Annals of Spiru Haret University. Journalism Studies 20(1), 2019, pp.

53–57

Communicating Accounting Ethics

Luminița Ionescu
se_lionescu@spiruharet.ro
Spiru Haret University, Bucharest, Romania

ABSTRACT. The aim of this paper is to explain particular aspects of ethics in accounting
and how professional accountants must respect the fundamental ethics principles. Over the
past decades there has been an increasing pressure on the professional accountants to
produce accurate financial information and to follow the Code of Ethics and international
accounting standards, in order to avoid errors and fraud in the financial reporting. The final
part of the paper presents ethical and moral aspects of accounting practice. The
accountant’s role is dependent on organizational accounting profession ethics and it
primarily involves communicating information for decision-making. Accounting ethics
applies to all accountants, whether practicing and working in business or public sector.

Keywords: ethics; accounting; fraud; financial information

1. Introduction
The role of accounting is to serve the public interest and to confirm or provide
assurances about the “true and fair view” of market participants’ financial data and
to provide data and information for the needs of national accounts (Horvat and
Koroset, 2015). Accounting ethics is a matter of great importance and
responsibility because accounting is the language of business and the method of
communicating business information for public and private sector, as well.
According to COSO (2007), fraudulent financial reporting can have significant
consequences for the organization and its stakeholders, as well as for public
confidence in capital markets. Periodic high profile cases of fraudulent financial
reporting raise concerns about the credibility of the U.S. financial reporting process
and call into question the roles of management, auditors, regulators, and analysts,
among others (COSO, 2010).
Communicating accounting ethics could prevent fraud, corruption and errors in
financial reporting for public and private sectors.

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2. Fundamental Principles in Accounting Ethics
The Code of ethics for professional accountants (IFAC) requires accounting
profession to uphold transparency and provide accurate financial reporting. In
acting in the public interest, a professional accountant should observe and comply
with the ethical requirements of the Code of ethics for professional accountants and
to follow the fundamental principles. A professional accountant is required to
comply with the following fundamental principles:
(a) Integrity – a professional accountant should be straightforward and honest in
all professional and business relationships.
(b) Objectivity – a professional accountant should not allow bias, conflict of
interest or undue influence of others to override professional or business
judgments.
(c) Professional Competence and Due Care – a professional accountant has a
continuing duty to maintain professional knowledge and skill at the level required
to ensure that a client or employer receives competent professional service based
on current developments in practice, legislation and techniques. A professional
accountant should act diligently and in accordance with applicable technical and
professional standards when providing professional services.
(d) Confidentiality – a professional accountant should respect the confidentiality
of information acquired as a result of professional and business relationships and
should not disclose any such information to third parties without proper and
specific authority unless there is a legal or professional right or duty to disclose.
Confidential information acquired as a result of professional and business
relationships should not be used for the personal advantage of the professional
accountant or third parties.
(e) Professional Behavior – a professional accountant should comply with
relevant laws and regulations and should avoid any action that discredits the
profession. Professional ethics can also be derived, simply, as a combination of the
ethics and profession concepts referred to above, or developed from a textbook
review (Brinkman, 2002). But, a professional accountant has an obligation to
evaluate any threats to compliance with the fundamental principles when the
professional accountant knows, or could reasonably be expected to know, of
circumstances or relationships that may compromise compliance with the
fundamental principles.
In accordance with the Code of ethics for professional accountants (IFAC), in
evaluating compliance with the fundamental principles, a professional accountant
may be required to resolve a conflict in the application of fundamental principles.
Thus, when initiating either a formal or informal conflict resolution process, a
professional accountant should consider the following factors, either individually
or together with other factors, as part of the resolution process:
(a) Relevant facts;
(b) Ethical issues involved;
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 (c) Fundamental principles related to the matter in question;
(d) Established internal procedures; and
(e) Alternative courses of action.
The interdependence of the ethical principles in accounting could be observed in
the figure below:

Figure 1 The fundamental principles in accounting ethics

Source: Author’s own work.

3. Ethical and Moral in Accounting Practice

Ethics in accounting is mainly known as applied ethics, which strongly emphasizes
human and business ethics, judgments, moral values, and their application in
accountancy (Jaijairam, 2017). Generally, the major ethical drivers of accounting
are an appropriate practice and a good standard of professionalism.
‘Ethics’ most often refers to a domain of inquiry, a discipline, in which matters
of right and wrong, good and evil, virtue and vice, are systematically examined,
while ‘morality’ is most often used to refer not to a discipline but to patterns of
thought and action that are actually operative in everyday life (Brinkman, 2002).
But, according to COSO, some companies committing fraud were experiencing
net losses or were in close to break-even positions in periods before the fraud and
the lowest quartile reflected companies in a net loss position and suffering from net
operating cash flow shortages.
In this situation, a professional accountant should not be associated with reports,
returns, communications or other information where they believe that the
information: contains a materially false or misleading statement; contains
statements or information furnished recklessly; or omits or obscures information
required to be included where such omission or obscurity would be misleading.

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 Ethics in accounting profession is closely related to the management of
accounting firms, which must implement professional standards and international
accounting standards (Ionescu, 2019). If accountants fail to abide by the rules of
financial reporting governing the accounting profession when presenting the
financial information of their company, the reporting may not be valid and hence
may not serve the public interest.
Thus, accounting ethics imposes an obligation on all professional accountants to
not let bias, conflict of interest or the undue influence of others compromise their
professional or business judgment.
According to the Code of ethics for professional accountants (IFAC), in
deciding whether to communicate confidential information, professional
accountants should consider the following points:
(a) Whether the interests of all parties, including third parties whose interests
may be affected, could be harmed if the client or employer consents to the
disclosure of information by the professional accountant;
(b) Whether all the relevant information is known and substantiated, to the
extent it is practicable; when the situation involves unsubstantiated facts,
incomplete information or unsubstantiated conclusions, professional judgment
should be used in determining the type of disclosure to be made, if any; and
(c) The type of communication that is expected and to whom it is addressed; in
particular, professional accountants should be satisfied that the parties to whom the
communication is addressed are appropriate recipients.
The good standard of professionalism, perseverance in problem solving and
individual responsibility serve the best interests of the company management.
Specific forms of ethics could be observed in handling consulting companies,
consultants as administrative and knowledge outsiders concerning their clients, the
rising competitiveness of the consulting sector (Lăzăroiu, 2015).

5. Conclusions
Over the past years accounting ethics has become an important and controversial
topic because accounting is fundamentally a social practice, which guides and
influences the behavior of people in organizations and the society, with important
consequences on the financial results of the organizations.
Communicating accounting ethics is essential for national professional bodies in
increasing business reputation and credibility of the financial reporting for the
private companies. Accounting ethics plays a key role in the accounting culture and
accountability, showing the growing interest of the general public in understanding
accounting procedures and tax statements.
Over the last decades we have witnessed a decline of the ethical climate and
culture all over the world, due to the international economic crunch, criminal

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activities or fraud and most universities have included ethics in the accounting
curriculum.

Author Contributions
The author confirms being the sole contributor of this work and approved it for
publication.

Conflict of Interest Statement

The author declares that the research was conducted in the absence of any commercial
or financial relationships that could be construed as a potential conflict of interest.

REFERENCES

Brinkmann, J. (2002). “Marketing Ethics as Professional Ethics: Concepts, Approaches,

and Typologies,” Journal of Business Ethics 41(1/2): 159–177.
COSO (2007). Internal Control – Integrated Framework. Guidance on Monitoring Internal
Control Systems, September, 6.
COSO (2010). Fraudulent Financial Reporting: 1998–2007, May.
Horvat, R., and B. Korosec (2015). “The Role of Accounting in a Society: Only a
Techn(olog)ical Solution for the Problem of Economic Measurement or also a Tool of
Social Ideology?,” Naše gospodarstvo our economy 61(4): 32–40.
Hurtt, K. (2010). “Development of a Scale to Measure Professional Skepticism,” Auditing:
A Journal of Practice & Theory 29(1): 149–171.
Ionescu, L. (2019). “Ethics and Management in the Accounting Profession,” Justice and
Management in Modern Society, National Conference, May, Brașov, 160–165.
Jaijairam, P. (2018). “Ethics in Accounting,” Journal of Finance and Accountancy 23: 1–
13.
Lăzăroiu, G. (2015). “The Role of the Management Consultancy Industry in the Knowledge
Economy,” Psychosociological Issues in Human Resource Management 3(2): 71–76.

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