Neutrality and Accounting Ethics
Accounting has become a challenging field in the aftermath of recent accounting scandals and the current state of financial reporting (Adhariani et al. 2017, p.44). It is one of the rare positions in the world where one must ensure that they are acting in the organization’s best interests while simultaneously adhering to the rules and traditions of accounting. As a result, it is one of the few professions where moral scrutiny is on the highest level, but it can be challenging to identify what risks must be taken at the organisational level to ensure that they are adhering to ethical accounting standards (Adhariani et al. 2017? There are several ideas being discussed to ensure that the accounting field as a whole becomes slightly more open (Adhariani et al. 2017, p.44). The notion of neutrality in accounting is one of those ideas. This essay will examine what accounting neutrality actually entails, the value it adds to accounting analysis, and whether it is the most effective way to ensure that accounting ethics and better decision-making are evident.
What is Neutrality in Accounting
Understanding what is meant by the neutrality in the financial statements is one of the most important things that people need to be able to do (Adhariani et al. 2017, p.44). The concept of neutrality in accounting refers to the necessity to ensure that there is no prejudice in any financial reporting done by the company. At the same time, it should demonstrate a fair assessment of how things should be done while also ensuring that they are portrayed favorably. Or, in certain cases, the systemic bias is apparent in the way accounting information is presented. What actually occurs in both circumstances is that the integrity of accounting as a profession is being undermined (Adhariani et al. 2017, p.44). Now to ensure that the traditional accounting method is taking care of the level of neutrality. Almost all accounting rules ensure that neutrality is upheld throughout the accounting process. In order to go deeper, it would be evident how neutrality during the accounting process is compromised and what some of the causes are that make it inevitable.
Along with neutrality, the term “faithful representation” is another accounting notion that has been frequently used in accounting discussions (Adhariani et al. 2017, p.44). By faithful representation, it is meant that the enterprises and transactions carried out by the stakeholders must be represented in a trustworthy manner (Adhariani et al. 2017, p.44). The idea is based on how consistently close the reliability factor will be in most situations (Adhariani et al. 2017, p.44). When discussing faithful representation, it is important to ensure that all of the data presented in the financial statement is taken into account. The goal is to ensure that the person using the financial statement is correctly making decisions based on the financial information they appear to be receiving from the financial statements (Adhariani et al. 2017, p.44). As a result, the concepts of neutrality and truthful representation are utilised in tandem, and the two guiding principles they provide are that the accounting reports must be free from bias (Adhariani et al. 2017, p.44). Additionally, in order to make the best choices possible throughout the accounting cycle, all information supplied in financial reports must be evaluated entirely on the basis of its reliability (Adhariani et al. 2017, p.44).
Instances of the Asymmetric Prudence in the IFRS
The main issue that needs to be addressed in this situation is how neutral financial reporting is needed to be done in order to ensure that the most pertinent and helpful financial data is needed to be sorted out. The likelihood that financial data will prove useful when making the final decision in any process will increase with the usefulness of the data. In some ways, neutrality becomes crucial to how this entire situation is supposed to play out.
Why does not Mean Ethics and Accounting Methods
Most accounting standards discuss the significance of neutrality in financial reporting, which can be demonstrated by taking a close look at the majority of them. There is a lot of uproar around the idea that neutrality is the sole action required to ensure that the level of ethics that can be shown in accounting and financial reporting would rise (Himick et al, 2016, p. 22). However, if that were the case, several of the most recent accounting scandals would have involved complicated IRFS and GAAP compliance due to the accounting rules that were being used (Himick et al, 2016, p. 22).
The important thing is to ensure that technical flaws like accounting are needed to be taken into account, rather than stressing how neutrality operates. The development of a worldwide standard that satisfies the interests of the larger accounting community must be ensured via effort and conversation (Kelly and Murphy, 2016, p.23). Additionally, the definition of the term “general interest” is required. It is necessary to develop security-enhancing variables in light of the numerous and inevitable hazards of instability. Like all other aspects of financial regulation, setting accounting standards has as its top priority promoting financial security. The general interest is this (Ho et al. 2015, p.351).
Neutrality and Accounting Ethics
Sciulli, N., Adhariani, D., and Clift, 2017. An Introduction to Care Ethics The Feminist Ethics of Care Perspective on Financial Management and Corporate Governance (pp. 17-48). Cham: Palgrave Macmillan.
Accounting for stakeholders and maximising the utility of accounting, Andon, P., Baxter, J., and Chua, W.F., 2015. 52(7), 986-1002, Journal of Management Studies.
M. Bamber and K. McMeeking, 2016. An analysis of the legitimacy implications of the legal procedures used to establish international accounting standards. 48(1), pp. 59–73 in The British Accounting Review.
A. Caglio and M. Cameran, 2017. Is working as an accountant a dirty job? GenMe’s opinion about the ethics of accountants. 53(1), pp. 1-27 of Abacus.
2018; Himick, D.; Brivot, M. Epistemic communities play the role of idea carriers in the financialization and standardisation of accounting. Organizations, society, and accounting.
2016; Himick, D.; Brivot, M.; Henri, J.F. Professional and lay experts’ contributions to the GASB’s Pension Project offer an ethical viewpoint on the development of accounting standards. Critical Perspectives on Accounting, vol. 36, no. 1, p. 22–38
(2015) Ho, S.S., Li, A.Y., Tam, K., and Zhang CEO gender, moral leadership, and conservatism in accounting. 351-370 in Journal of Business Ethics, 127(2).
2016; Kelly, K., and Murphy, P. The Interactions Between Subordinate Recommendations and Ethical Standards Affecting Accounting Decisions.