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strong ethics in accounting

The Importance of Strong Ethics in Accounting

When you check out accounting services, you probably have a list of things you’re looking for: professional ability, a collection of services you need, certifications, positive word-of-mouth from colleagues and friends.

And if it’s not already on your checklist, make sure you’re looking for strong ethics, too.

Whether you realize it or not, ethics are a vital component of the quality of service you receive. Without a sturdy ethical grounding, an accountant can easily put you, your financial information and your business in jeopardy.

Today, we’ll talk to you about the ethical aspects of running an accounting practice, including professional standards around confidentiality, independence and maintaining public trust.

Common Accounting Principles

Accountancy ethics aren’t necessarily uniform – they’re determined and governed by a variety of trade groups, such as the Chartered Institute of Management Accountants (CIMA) or the Association of Certified Public Accountants (AICPA).

One shorter set of principles that reflects some of the most important tenets of other accounting codes comes from the Association of International Accountants (AIA):

  • Integrity: “You must be straightforward and honest in all professional and business relationships.”
  • Objectivity: “You must not compromise professional or business judgment because of bias, conflict of interest or the undue influence of others.”
  • Professional competence and due care: “You must maintain professional knowledge and skill (in practice, legislation and techniques) to ensure that a client or employer receives competent professional service.”
  • Confidentiality: “You must not disclose confidential professional or business information or use it to your personal advantage, unless you have explicit permission to disclose it, or a legal or professional right or duty to disclose it.”
  • Professional behavior: “You must comply with relevant laws and regulations, and avoid any action that may bring disrepute to the profession.”

How Ethical Principles Impact Accounting Services

The above principles aren’t just pretty words — they have real-world impacts on how accountants go about their (and your) business.

Take objectivity, for instance. Should an accountant have a personal interest in a particular financial product, they might be tempted to nudge their company into choosing that particular product.

Objectivity goes hand in hand with independence. Consider this, from the AICPA:

“Independence in appearance is the avoidance of circumstances that would cause a reasonable and informed third party, who has knowledge of all relevant information, including safeguards applied, to reasonably conclude that the integrity, objectivity or professional skepticism of a firm or member of the attest engagement team is compromised.”

In short, independence isn’t only about actual independence, but perceived independence, too. An ethical accountant must not only act objectively and independently, but evade situations where a fair-minded person could perceive some level of impropriety.

Confidentiality goes without saying. An accountant that discloses confidential business information to the wrong person could undermine a strategic acquisition or provide invaluable intel to an industry rival.

Professional competence would seem to be more about skill than ethics, but it’s not just about an accountant practicing what they do well — it’s about them not stepping in when they don’t know an area well. An accountant acting according to the principle of professional competence would, for instance, decline to provide consulting services in an area they don’t have expertise in.

Accounting Services You Can Trust

Accountants must adhere to ethical rules and guidelines not just for the benefit of their clients, but for the good of the industry. Trust is a critical bond between client and accountant, and that starts long before the relationship begins — it starts with the public perception that accountants are trustworthy.

Thus, McManamon & Co. knows that if we don’t do our jobs right, it hurts everyone.

McManamon & Co. offers a wide array of accounting, tax and business consulting services. We not only boast a high caliber of expertise and personal attention, but a strict tether to professional ethics. And you should never accept anything less.

Reach out and find out what we can do for you and your business! Just call 440.892.8900 or contact us online.

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