Accounting’s ethical considerations and adherences in modern business practices

Introduction

The quickest way to know a company with haphazard financial operations is through the ethical practices of its financial practitioners. The absence of a credible ethical framework guiding the practitioners of any career is a gateway to professional disrespect and mistrust. The world is currently fast-paced; modern businesses are expanding and gaining standard formal outlook; this summons the need to conceive a credible accounting team, ensuring the reflection of values such as integrity and trust. However, this would only be realised when vehement accounting ethics are considered.

Ethics is not entirely a body of laws and rules governing a given practice; in accounting, it’s a habitual cycle that must be imbibed to birth legitimate and responsible business practice leading to financial security, accurate reports, and reasonable assurance that enhance confidence to the users of the financial statements, devoid of manipulation and personal interests. The advent of emerging technologies used to ease complex financial problems has grown to threaten the ethical adherence of accountants, reducing their integrity in businesses. This article explores accounting ethics and how they can be carefully adhered to in modern business practices.

Historically, accounting operations were conducted informally, with ethical practices lacking due to the focus on earning salaries. However, with evolution, accounting has developed robust structures to guide businesses and ensure accountants’ professional dispositions align with accepted standards, reshaping the profession and guiding accountants’ practices.

The accounting profession has evolved through regulatory bodies like GAAP and IFRS, which set ethical standards for transparency, accuracy, consistency, and comprehensiveness in reports. The Sarbanes-Oxley Act of 2002 introduced professional accountability, particularly in the Enron and Worldcom scandals. In Nigeria, organisations like ICAN and ANAN have contributed to ethical frameworks for accounting experts, highlighting the distinction between ethics and law. These frameworks aim to ensure professional accountability and transparency in the accounting profession.

Ethics in accounting has grown to dimensions of complexity; accountants now go about their day using modern technologies and abandoning salient ethical codes. Contributing factors to this rising challenge include the emergence of advanced financial tools and technologies and the unwillingness of large corporations to embark on thorough checks. These concerns demand the need for exploring ethical codes, broadening the awareness of professional responsibility in accounting.

Globalisation has led to a shift in modern businesses, presenting new ethical challenges for accountants. Companies must align operations with local regulations and socio-cultural norms, requiring them to produce accurate financial reports. This can lead to ethical dilemmas, such as accepting gifts from external individuals to influence figures in Nigeria or balancing the need to meet cultural standards with the need to avoid violating professional ethics in multinational companies with branches in different countries.

Globalisation has led to advancements in accounting technologies, such as artificial intelligence (AI) and automated software. These tools have improved efficiency and accuracy but raise ethical concerns. Automated technologies reduce the intellectual potency of accountants, as their intelligence is traded with machine intelligence. This raises questions about responsibility in cases of AI predictions or fault detection, highlighting the need for ethical arrangements with technology.

Financial instruments and off-balance-sheet activities can compromise trust and make it difficult for companies to make informed decisions. Accountants must use creative accounting to manage financial inflow and outflow, improving financial ratios. The Enron financial scandal illustrates how complex financial instruments can be used to conceal true figures, leading to misguided financial reports. However, critical analysis revealed the financial team’s conniving offence, causing heavy bankruptcy and job loss for workers. This failed ethical duty resulted in the annihilation of the accounting firm and the loss of jobs.

The case study brings to light why ethical considerations in accounting are important and the dangers that lurk around when they’re not upheld. It’s therefore a necessity that amidst the technological rave and advancements, accountants must remain upright and devoted to their jobs, maintaining integrity and the profession’s standards even when faced with compromising situations.

Accountants are responsible for maintaining a company’s finances and upholding strong integrity. They should stay updated on new accounting practices, learn from professional dilemmas, and advocate for ethical conduct within their companies. They should also issue consequences for erring workers to cultivate integrity values, leading to long-term success.

Strategies to promote ethical considerations

Ethics can be initiated in diverse ways, especially as it actively involves an organisation and its workers:

Training programmes:

Accountants should engage themselves in training programs to be trained and exposed on ethical issues. When they get more exposed and in-depth in ethics, they integrate it into their daily practice, enabling them to accomplish complementary services such as conflict resolution, ethical decisiveness, and core values on transparency, responsibility, and accountability.

Corporate governance:

Companies should adopt strong and strict governmental structures, as this ensures that ethical standards are consistently applied. These structures are in the form of external virtual auditors, an independent board of directors, coherent internal managers, and human resource personnel to facilitate ethical behaviours in compliance with the company’s guiding policies.

Ethical culture:

To foster a culture of commitment and integrity, companies should highlight ethical behaviours in all aspects of their operations. This can be achieved by rewarding diligent employees, punishing those who violate ethical standards, and ensuring leaders reflect credible ethical practices. This approach creates a high awareness of the dangers of unethical practices.

In the future, ethical challenges will continue to grow as long as businesses are on the rise and technologies are also in rapid growth. It’s therefore pertinent that accountants stay informed and abreast of ethical values, developing strong integrity values, fairness, ethical judgement, and continually promoting ethical culture in their individual companies.

Conclusion

Professional ethics are beneficial, fulfilling, and prestigious, but challenges arise due to modern business approaches and excessive use of advanced technologies. While technology ensures reliability and transparency, ethical use requires a balance. Integrating integrity, objectivity, professional competence, confidentiality, accountability, independence, and fairness into accounting practice is crucial to navigating strong ethics in modern businesses.