The research study provides an overview on the ethics in accounting profession. Ethics is the substratum of the accountants profession. Ethics is important for all accountants as they are responsible over the financial statement users and gives information to the users having conflicting interests. Ethics in accounting is crucial for accountants to gain professional skills and knowledge in their job so that they are able to present effectual services to customers. Despite presence of ethical standards, numerous accounting scandals have occurred within the enterprises operating in competitive business environment (Bampton and Cowton 2013). This led to failure in reporting process and management oversight of these enterprises. The corporations now-a-days are re-assessing ethics in accounting with interest in providing training to employees for underpinning ethical principles. Since accountants are liable to organizations financial integrity, ethical knowledge facilitates them to overcome ethical dilemmas that they face during their work. This study explores about how the ethical accounting practices influence the performance of an enterprise. This research study also aids to assess how the ethics in accounting practices improve the enterprises reputation in relation to investors and stakeholders. This paper focuses on practical and theoretical motivation relating to research topic. This study also reviews on the literature and designs hypothesis relating to ethics in accounting profession.
This research paper will help in practical motivation of the accountants to perform their job in effective way. This study will help the accountants to understand the essentiality of education relating to accounting ethics. Besides this, this paper will motivate the organizations to implement proper work culture as ethical accounting depends largely on the enterprise culture where it is generally practiced. It will also aid the business enterprise to recognize few dilemmas relating to ethical accounting, which they experiences in the competitive business environment. Several evidences reflect that most of the organizations in certain circumstances perform unethical accounting practices in order to maximize profitability and accordingly violate the stakeholder’s self- interest. This in turn has adversely influenced the stakeholders or investors to continue their business operations or make investment in the organizations. Moreover, the entities might lose its reputation or lower their share in the market. However, this research paper will encourage the organizations to adopt proper strategies in ethical accounting. These strategies will further positively influence the enterprise to sustain in the competitive business environment. Apart from this, this research paper will motivate the accountants to maintain ethics in their work practice and avoid unethical accounting practices.
The research outcome will further facilitate the business owners to integrate appropriate legal actions as well as strict rules and regulations for controlling unethical accounting activities that occurs in regular business operations. This study will motivate the employers of the enterprise to understand the significance of encouraging management accountants for considering implications of the business decisions for other individual. It will also motivate the organizations to develop personal values within the accountants, which would restrict them to do unethical practices and thus promote ethical behavior within the workplace. Furthermore, some of the professional corporations will get an idea from this study about the need to implement ethical standards within the accounting profession (Bampton and Cowton 2013). This will also provide huge opportunities to these professional organizations to provide leadership in accountant’s ethical motivation by creating enterprise values.
This study will explore on few theoretical theories in relation to this research topic. The theories that will be explored in this research study are- agency theory, deontology theory. As ethical behavior is crucial to proper business functioning, several changes have occurred in the present accounting practices. Christ and Burritt (2013) opines that ethical behavior primarily comes through individual’s principles and internalized values. The acceptability of different forms of ethical behavior seems to differ among the accountants. This study is mainly reinforced by “Agency theory” which describes that each individual have propensity to be honest to some extent but most of the individuals might choose to be dishonest mainly for financial payoff. This theory involves few basic assumptions such as- individuals acting in their self- interest are work-averse and thereby requires to be monitored and controlled. The basic idea that surrounds this agency theory depends upon honesty as well as ethics and also denial of any kind of social responsibility. The current accounting scandals in business world might be attributed to lack of corporate as well as personal ethical system. Moreover, the implications of individuals responsibility has been evident in the names of individuals and corrupted enterprises. Despite enterprise failures, the entities addresses ethical issues that previously affected them to lose trust of stakeholders. According to Duska, Duska and Kury (2014), deontological theory explains that an individual must obey to the obligations as well as duties while assessing ethical dilemma. From the perspective of accounting, this deontology theory is the viable approach that supports ethical decision- making. In addition to this, the deontology theory requires all the accountants to follow professional codes without even taking into account consequences of the actions taken by them. Thus, these theories relating to ethical accounting will help the accountants and enterprise to better understand the importance of ethics in the accounting profession. It will also enhance the knowledge of accountants relating to ethical accounting and also motivates them to implement ethics in their profession.
The section of this study intends to explore the significance of ethics in accounting profession. The ethical principles of accounting profession is elucidated in this study. This segment also focuses on the consequences of ethical accounting on the performance as well as productivity of the enterprise. This section mainly reviews on existing, theoretical and empirical literature is reviewed in this segment.
The ethical principles relating to this profession that has been identified by IFAC (International Federation of Accountants) include-
Ethics in accounting are usually meant to enhance accountants to the highest standard of conduct. The accountants should consider ethical code of conduct that an organization sets to encourage ethical behavior in certain business situation. Principles of ethics also aids accountants to assess their feelings during specific situations. Ethical principles makes honest reply to clients whose interest must endeavor protecting of their ability.
As per Thomas (2012) ethics in accounting has been difficult to regulate as the accountants might take into account public interest while assessing that they stays employed in an company. Ethics has become crucial for the accountants due to occurrence of several accounting scandals. The problems within this accountants and their conflict of interest have led to various professionalism standards while stressing ethics in the work environment. Few reasons of ethics in accounting profession involves- false transactions, registration of transactions with positive documents, misusing of assets and false accounting procedure application (Clikeman 2013).
Ethics in accounting emphasizes on moral values, judgments and business ethics in their decision making. The ethical drivers of the accounting are better professionalism standard and appropriate practice (Zadek, Evans and Pruzan 2013). Some of the organizations around the world have instituted ethical issues in the accounting process, which results in increase of potentiality for the conflict of interest. Kwok (2017) opines that development of ethical codes might secure business transactions and financial process. As a result, this affects the performance of accountants and credibility of the organizations. Moreover, adherence to ethics in accounting also aids to ensure business operations compliance with standards. However, the accountants mainy identifies and perform their job that contributes to formation of policies as well as fraud identification within an organization. Thus, ethical standards is important for accountants who basically renders taxation in service.
Several facts highlights that ethical accounting practices within an enterprises enhances its productivity, reputation and credibility. But the ethical issues relating to accounting practices have led to decline in profitability level of the companies. Moreover, ethical activities done by experts affect trustworthiness and reputation of the companies. Thus, ethical practices makes it easier for accountants to conduct their work practice within the business (Chun et al. 2013).
Null Hypothesis: Ethics in accounting practices influence productivity and performance of the business.
Alternative hypothesis: Ethics in accounting practices do not influence productivity and performance of business
Conclusion
From the above discussion, it can be concluded that the organizations adopting ethical accounting enhances profitability through their business operations. Ethical accounting also benefits the accountants to avoid the risk of financial fraud within the company. Ethical practices highly affects the accountants to follow legal activities and thus this also positively impacts on other stakeholders of an enterprise.
References
Bampton, R. and Cowton, C.J., 2013. Taking stock of accounting ethics scholarship: A review of the journal literature. Journal of business ethics, 114(3), pp.549-563.
Bampton, R. and Cowton, C.J., 2013. Taking stock of accounting ethics scholarship: A review of the journal literature. Journal of business ethics, 114(3), pp.549-563.
Bosse, D.A. and Phillips, R.A., 2016. Agency theory and bounded self-interest. Academy of Management Review, 41(2), pp.276-297.
Chafi, R.M., 2013. The Effect of Accounting Education on Occupational Ethics.
Christ, K.L. and Burritt, R.L., 2013. Environmental management accounting: the significance of contingent variables for adoption. Journal of Cleaner Production, 41, pp.163-173.
Chun, J.S., Shin, Y., Choi, J.N. and Kim, M.S., 2013. How does corporate ethics contribute to firm financial performance? The mediating role of collective organizational commitment and organizational citizenship behavior. Journal of Management, 39(4), pp.853-877.
Clikeman, P.M., 2013. Called to Account: Financial frauds that shaped the accounting profession. Routledge.
Duska, R.F., Duska, B.S. and Kury, K.W., 2018. Accounting ethics. Wiley-Blackwell.
Kermis, G.F. and Kermis, M.D., 2014. Financial reporting regulations, ethics and accounting education. Journal of Academic and Business Ethics, 8, p.1.
Kwok, B.K., 2017. Accounting irregularities in financial statements: A definitive guide for litigators, auditors and fraud investigators. Routledge.
Thomas, S., 2012. Ethics and accounting education. Issues in Accounting Education, 27(2), pp.399-418.
Zadek, S., Evans, R. and Pruzan, P., 2013. Building corporate accountability: Emerging practice in social and ethical accounting and auditing. Routledge.
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