means they have to take a certain number of accounting and auditing classes, pass a four-part exam, and comply with any other requirements of their state’s licensing board.
Working as a financial accountant doesn’t require any special licensing, but a lack of licensing may limit your career options. Thinking that after graduation taking another test is a big no-no? As Chapter 22 points out, many interesting and exciting accounting careers do not require licensure.
But what if you’re a financial accountant who isn’t a CPA or a member of the AICPA? Do you still have to worry about abiding by a code of conduct? Of course, you do! Any profession lacking ethical behavior descends into chaos. Financial accountants must have high professional standards, a strict code of professional ethics, and a commitment to serving the public interest. They achieve these goals through their integrity, objectivity, and independence.
Having integrity
In the world of financial accounting, integrity means you act according to a code or standard of values. You demonstrate integrity when you do the right thing, regardless of whether doing so is best for you personally.
Specifically, having integrity means that you serve, to the best of your ability, your employer and/or the client for whom you are preparing financial statements, keeping in mind that doing so may not be the same thing as completely agreeing with the way the employer or client wants you to prepare the financial statements. You can’t be worried that your employer or client is going to be mad at you or fire you if you disagree with him.
Maintaining objectivity
Whether you work in public accounting (you have multiple clients) or private accounting (you provide accounting services only for your employer), you must be objective, meaning impartial and intellectually honest:
Being impartial means you’re neutral and unbiased in all decision-making processes. You base your opinion and reporting only on the facts, not on any preconceived notions or prejudices.
Being intellectually honest means you interpret rules and policies in a truthful and sincere manner, staying true to both their form and spirit.
If you’re objective, you keep an open mind until all facts are revealed, despite what you hear from your client’s managers, employees, or anyone else privy to the work you’re doing.
Achieving independence
Many types of public accounting services, such as auditing, require the financial accountant to be independent in both fact and appearance. Being independent while providing services means that you have no special relationship with or financial interest in the client that would cause you to disregard evidence and facts when evaluating your client.
What does it mean to be independent in both fact and appearance? The biggie is that you avoid any real or perceived conflicts of interest: You don’t perform services for any client with whom you have either a personal or non-audit-related business relationship. For example, if you have a significant financial interest with a major competitor of your client, your client may question whose best interests you have in mind while performing the accounting services.
Financial accountants providing tax and consulting services do not have to be independent; however, they still have to be objective.
Introducing the Conceptual Framework of Financial Accounting
Every profession needs a roadmap to help the people employed in the field provide the best possible service while doing their jobs. For example, my airline pilot clients have shown me a detailed checklist they must follow each and every time they get in the cockpit, regardless of how many years of experience they have.
For financial accountants, the Financial Accounting Standards Board (FASB) started work on providing a conceptual framework — a structure of financial accounting concepts — back in the 1970s. The Financial Accounting Standards Board (FASB), which I discuss in Chapter 4, issued eight Statements of Financial Accounting Concepts through February 2018. Six of the eight were issued between 1978 to 1985. The concepts cover the financial accounting topics of objectives, qualitative characteristics, elements, and financial statement measurement.
Not sure what each of these terms means? I discuss this topic in detail in Chapter 6. For now, just remember that this financial accounting conceptual framework exists — or jump to Chapter 6 right now to read all about it!
Chapter 2
Introducing the Big Three Financial Statements
IN THIS CHAPTER
