Ethics and Accounting :: Finance Business Accountant Accountancy

Ethics and AccountingWhats ethics got to do with accounting? Everything Believe me,everything. When the word ethics is mentioned, what readily comes to mind is the questionof deciding amongst doing what is right and doing what is wrong. But doing what isright versus doing what is wrong within what context? The idealist will say thatdecisions of ethics should not be conditional. But it is not as simple as it sounds, forwhat constitutes right to one person, may be wrong to another person. What bridges the gap,guides, and clearly distinguishes the line between right and wrong in political,economic and social systems are traditions, culture, laws and regulations. Even then, whatis unethical may not necessarily be illegal, even though there exists a close birthbetween the two. These dynamics apply to almost every legal profession, accounting notexempted. This paper examines the issues of ethics in accounting. It also looks at thedifferences and similarities between monetary accounting to managerial accounting.IntroductionAccording to Marshall et al, (What the numbers mean, 2003)accounting involves identifying, measuring, and communicating economic teaching about anorganization for the purpose of making decisions and advised judgments. Thisdefinition clearly shows that there are stakeholders in the reading generated byaccountants. These include managers, shareholders, oversight and law enforcement agencies,and the general public. Since these entities rely on the reports generated byaccountants for small decision making, it is important that the information be reliable,objective, and presented in an easy to understand format. Ignoring or circumventing these valuesrenders the information generated unreliable. It can lead to devastatingconsequences as evidence by events which led to recent legislation such as the Sarbanes-Oxley Actwhich seeks to make top anxiety of organizations accountable for the financialstatement produced by their organizations through the internal controls they develop andenhance, and to oversee auditors who hitherto could have business interests other thanauditing in the organizations they were responsible for auditing.Financial versus Managerial accountingManagerial accounting refers to the management of company resourceswhile applying management accounting principles in decision making. Oneimportant characteristic of management accounting is that, it is internal to theorganization even though external information such as financial accounting reports willhave some amount of influence.Financial accounting refers to the identification, recording,computation, and reporting of financial information to users who may have a stake in theinformation reported. An important characteristic of this information is that it is gearedtowards users external to the company.A financial accountant generates information for externalconsumption. These products include the income statement, the balance sheet, the statement