What are the 5 most common ethical issues in accounting? As a business ethics keynote speaker, business ethics consultant and book author, I have had the opportunity to speak in front of many groups of financial analysts, accountants, fiduciaries and CFO associations. From a business ethics perspective, and as with most professions, the financial community is quite ethical. That said, we have all encountered accountants who have badly crossed the ethical line. The question isn’t so much the ethical accounting issues, but why it happens.
5 Most Common Ethical Issues in Accounting
Though in my business ethics keynote talks and moderating accounting ethics break-out sessions I have been privy to hearing of many ethical issues that exploded into scandal, here are among the top most common ethical accounting issues:
- Accepting bribes – This practice, though we hate to admit it, can – and does – occur. While any attempt must be reported, I would be naïve to state that it is “exceptionally” rare. Whenever it happens it is usually the interplay of a lack of oversite in terms of the client/accounting firm relationship and an inherent, unethical need on the part of the accountant or auditor.
- Manipulation of financial data – Though our digital age allows the financial community to seamlessly handle massive quantities of data, and the levels of sophistication of those inputting and working with that data has vastly improved, ethical disconnects happen. The culprit behind this practice is almost always top-down pressure in an effort to avoid or reduce taxation. An important caution is in order here: if a senior executive is eventually indicted, the government will work its way down (or up, depending), and you will have no defense. Far better to walk away from an unethical situation.
- Inaccurate data – As an adjunct to the point I made above, it is the inputting and at least temporary misstatement of data. What may begin as a temporary cover-up can indeed snowball into massive losses for shareholders. Again, an unintentional misstatement is bad enough, but an intentional effort is guaranteed to result in severe consequences.
- Theft of funds – There are more sophisticated ways to state it, but I have heard, spoken and written on numerous unethical schemes that involved theft of client funds by opportunistic accountants who again, were able to thrive in organizations that lacked a proper system of checks and balances.
- Issues of corporate social responsibility – These “gray areas” somehow elude scrutiny in most ethical financial discussions. As accountants, there is a duty not just to the organization but to “the greater community.” I have been challenged as to this point when I have delivered accounting ethics keynote addresses. There is no basis for challenge. The world has changed and, I feel, for the much better. Issues such as sexual harassment, workplace bullying, overt or subvert racism, religious intolerance and even covering up illegal dumping or environmental abuses now also fall into the accounting domain.
Scrutiny as never before
From surveillance cameras to sophisticated mobilization of shareholders and law enforcement, the 5 Most Common Ethical Issues in Accounting are no longer hidden from widespread view. If financial irregularities are part of a corporate culture, there are those who are committed to uncovering them.
The antidote to taking the wrong path is ethical training that is both impactful and reinforced. Every choice has a consequence, and a bad set of choices will bring down an organization. The department that is almost always the focus when irregularities are discovered is almost always linked to the financial area. Take the right path.
LEAVE YOUR COMMENTS!
