In today’s more challenging and competitive business era, ethics play a significant role in the financial reporting. For instance, ethics in financial reporting (maintains fairness and represent true statement) is an essential part of the business. The main role of ethics in financial reporting is creating or maintaining trust of stakeholders in an organization business. Moreover, ethics in financial reporting develops confidence of stakeholders in the organization’s financial reporting. Ethics in financial reporting indicates true financial data related to the business, indicates current and historical health of business, shows financial decision, and represents future growth of the organization (Graham, 2010). The organization must be followed the international accounting standards such as Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) with business regulations while reporting of financial statements to create trust in between the stakeholders and people.
Three primary organizations these are SEC (Securities and Exchange Committee), PCAOB (Public Company Accounting Oversight Board) and FASB (Financial Accounting Standards Board) work together to ensure that organizations financial reporting is reliable, true and available for all stakeholders. Furthermore, the most important role of ethics in business or reporting of financial statement is to ensure stakeholders or shareholders confidence in organizations. Strong follow of code of ethics and reporting fair or true financial transactions in financial statement indicates shareholders or investors that their investments in secure and organizations business practices goes in right direction (Kimmel, Weygandt & Kieso, 2010). Accounting professionals must be behaved ethical and moral reasoning while financial reporting to maintain trust of stakeholders in the organization and to maintain ethical business environment in the nation.