Question

Discuss the ethical standards for financial and managerial accounting. The IMA (Institute of Management Accountants) and The AICPA (American Institute of Certified Public Accountants) have established ethical standards. Review the ethical standards from each body. Are the standards significantly different? Similar? Do the standards have the same goal(s)

Answer 1

The IMA notes the following ethical standards in managerial accounting:

competence, confidentiality, integrity and credibility. ... Credibility refers to the accountant's ability to communicate accounting information fairly and objectively to all business stakeholders.

The AICPA developed five divisions of ethical principles that its members should follow: "independence, integrity, and objectivity"; "competence and technical standards"; "responsibilities to clients"; "responsibilities to colleagues"; as well as "other responsibilities and practices".

The Institute of Management Accountants (IMA) and the American Institute of Certified Public Accountants (AICPA) both provide certification options, continuing education and set professional standards for accountants. Both the IMA and the AICPA emphasize that accountants follow a code of ethics when performing their duties. Both organizations maintain a written code of ethics for their members to follow.

Focus of IMA

The IMA focuses on the sector of the accounting profession that serves businesses by working within the company, providing financial data to assist management with decision making, budgeting and analyzing alternative courses of action. These accountants serve customers internally within the organization and must maintain a level of trust with these customers. Maintaining high ethical standards develops the trust necessary for accountants to serve the needs of the company’s management and employees.

Focus of AICPA

The AICPA focuses on the sector of the accounting profession that serves investors, lenders and creditors outside of the company. These accountants provide financial statements to assist investors, creditors and owners with decision making regarding credit terms, lending decisions or financial investment decisions. These accountants serve customers externally and must maintain a level of trust with these customers. Maintaining high ethical standards develops the trust necessary for accountants to serve the needs of the company’s owners, creditors and investors.

Competence

According to the AICPA and the IMA accountants must remain competent in their responsibilities. An accountant who presents himself as competent but is unable to fulfill his professional responsibilities misrepresents the profession and himself in the eyes of his customer. An accountant who is unqualified to perform his duties must consult with a more qualified individual, refer the customer directly to the more qualified professional or seek additional training to increase his competence.

Integrity

Both the AICPA and the IMA stress integrity in their ethical standards. Integrity refers to behaving consistently with what is right and maintaining the appearance of what is right. In order to do what is right, the accountant must remain honest with her customers, even when the information she is sharing is negative. The accountant needs to respect the privacy of the customer and keep the information confidential. The only exception to confidentiality is when required by law to share the information