaS, blockchain and cryptocurrency, and fintech. Contact us today to get started!