Accounting code of ethics guides those in the profession to behave in a respectful, controlled and moral way. Clients need to have confidence in the business practices of professional accounting firms. A clear ethical code ensures that accountants practice a high standard of business that is exceptional in integrity and professionalism.
A public accountant agrees to uphold the profession's ethics and serve the public. It's important that an accountant maintains an objective view of finances. It is also necessary to demonstrate a degree of confidentiality, as accountants often deal with sensitive matters. Accountants must also be competently trained to perform the functions required to document and track the details of their clients' commerce. There are several organized accounting ethics training courses that accountants can take to become educated in the finer points.
Professional Ethics Codes
To regulate ethical standards within the accounting profession, several of the associations have set up their own ethics codes. The Institute of Management Accountants, The Institute of Internal Auditors and the American Institute of CPAs all feature nearly identical rules for ethical practice. They are explicitly laid out so that there is little room for ambiguity.
These organizations regulate the actions of their members, and accountants who violate the accounting ethics standards can lose their licenses or certifications to practice, either on a temporary basis or even permanently. Any ethical violations might also lead to legal action by state or federal law enforcement agencies. In serious accounting ethics violations, the Securities and Exchange Commission (SEC) will step in and enforce accounting and auditing standards.
Sarbanes Oxley Act
As a result of major corporate scandals involving breaches of accounting ethics, the government enacted the Sarbanes Oxley Act in 2002. It required public companies to be in compliance with Sarbanes Oxley regulations. Companies must conform to a higher standard of financial reporting so that investors and shareholders feel more confident about a company's financial disclosures.
This business reform measure was designed to create account oversight committees on various levels. It also includes new ways to prepare and certify financial reports and insider trading reports, ensures independent auditing and holds chief financial officers and chief executive officers personally accountable for violations.
Cost accounting is a method of evaluating costs, profits and everything in between when it comes to running a business, and you can use that information to help leaders of your company make decisions.
While this isn't a complete dictionary of accounting terms, these basic terms and definitions will give you a foundation to help you get started. These terms are commonly used in business accounting software.