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What Are the Benefits of Having a Code of Ethics in Accounting?
The accounting profession is known for its ability to accurately assess and report financial information for businesses. While opinions of the accounting industry tended to be favorable regarding its professional ethics, major accounting scandals severely eroded this opinion. Major corporations and a highly recognizable accounting firm were found liable of manipulating financial information to mislead managers, employees, investors and the general public. The American Institute of Certified Public Accountants (AICPA) has provided a code of professional ethics for accountants to follow when providing accounting services to clients.
Better Professional Environment
An accounting code of ethics that is enforced at public accounting firms or company accounting departments can ensure that individuals working with financial information act in the highest ethical manner possible. Accounting firms may review their code of ethics with potential employees to ensure that no misrepresentations are given regarding the expected ethical manner of employees during daily accounting functions. The code of ethics ensures that current employees understand the importance of acting ethically and that they respond to business scenarios with the proper mindset for maintaining high ethical standards.
Public accounting firms or companies using a standard accounting code of ethics may discover that they have a more positive reputation in the business environment than companies without a code of ethical conduct. Clients, consumers and other businesses tend to have a positive opinion of companies who act ethically and maintain a high level of professionalism when conducting operations. Favorable reputations may allow companies to increase their market share and earn higher profits founded on positive consumer good will.
Standards for Employee Discipline
A code of ethics can allow companies to develop disciplinary practices for employees who violate the ethical standards when conducting daily accounting functions. Accounting managers and controllers may be able to address difficult employee situations by reviewing the accounting code of conduct and instructing the employee on how to correct his behavior. Managers may reiterate the specific expectations the employee must adhere to when working for the public accounting firm or company.
Decreased Legal Liability
Public accounting firms and private accountants often face increased legal liabilities when acting unethically. As seen in the accounting scandals of 2001, individual accountants were convicted of attempting to destroy unfavorable or inappropriate reports and communications with clients regarding accounting situations. These employees increased the legal liability of their company; the actions of a few employees severely impacted the lives and reputations of thousands of other accountants. Creating and following an accounting code of ethics can ensure companies and their employees decrease legal liability from inappropriate actions.