ACCA’s 5 ethical principles of accounting

Accounting ethics are a set of moral principles that guide the conduct of accountants and other financial professionals. These principles ensure the integrity, reliability, and trustworthiness of financial information. Key principles often include:

• Integrity: Being straightforward and honest in all professional and business relationships.
• Objectivity: Not allowing bias, conflict of interest, or undue influence of others to override professional or business judgments.
• Professional Competence and Due Care: Maintaining professional knowledge and skill at the level required to ensure that clients or employers receive competent professional service, and acting diligently and in accordance with applicable technical and professional standards.
• Confidentiality: Respecting the confidentiality of information acquired as a result of professional and business relationships and not disclosing any such information to third parties without proper and specific authority, unless there is a legal or professional right or duty to disclose.
• Professional Behavior: Complying with relevant laws and regulations and avoiding any conduct that the professional accountant knows or should know might discredit the profession.

Ethics are critical in accounting because financial information is used by a wide range of stakeholders (investors, creditors, management, government, employees) to make important decisions. Unethical practices, such as manipulating financial data, can lead to misleading information, poor decision-making, financial losses for stakeholders, erosion of public trust, and damage to the entire financial system.

Ethical standards are set by various bodies, including professional accounting organizations (like the International Ethics Standards Board for Accountants - IESBA, or national bodies like the AICPA in the US or ICAEW in the UK) and regulatory bodies (like the Securities and Exchange Commission - SEC in the US). These bodies issue codes of ethics that members and regulated entities must follow.

The principle of Integrity means that accountants should be honest and forthright in all their professional dealings. This involves not knowingly being associated with information that contains materially false or misleading statements, omits necessary information, or is made recklessly.

Objectivity requires accountants to remain unbiased and independent when making professional judgments. They must not allow conflicts of interest, personal relationships, or pressure from others to influence their decisions or reports, ensuring that financial information is presented fairly.