No pun intended, but it often seems like there are too many ethical issues in accounting to count. In fact, the sheer variety of moral dilemmas an accountant might face makes it difficult to know what to do in a given situation. Fortunately, there are things you can do to identify these issues as they arise and also live up to your professional obligations.
Ethical Issues in Accounting
Why are ethics important in accounting? As an accountant, your daily responsibilities put you in contact with an incredible amount of sensitive company information. Because this information can have such a profound impact on things like executive bonuses and stock performance, you encounter more than your fair share of ethical issues.
Among others, the ethical conundrums accountants face includes things like:
- Fraudulent or illegal activity
- Possible conflicts of interest
- The confidentiality of payroll data
- Intense pressure from upstairs to paint a rosier earnings picture
- Dishonest clients asking for distorted financial statements
Whenever you run up against these sorts of situations, you must act with conviction to make firm and ethically informed decisions. Here are four things you can do if you’re dealing with ethical issues in accounting or have concerns about something you’ve witnessed.
1. Anticipate Any Possible Legal Concerns
Find out if a specific law or policy covers the situation in question. The resources you could consult include:
- Your direct supervisor
- Any professional association you might belong to
- A government agency like the Securities and Exchange Commission (SEC)
- The Financial Executives International Code of Ethics
- The AICPA Code of Professional Conduct
If there are legitimate legal concerns involved in the situation, these sources can also help you decide on a course of action.
2. Look at Things from an Outside Perspective
Sometimes, you’re too close to a situation to assess it properly. That’s why taking an outsider’s perspective can help. Compare the situation to what you learned about accounting ethics in your student days. Another good way to find clarity is to contemplate how you might feel if you read about the situation somewhere or if a loved one told you about it. It can be very difficult to remain objective, but this kind of emotional distance can help you see the situation more clearly.
3. Take Note of Who Might be Affected
Consider the different parties that are most likely to be harmed by the situation– or by whatever actions you do or don’t take. Keep in mind that failure to do the right thing makes you just as complicit as you’d be if you were directly involved.
4. Seek Out Expert Advice
Reach out for legal help if you feel compelled to report the unethical behavior of a colleague or your employer. This help can come from your in-house legal department or from an outside company. You can also look into any whistleblowing policies your company might have.
While an individual’s ethical code is definitely significant here, every company should have a specific code of ethical conduct for employees to follow. The company should also ensure that everyone who works for them understands what’s expected of them in ethical terms.
If the firm you work for doesn’t currently have an explicit code of ethical conduct, you and your colleagues should urge management to create one. Specific ethical guidelines might not solve every ethical dilemma, but they can definitely help individuals make sound moral decisions.
It’s never easy to confront ethical issues in accounting– or anywhere else, for that matter– but you are morally, and professionally, obligated to take action when you know something’s not right.
About Robert Caron
Robert is a Certified Public Accountant in the State of New York and a Chartered Financial Analyst. He has worked in the international tax departments of Big 4 and National accounting firms and held various finance and accounting positions in small and medium-size businesses. He specializes in helping people in the real estate and transportation industries, with a focus on international US taxation.