Ethics in Management Accounting

[hassan]

Managerial accounting is an internal function of a business. It reports financial information to business owners as well as managers. Like many professional accountants, managerial accountants are bound by ethics to report information accurately and honestly.

Facts
       Business owners and managers typically rely on managerial accounting information in making decisions. Managerial accountants who act unethically and report inaccurate or irrelevant information can distort the decision process. They can also lose the trust of business owners and managers.

Features
    A large part of managerial accounting is allocating business costs to the goods and services a company produces. Accountants who fail to allocate all costs in an effort to make production processes look better may cause the company to lose money. Revenue is lost because companies price goods and services according to their cost to the business.

[hassan]

Potential

   Companies can face legal repercussions from unethical management-accounting practices. Many companies undergo financial audits, which can discover inappropriate accounting methods. Business owners unaware of unethical acts from their managerial accountants may be subject to fines or penalties from government agencies.

Standards

    The IMA notes the following ethical standards in managerial accounting: competence, confidentiality, integrity and credibility. Competence is an accountant’s ability to use professional expertise and develop his accounting knowledge and skills. Confidentiality requires accountants to disclose information only at their supervisor’s discretion. Integrity prohibits managerial accountants from engaging in unethical conduct. Credibility refers to the accountant’s ability to communicate accounting information fairly and objectively to all business stakeholders.

[hassan]

Function

Managerial ethics ensures all financial information is reported to business owners, directors or managers. Accountants who fail to report negative information or use a company’s internal financial information for personal gain can create serious legal situations for businesses. Business owners often require all information, whether good or bad, when reviewing business operations and making decisions. Accounting ethics also ensures that each employee can be trusted with sensitive business information.

Misconceptions

Companies may choose to act unethically in the business environment. Business owners may determine that unethical behavior is not necessarily illegal, a logic that creates a gray-shaded area in business. Managerial accountants constantly may push ethical limits when recording and reporting financial information. Companies may need to provide detailed explanations to those conducting external audits regarding questionable accounting procedures.

Warning

Accountants who fail to abide by the IMA’s accounting ethical code face a variety of punishments. Accountants may lose their professional certification, be removed from accounting positions and face legal penalties depending on their inappropriate actions. Managerial accountants who do not disclose inappropriate accounting operations in their company also can be held liable. Maintaining the general public’s trust in companies is a primary responsibility of managerial accountants.

[tree]

Yes this is right and this is important