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Ethics in Accounting


The nature of accounting establishes a unique position of trust in relation to the clients, employers and general public, who count on accountants' professional judgment and advice in making financial/managerial decisions.'They have the responsibility to ensure that their duties are performed in conformity with the ethical values of honesty, integrity, objectivity, due care, confidentiality, and the commitment to the public interest before one’s own.

Theories of ethics

 1.  Utilitarianism
Jeremy Bentham is the founder of utilitarianism.
'The doctrine that an action is right in so far as it promotes happiness, and that the greatest happiness of the greatest number should be the guiding principle of conduct.'

Jeremy Bentham, the founder of the idea, argues that the more happiness there are in the decision, the better decision it is. However, happiness is an unquantifiable concept. John Stuart Mill supported the idea of utilitarianism but he developed an idea into more detailed one. He believes that there exists a different levels of happiness.

'It is better to be a human being dissatisfied than a pig satisfied; better to be Socrates dissatisfied than a fool satisfied. And if the fool, or the pig, is of a different opinion, it is only because they only know their own side of the question.

 2.  Theory of rights
The theory of rights derives from the belief that people have certain rights as they are being born as human beings which must be respected. Hence, according to this theory, an ethical decision is one that considers the rights of others. On the other hand, a decision is unethical to the extent that it violates another person’s rights. Generally, there are two categories of rights:

(1) natural rights- rights that exist independently of any legal obligations, often known as human rights and

(2) Legal rights and contractual rights- rights that are respected due to social agreement.

Amongst natural rights, the right of truth is the most significant in the function of accounting. The clients who request financial statements have the right to be provided with truthful and accurate financial information in order to make choices in constructing financial strategies. This right enforces a moral obligation on the accountants to produce legitimate and objective/true financial statements. On the other hand, legal and contractual rights are well-regarded in the relationship between accountants and employers and between accountants and clients. These contractual relationships mean that employers and clients have a legal right to expect professional and competent service from the accountants.

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