Legal and Ethical Concerns of Accounting and Financial Reporting

Ethics play a major role in business accounting and financial reporting. During times of economic weakness it has proven to be tempting for businesses to manipulate financial records to display a picture of economic health to their investors. Accountants have an enormous social responsibility to prevent this type of deception from occurring. The public has become increasingly aware of a blatant disregard for ethics over the last decade but there have actually been attempts to set and legally enforce ethical standards in accounting and financial reporting since the 1900’s.

There have been a number of major organizations developed in an effort to set and enforce ethical standards in accounting practices. One of the earliest organizations developed was the American Association of Public Accountants. The organizations founding members sought to ensure that their profession was practiced by ethical and competent professionals. The organization has evolved since its beginning and is now known as the American Institute of Certified Public Accountants (AICPA). Their mission statement today is, “to provide members with the resources, information and leadership that enable them to provide valuable services in the highest professional manner to benefit the public, employers and clients” ( ). While accountants are not legally required to join the AICPA, many corporations have begun to make it a requirement for employment in an effort to find honest and capable accounting firms or employees.

An accounting role is one that is taken very seriously. Some of the ethical principles that have evolved and accountants are expected to uphold are competence, integrity and objectivity. Accountants are also expected to participate in continuous education and remain up to date on rules and regulations throughout their entire careers. The Securities Act of 1933 and the Securities Exchange Act of 1934 impose criminal penalties that can be applied to accounting professionals and firms....