Ethics in Accounting

Topics: Financial statements, Public Company Accounting Oversight Board, Finance Pages: 3 (952 words) Published: November 8, 2005
Ethics and Legal Responsibility in Accounting

The profession of accounting has become spotlighted by the events in recent years including namely Enron. The ethical behavior of businesses is becoming increasingly scrutinized at every turn. Thus it is important to specify the nature of conducting accurate and ethically in accounting and how this can be of subsequent benefit to the company as well as the business world in the long run.

The definition of accounting according to Webster's dictionary is "the system of recording and summarizing business and financial transactions and analyzing, verifying, and reporting the results." The purpose of accounting is to provide financial and business information to possible investors, current investors, and management so they can make accurate decisions concerning the company. There are four basic statements that accounting provides: the Balance Sheet, the Cash Flow Statement, the Owner's Equity Statement, and the Income Statement. These four reports provide the perspective of how the organization is maintaining financially. The basis of many decisions will stem from how profitable an organization is and thus it can be tempting to increase the bottom line so the company looks better on paper than what the situation is in actuality. The importance of accounting is that it gives investors the confidence in making a well informed decision and though the accounting reports don't equate to a sure thing these reports aid in the flow of business. Thus without accurate accounting there would be no way an investor could feel safe or educated in providing monies to an organization. Thus accounting promotes the flow of business. Accounting also is hinged on various people's monies and so it must be performed with accuracy and integrity. There are many people's lives and financial well-being at stake and thus there should be a considerable amount of integrity and ethical behavior utilized in accounting.

The purpose of...
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