Everyone will agree that ethics is a critical aspect of a good accountant. These accounting rules and regulations exist to make sure that the end users are objective in their decision-making process by using accurate financial statements. Poor ethics in accounting usually result in various adverse consequences – personally and business-wise.
A survey by CareersinAudit.com involving 1,700 accountants worldwide found out that 48 percent of the respondents experienced pressure from the senior management to alter their company accounts. In the same study, 40 percent of them were aware that their senior staff members are involved in unethical accounting practices.
Unethical accounting practices are usually motivated by management pressure, bonus incentives, greed, and more. However, these actions typically result in short-term gains, but long-term negative consequences.
There are many recipes for unethical behavior, and they all include a variety of ingredients. The good news is that the specific quantities of the ingredients may not be as important as their mere presence. — Mitchell M. Handelsman Ph.D.
Personal Consequences
Once accountants have been proven to commit unethical accounting practices, they usually receive punishment. This punishment can result in substantial financial costs, long prison time, or other legal penalties depending on the gravity of the crime. Not only will it affect the personal life of the accountant, but it will also be devastating for all his family and friends.
The inability of accountants to uphold accounting standards may also risk the loss of their credentials, and eventually the revokement of their license. It will be a significant toll on their professional career.
Criminal Activities
As mentioned above, poor ethics are considered a crime. Involving oneself in this illegal activity proves that they are more than willing to bend and break the rules for their personal benefits or the sake of the success of their business.
For example, an accountant has the power and control to help embezzle money from businesses. They also know the ins and outs to conceal evidence. In addition, an unethical accountant is also in the position to manipulate financial data to be able to commit various crimes such as tax evasion and fraud. Committing these criminal activities can lead to a long period of jail time.
If unethical or illegal behavior is commonplace in the circles someone moves in, it’s more likely they’ll see it as normal. There will always be someone who is behaving more outrageously than they are whose example they can use to rationalize their own behavior as not so bad. — Alice Boyes Ph.D.
Loss Of Reputation
There are two outcomes once unethical behaviors are exposed – the loss of reputation of either the accountant or the business, or even both. If you are a dishonest accountant, there is a substantial possibility that companies would not hire you anymore in the future. This instance may negatively affect your professional career.
If your business operates unethically, word will surely get out. This is especially possible for companies located in tight-knit communities. Once your customers find out how your operations are done, they might not patronize you anymore.
In general, consumers would instead buy from companies that operate ethically, support their communities, and take care of their employees. If they see that your company do not comply with any of the following guidelines, this can affect your customer’s willingness to buy. Suppliers might also avoid transacting business with you. Over time, this loss of confidence in your company may destroy your business.
People might believe that risky behavior is the only way to get ahead. This might account for some of the risky behavior in the financial markets – the only way to get ahead was to act in increasingly risky ways. — Camille S. Johnson Ph.D.
Human Capital Loss
Many employees prefer working for an ethical company. If company accountants are forced to behave unethically, they might squeal the business mishaps happening on the inside. If reputable accountants get the word out to other company employees, there is a significant possibility that they lose their trust and confidence in the company. It might lead to a substantial human capital loss, and eventually the business’ downfall.
Unethical accounting practices lead to various consequences. Hence, it is essential that every accountant uphold their principles and focus more on their ethical sensitivity. In this way, it would be easier for them to recognize ethical dilemmas in their work which will maintain the stakeholders’ confidence in them.