Considering the Ethics of Accounting in Managing Business Accounts: A Review

Abstract

This research paper aims to investigate the role of ethics in managerial accounting and financial accounting practices. To achieve this objective, a questionnaire-based research methodology was employed to collect data from accounting professionals in various industries. The questionnaire was designed to explore the extent to which ethical considerations are integrated into the decision- making processes of accounting professionals, as well as to identify the most common ethical challenges faced by accounting professionals in their day-to-day work. The data collected was analysed using statistical software and presented in the form of descriptive statistics, such as mean and standard deviation. The findings of the research indicate that ethics plays a crucial role in accounting practices and that accounting professionals face various ethical challenges, such as conflicts of interest, pressure from superiors, and the need to maintain client confidentiality. The results of this research can provide valuable insights for accounting professionals and organizations to develop ethical guidelines and policies that promote ethical behaviour in the accounting profession. Overall, this research highlights the importance of ethics in accounting practices and the need for ongoing education and training to ensure that accounting professionals maintain high ethical standards in their work.

Keywords:   Ethics, Accounting, Profession and Business Accounting.

Introduction

Accounting plays a crucial role in the business world, with both managerial accounting and financial accounting practices serving as the foundation for making sound financial decisions. However, the importance of ethics in accounting cannot be overstated. Ethical considerations play a vital role in ensuring that accounting practices are conducted in an honest and transparent manner, and that financial statements accurately reflect a company’s financial position. Recent years have seen several high-profile accounting scandals, such as the Enron scandal, which have highlighted the need for ethical behaviour in the accounting profession. In response, regulatory bodies and professional organizations have developed codes of ethics and guidelines to ensure that accounting professionals maintain high ethical standards in their work. This research paper aims to investigate the role of ethics in managerial accounting and financial accounting practices. Through the use of a questionnaire-based research methodology, the study aims to identify the most common ethical challenges faced by accounting professionals, as well as to explore the extent to which ethical considerations are integrated into the decision-making processes of accounting professionals. The findings of this research can provide valuable insights for accounting professionals and organizations to develop ethical guidelines and policies that promote ethical behaviour in the accounting profession. With the importance of ethics in accounting practices, this research is timely and relevant, highlighting the need for ongoing education and training to ensure that accounting professionals maintain high ethical standards in their work. Recent case study examples, such as the Wire card scandal, further underscore the importance of ethics in accounting practices. The collapse of Wire card due to fraudulent accounting practices has resulted in billions of dollars in financial losses and has shaken investor confidence in the accounting profession. This highlights the need for organizations to take a proactive approach in promoting ethical behaviour and preventing unethical practices. Overall, this research paper aims to contribute to the ongoing discussion on the role of ethics in accounting practices, with the goal of promoting ethical behaviour and maintaining the integrity of financial reporting.

Literature Review

Introduction: Accounting is an essential function for organizations that provides financial information to stakeholders, such as investors, creditors, and management, to make informed decisions. Two types of accounting, managerial accounting and financial accounting, serve different purposes. Managerial accounting focuses on providing internal financial information to management for decision-making, while financial accounting aims to provide external financial information to stakeholders for evaluating the financial health of the organization. However, both types of accounting require ethical behavior to maintain the integrity and reliability of financial information. There has been limited research on the role of ethics in managerial accounting and financial accounting in Brunei. However, the available research indicates that ethical behavior is essential for the effective functioning of the accounting profession in Brunei. The relationship between ethical leadership and ethical behavior among accounting professionals in Brunei [1]. The study found that ethical leadership positively impacted the ethical behavior of accounting professionals in Brunei, emphasizing the importance of ethical leadership in promoting ethical behavior in the accounting profession. Another study examined the role of ethics education in promoting ethical behavior among accounting students in Brunei [2]. The study found that ethics education significantly improved the ethical decision-making abilities of accounting students, highlighting the importance of ethics education in developing ethical accounting professionals. In terms of organizational culture, there is limited research on the impact of organizational culture on ethical behavior in accounting in Brunei. However, the importance of a strong ethical culture in promoting ethical behavior is well-established in the literature. The consequences of unethical behavior in accounting in Brunei can have severe legal, financial, and reputational impacts, as is the case in other countries. Therefore, the importance of ethical behavior in accounting cannot be overstated, and accounting professionals in Brunei must prioritize ethical decision-making to maintain the trust of stakeholders. While limited research has been conducted on the role of ethics in managerial accounting and financial accounting in Brunei, the available studies highlight the importance of ethical leadership and ethics education in promoting ethical behavior in the accounting profession. Further research is needed to fully understand the impact of organizational culture on ethical behavior in accounting in Brunei.

Role of Ethics in Managerial Accounting: Managerial accounting is responsible for providing financial information to internal stakeholders, including managers, to make informed decisions that maximize the organization’s value. Ethical behavior is essential to ensure the accuracy and reliability of financial information that management relies on to make decisions. According to, unethical behavior, such as manipulating financial information, can lead to poor decision-making that harms the organization’s financial health [3]. Therefore, managerial accountants must follow ethical standards, such as integrity, objectivity, confidentiality, and professional competence, to ensure the financial information’s accuracy and reliability. One case study example of the importance of ethical behavior in managerial accounting is the Enron scandal. Enron, a former energy company, used creative accounting practices to inflate its financial statements, leading to a significant loss of investor trust and bankruptcy. The company’s top executives were involved in unethical behavior, such as hiding debt, to maintain the appearance of financial stability. This case highlights the importance of ethical behavior in managerial accounting to ensure accurate financial information and prevent unethical practices that can harm an organization’s financial health.

Role of Ethics in Financial Accounting: Financial accounting is responsible for providing external financial information to stakeholders to evaluate the organization’s financial health. Financial accountants must follow ethical standards, such as the Generally Accepted Accounting Principles (GAAP), to maintain the integrity and reliability of financial information. According to, unethical behavior, such as financial statement fraud, can harm stakeholders’ trust and negatively affect the organization’s financial health [4]. Therefore, financial accountants must follow ethical standards, such as honesty, objectivity, and professional skepticism, to ensure the financial information’s accuracy and reliability. One case study example of the importance of ethical behavior in financial accounting is the WorldCom scandal. WorldCom, a telecommunications company, used fraudulent accounting practices to inflate its earnings and hide expenses, leading to a significant loss of investor trust and bankruptcy. The company’s executives were involved in unethical behavior, such as manipulating financial information and lying to auditors, to maintain the appearance of financial stability. This case highlights the importance of ethical behavior in financial accounting to ensure accurate financial information and prevent fraudulent practices that can harm an organization’s financial health.

Ethics and the Accounting Profession: The accounting profession requires ethical behavior to maintain the integrity and reliability of financial information. According to the American Institute of Certified Public Accountants (AICPA) Code of Professional Conduct, accountants must follow ethical standards, such as integrity, objectivity, confidentiality, and professional competence, to maintain the public’s trust in the profession [5]. Unethical behavior, such as conflict of interest, can harm the profession’s reputation and negatively affect the organization’s financial health. Therefore, accounting professionals must follow ethical standards to ensure the financial information’s accuracy and reliability and maintain the profession’s integrity.

Conclusion: Both managerial accounting and financial accounting require ethical behavior to maintain the integrity and reliability of financial information. Ethical standards, such as integrity, objectivity, confidentiality, and professional competence, are essential for accountants to follow to ensure the financial information’s accuracy and reliability.

Research Objectives

For this purpose, we want to analyses to what extent does ethics plays an important role in managerial and financial accounting in terms of:

• Decision making
• The Process thought in preparation of accounts.

Thus, the objective of these survey is:

• To understand the impact of ethics in accounting decision and preparation
• To identify which of the five ethics places more emphasis towards decision making and preparing account.
• To what extent each ethics put as most important in managerial and financial accounting

The questions derived from these objectives are:

• How ethics shape and influence an accounting preparation
• Which ethics are deemed the most important in accounting?

Which ethics are less adhered to by FA/MA in accounting

Research Aims

The aim of this research is to explore the factors that impact decision making in organizations, with a focus on the role of ethics and decision-making techniques.

Research Scope

The research will focus on decision-making processes in organizations across different industries and sectors. The study will investigate the factors that influence decision making and the decision- making techniques that are commonly used.

Research Limitations

The research may be limited by the availability of data and the willingness of organizations to participate in the study. Additionally, the study may be limited by the biases and subjectivity of the researchers.

Methodology

Research Methodology

This chapter outlines the research methodology used to collect, analyse and interpret data gathered for the study on the roles of ethics in accounting in Brunei.

Research Design

This study aims to analyses the roles of ethics in accounting in Brunei. Both primary and secondary data will be used to collect data. The primary data will be collected by using quantitative methodology. This quantitative approach will focus on hypothesis testing by collecting data followed by analysing the data.

Sampling Method

The target for this study will be around 5 to 10 respondents, which targets the people who work in the accounting firms in Brunei. The survey is sent via email or by forwarding the survey through WhatsApp and Instagram. The survey contains a brief explanation of the purpose of the study, the respondent’s confidentiality, and the link to the survey.

Data Collection

Data will be collected by preparing an online questionnaire survey (via google form) and distributing it to people who work in the accounting firm. A closed-ended question survey will be used for the primary data collection in this research study. This is because closed-ended questions are often used in surveys and can be answered with a simple answer such as “Yes” or “No”. Also, closed-ended questions can easily be analysed statistically [6]. The first section of the questionnaire will measure the demographic profile of the respondent, such as gender, age, and years of working. As for the other sections, all questions will use the 5-Likert scale questions. Whereas secondary data are essential in this study, data collection will define the research problem; understand the previous research conducted; for the literature review. The secondary data are collected from various sources such as Science Direct, google scholar, government reports and publications, journals, internet sources, and websites. Additionally, when conducting research using questionnaires, it is important to follow a thorough guide approach to ensure the quality of the data collected. The following is a step-by- step guide to help researchers conduct research using questionnaires.

Step 1: Define the research question and objectives.

The first step in conducting research using questionnaires is to clearly define the research question and objectives. This will help in designing the questionnaire and identifying the target respondents.

Step 2: Identify the target respondents.

Identify the target respondents who are best suited to answer the research question. Consider factors such as age, gender, education level, job title, and other relevant demographic information.

Step 3: Develop the questionnaire.

Design the questionnaire to ensure that it is clear, concise, and easy to understand. Use appropriate language, avoid complex jargon, and ensure that the questions are relevant to the research question and objectives. Additionally, consider using open-ended and closed-ended questions to gather both qualitative and quantitative data.

Step 4: Pre-test the questionnaire

Pre-test the questionnaire with a small group of respondents to ensure that the questions are clear and easy to understand. This will help identify any issues with the questionnaire and allow for adjustments to be made before administering it to the target respondents.

Step 5: Administer the questionnaire.

Administer the questionnaire to the target respondents, either through online surveys or in-person interviews. Be sure to follow ethical guidelines for research and obtain informed consent from respondents.

Step 6: Collect and analyse the data.

Collect the responses and analyze the data using statistical software or other analytical tools. Use the data to answer research questions and objectives.

Step 7: Report the findings.

Report the findings in a clear and concise manner, and draw conclusions based on the data. Be sure to discuss any limitations of the study and implications for future research.

In summary, when conducting research using questionnaires, it is important to define the research question and objectives, identify the target respondents, develop a clear and concise questionnaire, pre-test the questionnaire, administer it to the target respondents, collect and analyze the data, and report the findings. Following this thorough guide approach will help ensure the quality and reliability of the data collected.

Measurement Variables

Two types of variables will be discussed in the study: dependent and independent. According to researchers often use independent and dependent variables to the cause-and-effect relationships in their research studies [7]. The independent variable is the “cause”, as other variables do not influence it, and the dependent variable is the “effect”, as the independent variable influences it. In this case, the independent variable is the effect of social media marketing, whereas the dependent variable is the business performance.

Findings

The findings are based on the responses of 10 individuals from different companies in Brunei Darussalam. The analysis starts with the respondent’s demographic details, followed by their knowledge about the role of ethics in accounting, and their opinion on the code of ethics and conduct (i.e., integrity, objectivity, professional competence and due care, confidentiality, and professional behavior).

Demographic Details

Table 1 below shows the respondents’ gender, age, and length of employment. A majority of the respondents are female, which makes up 60% of the respondents while the other 40% are males. All of the respondents are below 36 years old, which explains their length of employment being less than 10 years with a significant number of the respondents working less than 1 year (60%).

Table 1: Respondents’ demographic details.

Knowledge on Ethics

Table 2 below displays 4 measures of respondents’ knowledge about ethics. With regards to their understanding on the role of ethics in accounting, majority of the respondents think that ethics are fundamental to accounting. As for their understanding on the impact of ethics on financial reporting, almost all of the respondents feel that ethics are essential for accurate and reliable financial reporting while the minority feels that ethics has no impact or may be compromised for financial reporting purposes. When it comes to the respondents’ action towards ethical dilemmas and unethical behavior, 100% of them would rather take action instead of ignoring it. This indicates that the respondents view ethics as an importance in accounting.

Table 2: Respondents’ knowledge on ethics in accounting.

Figure 1 below exhibits respondents’ ethical behavior measured via a Likert scale. A high percentage of the respondents actively promote and encourage ethical behavior towards themselves and their colleagues or subordinates in accounting practices. On top of the fact that none of the respondents disagree with promoting ethical behavior, this reinforces the earlier statement that the respondents view ethics as an importance in accounting.

Figure 1: Respondents’ ethical behavior.

Opinions on the Code of Ethics and Conduct

Integrity

Figure 2 below illustrates the respondents’ view on maintaining integrity in managerial accounting and finance. Around half of the respondents strongly agree while the other half agree that maintaining integrity is essential and contributes to the organization’s long-term success and sustainability. Interestingly, most of the respondents strongly agree that maintaining integrity is important in avoiding many consequences such as legal issues.

Figure 2: Respondents’ view on maintaining integrity.

Objectivity

Figure 3 below shows the respondents’ view on maintaining objectivity in managerial accounting and finance. As opposed to their view on maintaining integrity, the respondents are divided between agreeing and feeling neutral about how maintaining objectivity is essential and contributes to the organization’s long-term success and sustainability. Nonetheless, the aggregate of respondents agrees and strongly agrees that the statement is quite substantial. However, 10% of the respondents surprisingly do not agree that maintaining objectivity avoids presenting biased information [9-12].

Figure 3: Respondents’ view on maintaining objectivity.

The following Figure 4 presents the respondents’ view on the usage of performance metrics and incentives compromising objectivity in managerial accounting and finance decision-making. 70% of the respondents agree that performance metrics and incentives can compromise objectivity while 20% of the respondents disagree and think that performance metrics and incentives do not compromise objectivity.

Figure 4: Respondents’ view on performance metrics and incentives compromising objectivity.

Professional Competence and Due Care

Figure 5 displays the respondents’ view on professional competence and due care in managerial accounting and finance. It can be seen that almost 100% of the respondents view professional competence and due care as essential and contribute to the organization’s long-term success and sustainability while

ensuring the reliability, fairness and accuracy of information in the financial report.

Figure 5: Respondents’ view on professional competence and due care.

Figure 6 below shows that 100% of the respondents believe that professional due care is important for an ethical and responsible decision-making in accounting and finance, which further strengthens the respondents’ positive view shown in Figure 5.

Figure 6: Respondents’ view on the importance of professional due care.

As for Figure 7 below, it displays whether the respondents have encountered a situation where they felt pressured to compromise their professional due care standards and the way they handle the situation. 80% of the respondents have encountered such a situation, with 50% of them handling it appropriately while the other 30% were not able to handle it appropriately. As for the remaining 20%, they have not encountered such a situation.

Figure 7: Respondents’ confrontation on compromised professional due care.

Confidentiality

Figure 8 below presents the respondents’ view on adhering confidentiality in managerial accounting and finance. Almost all of the respondents think that confidentiality is an important aspect in accounting and finance. Specifically, they view confidentiality as an essential and contributes to the organization’s long-term success and sustainability and is critical for protecting the organization’s reputation and competitiveness while also ensuring compliance with legal and regulatory requirements.

Figure 8: Respondents’ view on confidentiality.

Professional Behavior

As for Figure 9 below, it shows the respondents’ view on professional behavior in managerial accounting and finance. Almost all of the respondents think that professional behavior contributes to the organization’s long-term success and sustainability, and helps to maintain integrity, credibility and reputation of the profession and public trust in financial reporting. However, a surprising 10% of the respondents view professional behavior as inessential for the organization’s success.

Figure 9: Respondents’ view on professional behavior.

Overall Impression

Table 3 below displays the respondents’ overall impression on the code of ethics and conduct via a Likert scale of 5 items. The percentage shows that more than 80% of the respondents have a positive impression on the code of ethics and conduct and view it as an important guiding principle in accounting.

Table 3: Respondents’ overall impression on code of ethics and conduct.

Results and Discussions

The results and findings of research on the role of ethics in managerial accounting and financial accounting indicate that ethical behavior is essential for the effective functioning of the accounting profession. Here are some of the key findings:

• Importance of ethics in decision-making: Ethical behavior is critical in decision-making, and ethical considerations should be taken into account when making accounting decisions. Ethical behavior ensures that the decisions made are fair, transparent, and in the best interest of stakeholders.
• Impact of ethical leadership: Ethical leadership plays a crucial role in promoting ethical behavior in accounting. Leaders who model ethical behavior and create a culture of ethics in their organizations positively impact the ethical behavior of their employees.
• Influence of organizational culture: Organizational culture also plays a significant role in promoting ethical behavior. Organizations that have a strong culture of ethics are more likely to have employees who behave ethically.
• Need for ethics education: Education on ethics is crucial for accounting professionals to make informed ethical decisions. Accounting professionals need to be aware of their ethical responsibilities and be able to identify ethical dilemmas and respond appropriately.
• Impact of unethical behavior: Unethical behavior in accounting can have severe consequences for companies and their stakeholders, including legal, financial, and reputational damage.
• Overall, the results and findings of research on the role of ethics in managerial accounting and financial accounting emphasize the importance of ethical behavior in the accounting profession and the need for ethical leadership, organizational culture, and ethics education.

 Conclusion

In conclusion, this research paper has explored the role of ethics in managerial accounting and financial accounting practices. Through the use of a questionnaire-based research methodology, the study has identified the importance of ethics in the accounting profession, as well as the most common ethical challenges faced by accounting professionals. The results of the research highlight the need for organizations and accounting professionals to develop ethical guidelines and policies that promote ethical behavior in the workplace. One of the key recommendations from this research is the need for ongoing education and training to ensure that accounting professionals maintain high ethical standards in their work. Organizations should provide regular training and resources to their employees to help them understand ethical considerations and decision-making processes. Additionally, organizations should encourage a culture of transparency and openness, where employees are encouraged to report unethical behavior and concerns without fear of retaliation. This can help prevent and address unethical behavior before it becomes a bigger problem. Finally, it is important for accounting professionals to be aware of their own biases and potential conflicts of interest, and to seek guidance and support from colleagues and superiors when facing difficult ethical decisions. The case study of Enron provides a clear example of the consequences of unethical behavior in accounting practices. The collapse of Enron due to unethical accounting practices resulted in the loss of thousands of jobs, and billions of dollars in financial losses. This underscores the importance of ethical behavior in accounting practices, and the need for organizations to take a proactive approach in promoting ethical behavior and preventing unethical practices.

In conclusion, the findings of this research provide valuable insights for accounting professionals and organizations, highlighting the importance of ethics in accounting practices, and the need for ongoing education, training, and support to promote ethical behavior in the workplace.

Acknowledgement: Asqina Nur, Nurul Amalina,Hajah Norain and Awangku Mohammad for data collection.

Appendices  

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