Question

For this assignment discuss the importance of ethics in financial accounting. What issues may arise if ethics is compromised? How would this impact the company internally, how would it impact the external users such as investors, creditors, government, etc?

Answer 1

Ethics refers to a system of moral rules or principles of behaviour which includes doing the right thing in the right approach. The accounting profession have obligations to shareholders, employees, creditors, suppliers, the government, and the public at large. Decisions that are made on information given by accountants can materially affect the internal and external users. Therefore behaving ethically is an essential and expected trait. Also there are high expectations of society from the accounting professionals and people need to have confidence in them by providing quality of complex services. Thus, the information provided by accountants must be reliable, realistic, efficient, and are unbiased.

The breaches in ethics can cause major scandals for the firms and lead to loss of consumer, employees and investor confidence. When the accountants make unethical decisions, benefiting only themselves, it can result to the kind of scandal and outrage which can ruin the careers and even companies. Any failure to ethics will result in negative consequences for business owners, stakeholders and tax reporting agencies.