Undoubtedly maintaining ethical practices and standards leads to improved sustainability and survival of your business. It also results in a higher chance of development and overall growth. Ethics deals with integrity, morality, and above all, honesty. Being ethical means following the fundamentals and basic principles of correct conduct. It means differentiating between wrong and right, and moral and immoral. For an accountant professional, it is all about what is right when handling money. Companies want their financial reports to be as accurate as possible. It helps them make more accurate and informed business decisions. Inaccurate or unethical financial reporting can cause a business to lose revenue or suffer corporate collapse if malpractice evidence comes out.
Unfortunately, not all accountants or accounting firms are worth your trust. The violation of private or public trust occurs regularly. And, solving them usually ends in disaster. For businesses that deal with large amounts of cash, a little skimping on the top can sometimes go unnoticed. Nowadays, it is of utmost importance that accountants act responsibly as a business relies on them. Thus, they should be stringent and moral when it comes to performing accounting tasks.
To support this claim, we are sharing some reasons why ethics are crucial in the accounting field. You can find them listed below.
- ACCOUNTANTS DEAL WITH SENSITIVE DATA
As an accountant, you will need to handle sensitive information daily. When it comes to keeping the financial books, you will have to look at transactions, bank information, and other finances. Other than that, you will also be in charge of handling valuable employee information, such as bank details, payroll, and much more. It is a wise decision to keep this data confidential and away from prying eyes.
To keep this information secure, always follow ethical accounting practices. Practices such as avoiding sharing sensitive data via email, making sure your network is secure, and taking other security precautions. Also, don’t sin going around sharing this information for your gains. If you’re a business owner and doing the accounting yourself, consider getting an online masters in accounting to equip yourself with the necessary elements. An accounting-based education will guide you on what practices are ethical and which ones you should avoid when handling your business finances.
- AVOID LEGAL ACTIONS
When you do not follow an ethical code of conduct while handling accounts, you will be more likely to face legal actions if you get caught. And, you are bound to one day if you do not stop.
You may not know about these practices and might unintentionally be doing them. It can turn into larger issues in the long run. It is just like asking trouble to come upon yourself. To avoid facing any legal action, you should well verse yourself with accounting practices and ethics. It involves understanding how to take care of financial books and avoiding all unethical accounting practices that can put the business at risk.
- IF YOU ARE A BUSINESS OWNER, YOUR BUSINESS COUNTS ON YOU
As you might know, there are tons of reasons to follow ethical accounting practices. However, the most crucial one is that your business counts on you to be fair and honest. It will matter to you as well as your employees to be ethical when you deal with money. For example, you need to be fair to your customers about pricing and your commitments. Just like that, the future of your business relies on it as well.
You might try to defend some of these practices, but they can have severe consequences in the future. It can lead to matters such as loss of customers, disgruntled employees, severed ties with your community, and much more. So, avoid getting too comfortable with these practices and try to negate them as quickly as you can.
You will have to be a professional when maintaining financial books, whether you work with an accounting firm or are handling your business books. To be as ethical as possible, you need to follow some accounting laws and best-practices. One of the practices is the generally accepted accounting principles (GAAP) defined by the FASB (Financial Accounting Standards Board). But, keep in mind these are not always necessary to follow.
So to be a professional, you need to fulfill all requirements and rules defined by the authorities. Follow these rules and regulations to avoid all accounting-based legal actions or penalties to ensure your business keeps on running smoothly.
Imagine this, if someone catches you doing unethical accounting practices, who will they blame? Of course, it will be you. When you act unethically or make errors while maintaining your books, it will be on you. A good practice is to keep updated with the latest accounting best-practices to avoid making any unintended errors. If you do not educate yourself with these latest practices, you will end up making a mistake at some point. To prevent them, do not overestimate your accounting skills, read the latest accounting developments, make better judgments. If you make these errors on multiple occasions, now might be the time to hire a professional accountant for your business.
- TO AVOID A VOLATILE STOCK PRICE
Suppose your company sells its shares to investors on the stock market. In that case, being unethical with your accounting practices can lead to investors reselling their shares, devaluing your business. It can seriously decrease your stock price in the open market, allowing high-risk investors to step in and purchase them for a lower price.
Such volatility in stock price might end up introducing investor panic, which will result in a high sell-off driving the share price even lower than before. If that happens, your company might get delisted from the stock market. Once your company gets delisted, you will have a tough time acquiring cash to run your business operations.
The bottom line is, it is crucial that you follow ethical accounting practices, whether you maintain books by yourself or you are an accounting professional. These unethical practices might be bringing in some cash currently. Still, if you continue, they will be the reason for your business’s collapse. After all, accounting is the heart of every business. It decides if you will make a profit in the next year or have to close up shop early.