Why Professional Ethics Are a Cornerstone of the Accounting Industry
The core of the accounting profession is simple math; debits equal credits, assets equal liabilities plus equity. And, as we know, math and numbers are the same across all languages, and they represent certain rules that haven’t changed in centuries. In the end, everything should even out and be accurate. So in an industry based on actual information, why do we need professional ethics?
The reality is that accounting simply can’t be accounting without a code of professional conduct. Ethics are a cornerstone of our industry, and without having them in place and practicing them on a daily basis, the industry would fail. Below, we’ll talk about how professional ethics are the building blocks of the accounting industry’s foundation, and why we need to adhere to professional ethics to help the profession succeed.
CPAs Are Looking for the Why
On one of my first audits in public accounting, my manager told me a lot of what I would do as a new staff member had to do with the “what,” but I should always try to find the “why;” why a transaction happened, why a certain account has a certain balance, and why we do things the way we do. By consistently asking why, I could help to uncover truths and refine processes to help us and our clients continue to ethically succeed.
As accountants, we’re consistently encouraged to find the “why” behind transactions. The same should be true for decisions made within the accounting field. You should constantly be asking why something is being done, and if you define the why and something doesn’t sit right with you, you should dig a little deeper. This is at the core of professional ethics within the accounting industry. While ethical dilemmas are rarely black and white, many of them can be remedied if we ask ourselves, our superiors, and our clients “why” if something doesn’t feel right from an ethical standpoint.
The Profession Centers Around Unbiased Information
At its core, accounting deals with transactions, numbers, and the actual information coming into and going out of a company. For accounting to work properly, the information has to be accurate. But for the information to be accurate, accountants need to be unbiased in how they work with the information.
Accountants are human, and humans make mistakes. Sometimes mistakes are made by accident, and sometimes mistakes are made deliberately. While CPAs deal with actual information, sometimes that information can be tweaked to fit certain needs. The goal of professional ethics is to ensure that deliberate mistakes don’t go unnoticed. It’s much harder to knowingly change information if there are people around adhering to professional ethics who have to review that information.
The job of the CPA is to ensure that stakeholders and management have an accurate picture of what’s really going on within an organization, and we can’t do that unless we employ professional ethics on a consistent basis. And if we mislead stakeholders, we’ll eventually be the ones to suffer the consequences.
Honesty and Integrity Have to Be Upheld to Maintain Trust
Trust is a cornerstone in every relationship. Today’s accountants have to be aware of the huge ethical breaches of the recent past, most notably how Arthur Andersen helped Enron mislead shareholders to the eventual demise of both companies, and how a significant contract of trust was shattered. The collapse of Enron and subsequent conviction of Arthur Andersen led to thousands of people losing their jobs and retirement savings, as well as a big shakeup in the economy. The public trust had been violated, and huge scandals like this are remembered for decades after they occur.
The big takeaway from this case is that, while Enron was implementing shady business practices, it was Arthur Andersen, the CPAs, and accountants, that were helping the company cover it up.
It’s no surprise that professional Code of Ethics overhauls and regulation increases, both at the governmental and company level, followed the downfall of Enron. Shareholders had been shaken, and the only way to regain their trust was to prove that those with financial oversight had the honesty and integrity to make the right decision, even if it didn’t always paint a rosy picture.
Today, ethics are a core part of the accounting profession to aid in preventing disastrous situations like the Enron and Arthur Andersen scandal; without ethics in place, the public wouldn’t put their faith in what we do and accounting companies big and small would have a hard time even getting in the black. If there were no ethical standards within the accounting industry, the clients we serve and the companies we work for would fail. We are the liaisons of financial information to interested parties, and we have to take due care to ensure that information is accurate. We also have to understand that honesty and integrity help our clients the most, help us maintain trust with the general public, and help our businesses stay financially viable. Professional ethics make it a win-win-win situation.
Ethics Help Us Navigate a Changing Profession
Accounting has certainly evolved over the last century, with significant changes taking place in the last few decades as technology has become a key player in the profession. Without a strong base of ethics in the field, rapid changes like this would cause confusion and inconsistencies from state to state and firm to firm.
The role of the accountant has also changed dramatically. CPAs can work in public accounting, tax, and industry, and they can hold a variety of roles in each of those fields. They can work as managers, C-suite executives, cost accountants, and even within the information systems sector of a business. They can also work at organizations of any size. Some CPAs own their own single-member firms while others work for global organizations. Basic ethics help us lay a foundation for any role an accountant plays in any organization. They pertain to every job in every field to help us navigate dilemmas at every step in our career. And while you should always keep up with job-specific ethics, you’ll know you have a strong base for ethical decisions just by adhering to the foundation of professional ethics in the accounting industry.
The basics of ethics in our profession are to act with honesty and integrity, objectivity, and the competence required of us through the CPA license. Broken down into an even more simple idea, we should always be evaluating if a situation is ethical and trust our feelings if something seems off. These key ethical foundations hold true no matter how the profession changes and can help every single CPA get on the path to the right decision.
Professional ethics in the accounting industry have been, and will always be, vital to the survival of the profession. If you’re looking to brush up on your ethics or fulfill your Ethics CPE requirements, check out the variety of NASBA approved Ethics courses we offer.