Accountants have a mammoth responsibility to uphold legal and financial standards and comply with federal regulations. Much like healthcare providers, they are bound to honor their professional oaths to maintain transparency and legal compliance.
Deviating from federal rules and engaging in malpractice can create scores of ethical and legal challenges for accountants.
Many business owners regard their accountants as magicians who can crunch numbers to ensure financial growth and profitability.
While that’s not entirely wrong, accountants also serve as the watchdogs of financial regulation in the corporate world. They are required to report fraudulent activities and embezzlement cases and ensure companies prepare accurate financial reports.
Keep reading to learn more about the ethical challenges in the field of accounting.
Financial Misreporting & Manipulation
Entrepreneurs are overwhelmed by burdensome financial pressure, and the slightest errors can lead to irreversible losses. Business growth and profitability are subject to numerous factors, such as economic conditions, demand-and-supply dynamics, and political climates.
When projected financial outcomes don’t turn out as expected, many business owners pressure their accountants.
Accountants sometimes misreport financial figures or manipulate the digits to satisfy stakeholders. Business owners often pressure accountants to fudge the numbers to maintain liquidity and industry reputation, neglecting the legal consequences.
This pressure to misreport or manipulate figures creates a grave ethical conundrum for morally upright accountants.
Many new entrants and junior accountants succumb to this pressure to salvage their careers and retain their jobs. However, experienced and well-qualified accountants understand their ethical and legal obligations to maintain financial transparency.
Young professionals are strongly advised to pursue a Master’s In Accountancy to identify legal tools and resources.
A master’s program will equip you with real-world exposure to the corporate financial system, creating a well-rounded skillset. Higher education will introduce you to various legal resources and mechanisms to report financial misreporting and pressure to fudge numbers.
It will also facilitate ethical learning by outlining the criminal and civil liabilities of engaging in misreporting. Well-qualified accountants with advanced training are better equipped to handle such situations.
More importantly, higher education will elevate your skillset and marketability, making it easier to pursue other opportunities. With a master’s degree under your belt, you can quit a job that compromises your ethical and moral integrity.
Omitting Crucial Financial Details
Omission of crucial financial details is a cardinal sin in the realm of financial accounting, and professionals must refrain from this malpractice. The pressure of omitting certain details that reflect poorly on a company’s financial performance can often force accountants into misreporting.
It’s normal for business owners and employers to downplay the legal ramifications of omitting certain details. However, seasoned and experienced accountants fully understand the implications of omission on their career and state licensure.
Unfortunately, many new entrants fall prey to employers’ psychological manipulation and pressurizing tactics, forced into omitting negative financial details.
For a young professional, the act of omitting a few transactions may seem a small price to build ties with executive leaders. At times, the lure of being invited to the C-suite is enough to convince entry-level accountants to misreport and omit certain details.
However, the omission of financial details has far-reaching implications for the accountant’s career and the organization. Suppose you are preparing financial documents to attract investors by fudging certain details and omitting negative projections.
In that case, the investor cannot undertake an accurate risk assessment to evaluate the company’s true potential.
Investors and business associates undertake their own financial assessments, and accounting discrepancies come to light in many cases. Finding discrepancies and ommissions at a later stage can compel investors, clients, and associates to take legal action against corporate fraud.
Confidentiality & Privacy Concerns
It’s interesting to note the numerous similarities in the professional ethics of accountants, lawyers, and healthcare providers. All these professionals deal with sensitive personal information, subject to confidentiality to maintain client privacy.
Accountants sift through the confidential financial information of individuals, households, investors, and organizations.
Accountants are required to maintain confidentiality and protect the privacy of their employees. They cannot use the financial information for their vested interests or benefits or engage in corporate espionage.
Failure to protect the confidentiality of a company’s financial information can result in complex legal repercussions, ending the accountant’s career.
Suppose an accountant trades confidential information to a competitor in exchange for a substantial sum of money. In that case, the accountant can face a potential lawsuit for committing an ethical and legal crime.
A breach of confidentiality can end an accountant’s career by compromising the professional’s reputation, credibility, and integrity. Facilitating the theft of confidential information or unintentionally compromising confidentiality results in lengthy and challenging legal complications.
Final Thoughts
Businesses want to entrust their financial reportage and profitability into safe and reliable hands. An accountant’s market reputation and credibility determine career prospects more profoundly than skills and reputation.
No company is willing to hire accountants accused of misreporting, breaching confidentiality, or engaging in dishonest practices.
Many young accountants undermine the significance of building a spotless and credible reputation. If an employer pressures you into misreporting figures, you need to hunt for another job immediately.
Accountants enjoy high market demand and stability, and finding lucrative employment opportunities isn’t that challenging.
However, it’s tough to salvage one’s career after legal action due to succumbing to pressure and committing fraud or misreporting.