Differing between legal and ethical choices

- Remember construction workers in the 1920s. You know, the ones where workers are freely going about their work on steel girders without any safety equipment. I cringe when I see this. But it was the 1920s, safety standards weren't mandatory. Workers assumed all the risk. This is an example of what's legal, but not ethical. The difference between the two often comes up in accounting. Legal requirements and laws are established by governments and often have their roots in ethics. But even when you apply your best professional judgment and interpretation, errors will happen. The question is whether the errors are intentional or not. This is why some accounting rules have been legally reinforced. For example, some years back governments introduce laws, protecting financial reporting integrity arising from famous accounting scandals. The most well-known crossover is the US Sarbanes-Oxley Act or what accountants affectionately referred to as SOX. SOX and other similar legislations around the world require company directors, usually the CEO and CFO to certify financial information they present to stakeholders. If there are errors, they may incur penalties and even criminal charges for questionable activities. SOX also increased board oversight and auditor independence when reviewing financial statement accuracy. So apart from following accounting rules, accountants must also know and follow legally enforced obligations within the accounting standards. Ethical standards on the other hand, don't necessarily have legal basis. Accounting ethics is about your professional values of what's right, and what's wrong, which makes it much more subjective. Fortunately, accounting professions standardize these ethics through a professional code of conduct. For example, one ethics test is something called a sniff test. This means if I suspect something isn't right ethical or otherwise, I must report it to those who can take action. Remaining silent is not an option. If you ignore it, then you'll be complicit. And remember those pesky accounting standards, you know, IFRS, Gap, ASPE and so forth? Those aren't laws, but rather mutually agreed professional rules and principles all accountants are expected to apply, interpret, and to deliver with integrity. Ethical accounting is more than respecting laws and a code of conduct. It's about your professional reputation. Those who act ethically and with integrity are the ones sought out for their advice and services. Hold yourself to a higher standard and become a role model for those around you.