Question

Explain how sound ethical practices and reasoning inform the objectivity expected in accounting and financial statements

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Answer 1

The objectivity principles states that financial and accounting information needs to be independent and free from biases. Accepted accounting principles are represented by rules and convention. These principles contribute to the likelihood that a company financial statements provide reliable information about it's operating results and financial position, each of which is useful in decision making process. It is therefore essential that information presented is objective, meaning that it is impartial unbiased and free from subjective valuation. Objectivity requires that measurement presented in financial statements be based on verifiable evidence such as an electronic or paper trials that support the transaction represented in the statement.

Following are the some of the ethical practices among the accounting professional which directly effects the objectivity of the financial statements

• Integrity : Integrity is an important fundamental element of the accounting profession. Integrity requires accountant to be honest with clients financial information. Practices of code of ethics and conduct ensure that professionals act in consistent manner. Professionals practicing sound ethical practices will leads to meet the expected objectivity.
• Objectivity and independence: objectivity and independence are the fundamental ethical values of accounting profession. The professional must remain free from conflicts of interest and business relationship when conducting accounting practices. Suppose professionals fail to abide by this ethics will leads to failure of sound ethical practices and hamper an accountants ability to provide honest opinion about company financial statements.
• Due care and competence: Due care is ethical values which requires accounting professionals to abide all technical and ethical accounting standards . Accounting professionals are expected to due care about all general accepted accounting standard and apply them to the companies financial statements. Due care requires professionals to practice diligence of financial statements. Competency is normally based on individual education and experience.

Objectivity expected from financial statements are directly linked with sound ethical practices by accounting professionals. One can easily says complying with ethical requirements will leads to fulfillment of objectivity of financial statements. Without practicing ethical values, accounting professionals cannot provides the opinion on financial statements with unbiased attitude and free from material misstatement.