What Is A Business Ethical Issue In Accounting?

The process of making good and moral choices in regard to the preparation, presentation and disclosure of financial information, is ethics in accounting. During the 1990s and 2000s, a series of financial reporting scandals brought this issue into the light. Having some knowledge of the issues presented in accounting ethics can ensure someone to be aware and consider some of the effects of the actions that one takes with their own business.

Dealing With Business Ethical Issues In Accounting

Accountants help make sure that the business world is issue-free by monitoring whether ethics is being utilized in an efficient manner. They're responsible for making sure that businesses report their finances clearly and according to recognized standards, and that often puts them in situations that can be ethically or even legally questionable.

Fraud In Financial Reporting

Most accounting scandals in the past have centered on fraudulent financial reporting. Fraudulent financial reporting is the misstatement of the financial statements by company management. Usually, this is carried out with the intent of misleading investors and maintaining the company's share price. While the effects of misleading financial reporting may boost the company's stock price in the short-term, there are almost always ill effects in the long run.

Disclosure Violations

Deliberately recording transactions that is not in accordance with generally accepted accounting principles (GAAP) and the failure to disclose information to investors that could change their decisions about investing in the company is considered fraudulent financial reporting. It is important for management to protect the company's proprietary information. Some information related to other matters may not be ethical to keep from the investors to know.

Penalties For Violations

Penalties for violations of accounting ethics laws have increased greatly since the Sarbanes-Oxley Act was passed in the year 2002. Violations like, manipulating financial records, destroying information, and interfering with an investigation, provides legal protection for whistle-blowers and executes harsh penalties for those who committed such violations in this legislation. In addition, chief executives can be held criminally liable for the misreporting of their company.

HTH & Accounting Associates help organizations and business owners with accounting and/or financial consulting services.  

For Help with accounting cycle or Bookkeeping contact usat accounting@thaddeus.org or call us at 909-599-2111

Resources:

https://smallbusiness.chron.com/ethical-issue-financial-accounting-57889.html

https://smallbusiness.chron.com/ethical-issues-facing-accounting-profession-18307.html

Thank you for reading, 

The writer of this blog is, Jory Mirtil. He works at Thaddeus as an Accounting Intern. He chose Thaddeus because of the work environment and the mission it stands for. He is someone who aspires to be an Accountant one day. His career path journey will involve a ton of work experience and education in accounting in order to reach his dream to become a CPA.