Importance of Ethics in Accounting & Financial Decision Making

Ethics are important to any business, creating trust and customer confidence. When businesspeople make unethical decisions, benefiting themselves only, it can lead to the kind of scandal and outrage that destroy careers and even companies. Nobody wants to deal with shady, unethical individuals, giving preference to those they can trust to behave in an ethical way.


Ethical behavior creates a comfort zone where people know that they will be treated fairly. Ethics means transparency in accounting and financial matters, building trust within a community and among investors and customers. Once trust is lost, it is very hard to gain it back.


A key ethical concept dealing with accounting and financial matters is to keep these matters confidential. An ethical person will not disclose private financial matters to people who should not have the information. A lot of damage can be done by an employee or consultant spilling the beans about a firm's or an individual's financial situation or decisions.


An ethical environment fosters collaboration, the sharing of ideas. Collaboration requires a sense of honesty and ethics. If you know that your idea will be stolen by a colleague or that it will be misused, you will not collaborate. Each person brings a set of knowledge and skills to a finance committee or group, and if people refuse to collaborate and share information, good decisions are harder to make.

Code of Ethics

Emphasizing the importance of ethics in accounting and financial matters, the American Institute of CPAs requires members to follow its code of professional conduct. Other organizations also have a code of conduct, such as the California Society of CPAs, the New York State Society of CPAs and the Institute of Management Accountants.


Unethical behavior can ruin firms and careers. Arthur Andersen, once one of the top U.S. accounting firms, had to close its doors when, because of unethical behavior during the Enron scandal, other companies no longer wanted to do business with Arthur Andersen. If unethical behavior is accepted in a firm by top executives, it trickles down to other areas of a company, creating an unhealthy corporate culture.



About the Author

Sheila Shanker is a certified public accountant based in California. She writes online courses for professionals seeking CPE hours and has also published the book "Guide to Non-profits: From the Trenches." Her articles have been published in national magazines such as the "Journal of Accountancy," "Architecture Business and Economics" and "Veterinary Economics." Shanker holds a Master of Business Administration.