Question

• Discuss how sound ethical practices and reasoning inform the objectivity expected in accounting and financial statements.
• How would you suggest improved ethical practices could be established and maintained in a given organization’s accounting?
• What role does an individual “down-the-ranks” have in establishing and maintaining an ethical tone and company culture?

Answer 1

*Sound ethical practices and reasoning inform the objectivity expected in accounting and financial statements by following explaination:-

No business is exempt from ethical behavior and practices. However, those dealing with money and sensitive personal and company information must adhere to strict ethics and integrity standards. This is imperative to gain and retain the trust of clients, co-workers and business partners. Integrity is generally considered one component in the ethical standards of accounting practices.

Professional Skill and Competence :- Accounting is a detail-oriented career that requires knowledge and skills to do the job correctly. Mistakes lead to problems with investors, business partners, finance lenders and the Internal Revenue Service. It is imperative that anyone working at any level in accounting understands what is required of the job and how to execute it properly.

Confidentiality of Information:- Accountants see the good, the bad and the ugly of a company or a person's financial situation. Clients have a right to know that this information is kept in the strictest of confidentiality and is only shared with other professionals if consultation is required to address a specific problem. Failure to keep information confidential could result in bad publicity and possible defamation of a company or person. It could also open the door to fraud, identity theft, and other illegal activities if the information is shared with the wrong parties.

Honesty and Integrity Standards :- Integrity covers a lot of different ethical standards that include honesty and professional conduct in all circumstances. An accountant should always present the facts objectively and refrain from slanting information in a misleading way. An accountant who doesn't demonstrate a high level of integrity isn't trustworthy and loses the confidence of clients.

Indepedence and Objectivity :- Most accountants are partnered or licensed to advise clients on investing and financial services. It is important that accountants maintain a fiduciary responsibility, seeking an objective solution, and providing advice based on that objectivity. It has been a rampant problem in the financial services industry that products were recommended to clients simply because they provided the highest compensation to the adviser. Accountants must be objective with independent viewpoints, especially since they are dealing with the financial details of the company.

Professionalism and Demeanor :- Professionalism is a standard that goes beyond the office. Whether at a networking event or a party, maintaining a professional demeanor is good business. Accountants should be law-abiding citizens who don't have bad habits, such as gambling, that could put them in a risky position to compromise client information. No one trusts an accountant who gets drunk at a party and starts spouting off information that probably is bound by confidentiality standards.

*By following Five Steps we can improve ethical practices could be established and maintained in a given organization’s accounting:-

1.Develop a code, and make ethical performance a strategic priority. A relevant code of ethics, conduct or similar policy that sets clear objectives, standards and expectations is a key requirement for ethical performance. A code needs to be supported by a focus on ethical performance in wider decision making.

2. Set the tone from the top. Senior management teams must show leadership and be seen to live the organisation’s ethical values. Only once that happens can employees get in step and ensure the whole organisation lives those values.

3. Engage, communicate and train your staff. Engage staff and other stakeholders such as suppliers, investors, regulators and consumer communities, through effective and informative communication. Good, regular and consistent communication and training will help to embed an ethical culture.

4. Provide support routes for staff. Organisations need to develop clear routes for reporting suspected fraud and violation of company policies on ethical behaviour. Too many organisations are weak in this regard and must adopt a zero-tolerance approach.

5. Measure effectiveness of your ethics programme. To ensure best practice, organisations need both to measure their ethical performance and to foster open discussion.

*Individual “down-the-ranks” have in establishing and maintaining an ethical tone and company culture has following roles:-

1.Individual should have good Personality,attitude and coping mechanism. If individual have positive personality then he has estabilish and maintain an ethical tone and corporate culture.

2. Individual should not support misconduct and has a good knowledge, skills & Confidence.

3. Organisation should new recuritment only after proper screening.

4. Individual/Staff should be properly supported by top management only then he can estabilish and maintain an ethical tone and corporate culture.