Accounting Principles and Ethics

Accounting principles can be defined as general rules and concepts that govern the field of accounting. In a broader sense, these general rules are referred to as basic accounting principles and guidelines. They form the groundwork on which more detailed, complicated, and legalistic accounting rules are based. On the other hand, accounting ethics refer to the expectation placed on the accountants by decision-makers using financial records. In this light, the accountants are expected to be competent, reliable and objective as they take on their duties.

Considering the financial management of health care organizations, The General Accepted Accounting Principles, GAAP, are pretty much the same as they are for all the organizations. GAAP is the term used to refer to the standard framework of guidelines for financial accounting used in any given jurisdiction. It incorporates various aspects including the standards, convections and rules that accountants follow in recording and summarizing transactions, and in the preparation of financial statements.

The GAAP principles derive from tradition, such as concept matching. In any financial statement, the auditor must indicate to the reader whether the information contained within the statements complies with GAAP. There are several principles under the GAAP umbrella, and which include the principle of regularity, which ensures that the statement conforms to the enforced rules and laws. Also included is the principle of consistency, which ensures that the accounts apply the same methods and procedures from period to period (Healthcare, 1992).

The principle of sincerity ensures that the accounting reflects in good faith the reality of the company’s financial status. The other principal is the principal of permanence of methods it aims at allowing the coherence and comparison of the financial information published by the company. One should show the full details of the financial information and not seek to compensate a debt with an asset, revenue with an expense; this summarizes the principal of non-compensation.

The principal of prudence aims at showing the reality as it is. In such a case, one should not to make things look prettier than they are. Take for example the revenue: it should be recorded only when it is certain and a provision should be entered for an expense, which is probable. When stating financial information, one should assume that the business would not be interrupted; putting it in other words the principal of continuity. The principal mitigates the principal of prudence in that assets do not have to be accounted at their disposable value but in their historical value.

Each accounting entry should be allocated to a given period, and split accordingly if it covers several periods, which is the principle of periodicity. For example if the patient pre-pays a subscription the given revenue should be split to the entire time-span and not counted for entirely on the date of transaction. In addition, the last is the principal of full disclosure or materially. All information and values pertaining to the financial position of a business must be disclosed in the records (Healthcare, 1992).

Long before the joint commissions on Accreditation of Healthcare Organizations required an institutional ethics mechanism. Before bioethics committees and medico-moral committees Catholic Hospitals, there was fraud, abuse and waste. The issues that have taken center stage in medicine and medical ethics now seem to be just, fraud, abuse, waste, whistle blowing, anonymity. The zero tolerance for fraud and abuse by physicians or anyone else form the cornerstone of medical Ethics (John, 1998).

Understanding and using medical ethics is not the same as understanding and submitting to fraud-and-abuse laws. The corporate compliance is the document that is used to state and define what a particular health institution refers as unethical. These may include abuse, fraud and waste.

Any fraud or a set is unethical and in some cases illegal, examples of fraud are recording incorrect dosage on prescription slip and using company supplies for personal use. Others include using the company’s forms excessively inappropriately and giving drugs to patients in form of drug abuse. In addition, using patient’s supplies without their prior knowledge or without their permission is also considered as unethical if not illegal.

Abuse can be of many types, from physical abuse, mental for example teasing a patient, sexual and verbal using harsh and belittling words. Neglect falls under the same category, the lack of nurturing, caring and the promotion of client’s health and well-being. Abuse can also be in the form of exploitation, taking advantage of a client or swindling them. Endangerment, whereby the safety and the welfare of a client is jeopardized is treated as abuse (John, 1998).

In conclusion, The General Accepted Accounting Principles (GAAP) and the Corporate Compliance are both required in financial management of health care organizations. This is in the sense that the GAAP governs the financial aspect of the organization and the Corporate Compliance is more concerned on how the clients are treated. The better the clients are treated the more the revenue and the more the financial records are handled ethically the organization grows financially.



John, L. P. (1998). Is Medical Ethics the Same As Corporate Compliance? Retrieved 10 October, 2009 from

Healthcare F. M. (1992). Generally Accepted Accounting Principles Defined. Retrieved 10 October, 2009 from

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