Both certified accountants are responsible for acting in the best interests of the public and adhering to essential accounting standards such as accountability and objectivity. In addition, they must exercise due diligence, ethical responsibility, and secrecy in all transactions. Behaving in the public’s interest entails paying attention to the interests of consumers, taxpayers, the state, and other stakeholders that depend on the honesty of accounting. Accounting and auditing standards are in place to ensure professional behavior in the accounting industry. These accounting and auditing standards have a huge impact on how accountants conduct their work.
One of the accounting standards that have had an enormous impact on the accounting profession is the General Accepted Accounting Principles (GAAP). GAAP contains basic rules and procedures that take into consideration the complexities and legalities of accounting. GAAP rules and procedures are used by the Financial Accounting and Standards Body to establish good accounting practices. The United States regulations require all public listed companies to release their financial statements yearly in line with General Accepted Accounting Principles. GAAP contains ten vital concepts. The ten principles of GAAP include regularity, consistency, sincerity, permanence, continuity, materiality, prudence, non-compensation and utmost good faith. The principle of non-compensation, for instance, states that all accounting elements of a firm must objectively be reported whether they are bad or good. The principle of materiality, on the other hand, requires full disclosure of a company’s financial situation (Airline, 2015).
General Accepted Accounting Principles have several impacts on the ethics and professionalism of accountants. GAAP ensures that there is transparency, integrity, and honesty in the reporting of the financial statements. The principles also standardize methods, descriptions, and terminologies making the work of certified accountants easier. Financial statements released by GAAP compliant companies can be compared with those of external parties with relative easy. GAAP ensures that there is transparency, continuity, and professionalism in accounting. This ensures that investors and stakeholders in an entity make prudent and informed business choices. The ten GAAP principles eliminate confusing accounting reporting methods. Besides, the ten principles ensure financial reporting offer potential investors the true financial situation of a company (Airline, 2015). Cases of falsifying accounting records are on the rise. Most companies falsify financial books to paint a picture of a good financial health. Companies are therefore under pressure to hire professional accountants who abide by the accounting code of ethics. GAAP ensures that accountants are transparent and objective in all their dealings (Allen & Bunting, 2008). The principles introduce some responsibility in the manner in which accountants perform their duties. They have made the accounting profession more ethical and transparent. They also ensure that reporting of financial information is relevant, reliable and consistent. Accounting standards require accountants to detect financial situations that raise ethical concerns. When professionals or entities identify situations that compromise their independence they apply accounting principles which help minimize the risks (SEC Concept Release).
Accounting standards, rules, and principles bring sanity and a sense of professionalism in the accounting professional. They shift a burden of responsibility towards certified accountants in terms of ensuring that reported financial information is transparency and objective. The standards also make the work of accountants easier by standardizing methods and terminologies in accounting. Adherence to accounting standards improves investor confidence and enhances the corporate image of a company.
Airline, K. (2015). GAAP: Standards & Rules for Accountants. Business News Daily. Retrieved Oct. 7, 2017, from http://www.businessnewsdaily.com/5486-generally-accepted-accounting-principles-gaap.html
Allen, C. & Bunting, R. (2008). A Global Standard for Professional Ethics. Journal of Accountancy. Retrieved Oct. 7, 2017, from https://www.journalofaccountancy.com/issues/2008/may/aglobalstandardforprofessionalethics.html
SEC Concept Release: International Accounting Standards. (n.d). Securities and Exchange Commission Retrieved Oct. 7, 2017, from https://www.sec.gov/rules/concept/34-42430.htm