Issues of ethics, regulation and compliance and the extent to which they are constraints or threats

1. Accounting ethics.

Accounting ethics are the various rules and guidelines required to be followed by everyone associated with accounting. Some of these rules include the rule of non-acceptability of the contingent fees, like setting the audit fees based on the net profits of the clients, Confidentiality where the auditors have to keep all the information of their clients confidential and are not allowed to disclose it to any outsider, duty concerning the reporting of the breach of the rules by anyone, etc.

• Integrity: Every accountant working in various industries are expected to have qualities like trustworthiness, high moral and honesty in their approach. They should have a professional attitude and work without compromising on their honesty and integrity related to the financial information that they are handling.

• Professional competence: They should have the capacity to upgrade and improve their level of skills and knowledge, know the current relevant accounting standards, laws and changes in them and provide reliable and accurate financial information.

• Protection of information: Accountants have the responsibility to protect the confidential information that the clients entrust them with. They are not suppose to disclose them to any outsider, unlawfully, for personal gain or without any authority to do so. This is a very important part of professional accounting ethics.

• Abide by laws: They should comply with the applicable rules, regulations or accounting standards. They must stay away from any fraud, or illegal act or even people doing so.

• Objective: Their attitude should be objective and unbiased. They should not make any decisions with information from unreliable sources or involving any personal bias. There should not be any conflict of interest in the work process.

• Social responsibility: Accounting ethics also involve a certain amount of social responsibility. Therefore, the accounting work should have a positive social and environmental impact. They should create a sustainable business process that contributes to society’s well-being.

2. Accounting regulation.

In addition to helping managers keep control of their business, good accountancy allows investors, managers, and regulators to compare companies directly. To ensure all accounting practices of all companies could be compared directly, the Generally Accepted Accounting Principles (GAAP) were developed as the guideline for accounting in the United States.

GAAP is a set of accounting rules and standards used for financial reporting. In the United States, public companies operate under the rules of US GAAP.

Most of the world uses the International Financial Reporting Standards (IFRS). However, through convergence, the US is moving from US GAAP to IFRS standards. The purpose of convergence is to have US GAAP closely mirror IFRS standards. These are the basic rules that companies and their accountants must follow when creating financial statements.

3. Accounting compliance.

Accounting compliance refers to the adherence to a set of policies and rules that help companies maintain relevancy and accuracy in their financial reporting. These standards, often known as accounting compliance standards, are designed to ensure that companies comply with the law and the practices of their particular industry. Compliance in accounting has two aspects:

• Accounting Compliance Standards: These are an agreed-upon way of doing something. They help companies maintain relevancy, accuracy, and security. Standards are only practical when they are observed and enforced.

• Compliance in Action: This refers to a company’s efforts to ensure it complies with the standards created by the government or other relevant agencies. For example, a company might need to maintain a ledger or have safeguards in place to ensure only authorized individuals can view certain pieces of data.