Managerial accounting, also called management accounting or cost accounting, focuses on providing information to internal users and decision-makers. Unlike financial accounting, where the objective is to provide financial information about what occurred in the past, managerial accounting supplies operational information and has a future-oriented focus. This gives managerial accountants a front-and-center role in upholding and maintaining a business’ ethical culture.

Managerial Accounting Functions

A glance at managerial functions shows how integrated its tasks and responsibilities are with business ethics and ethical standards. Managerial accounting focuses on supplying information used in business planning, decision making, measuring and monitoring the effectiveness of internal business controls. On the planning side, budgeting and forecasting are functions of managerial accounting. Analysis reports such as cost-volume-profit analysis, investment appraisal techniques and profitability analysis reports help managers make important business decisions. Monitoring functions include defining standards against which performance, efficiency and accountability can be measured.

Significance of the Ethical Role

Business owners and decision makers require full and objective data when reviewing business operations and making critical decisions. Ethical standards ensure information is reported in full and without bias whether the information is positive or negative. Additionally, managerial accountants have access to sensitive business information. Accountants who disclose or use internal information for personal gain can destroy trust and set the business up for serious legal implications. Accounting ethics ensure that managerial accountants can be trusted with sensitive business information.

Code of Ethics

The Institute of Management Accountants, established in 1919 as resource for U.S. accounting professionals, includes a commitment to maintaining “Highest Standards of Integrity and Trust” as one of its core values. This commitment includes a two-part ethical code of conduct that summarizes the role ethics plays in four areas of managerial accounting. The first addresses competence, the second addresses confidentiality, the third addresses personal integrity and the fourth addresses credibility. The second section of the code outlines procedures for dealing with instances of ethical misconduct.

Global Commitment to Ethics

The field of managerial accounting takes its role in maintaining and upholding business ethics seriously. The International Federation of Accountants, a global governing body, has a code of ethics that applies to managerial accountants worldwide. The IFAC code outlines ethical responsibilities relating to areas such as taxes, fees and commissions, advertising and solicitation. It also includes ethical guidelines relating to integrity and objectivity, resolution of ethical conflicts, competence, and confidentiality. IFAC ethical standards are mandatory requirements. If they are stricter than the ethical requirements a country imposes, managerial accountants must abide by IFAC ethical standards.