The Centrality of Ethics to the Accountancy Profession

Global Ethics Day will be celebrated on 16^th October 2024. This initiative, founded by the Carnegie Council for International Affairs is now in its eleventh year. Global Ethics Day | Carnegie Council for Ethics in International Affairs | Carnegie Council for Ethics in International Affairs

The theme for this year is “Ethics Empowered”, and the CCAB Ethics Group considers that it would be timely to reflect on the importance of ethics for the accountancy profession; and to highlight three key messages:

Empower through Education and self-reflection

1. Professional Accountants should consider ethics to be a professional competence. This requires them to undertake regular CPD on ethics; self-reflection activity, and familiarisation with frameworks to guide their ethical decision making.

Be true to ethical values and model ethical behaviour

2. Professional Accountants should not confuse compliance with ethical behaviour;

Follow your North Star

3. Professional Accountants should use the five fundamental ethics principles and the duty to act in the public interest as their constant navigation tool when facing an ethical dilemma.

Ethics vs Compliance

In every sphere of professional activity, Professional Accountants- and the clients that they work for- have to deal with an ever-increasing tide of regulation. In addition to Financial Reporting and Auditing Standards, and legislation governing Taxation, Anti-Money Laundering  and Sanctions, the profession is expected to be familiar with legislation, standards and regulations relating to employment; equality and diversity; health & safety; competition; procurement and sales; sustainability and the environment; data protection, intellectual property; artificial intelligence; corporate governance and risk management; and consumer protection.

This is the price of being a trusted adviser.

Yet, so great is the volume and weight of regulation that it pervades much of the profession’s decision making and innovation.  The explosion of artificial intelligence and digital tools have led to the emergence of SupTech (supervisory technology to supervise compliance with the thousands of rules and regulations Financial Services Companies must adhere to) and RegTech (tools which leverage machine learning and AI to improve the way organisations manage their increasing load of regulatory compliance).

Whilst such digital tools may help manage regulatory compliance, they may provide a false sense of security. It is important that accountants do not become complacent and that they remember that professional ethics is much more than mere compliance.

Indeed, Professional Accountants may be so preoccupied with gathering evidence of compliance, that they fail to reflect properly on the reality of the rightness and wrongness of actions and the decisions they take.

Dilemmas faced by professional accountants can be regarded as broadly regulatory or judgemental.  Law and regulation provide the framework for ensuring compliance with  regulatory issues.  However, as the body of rules and regulations grows unevenly across different jurisdictions, the opportunities for regulatory arbitrage increase, thus potentially distorting markets.

More importantly, not all dilemmas are capable of being dealt with directly by a clear regulation.  Ethical issues that fall outside clear rules have to be judged in the context of the value framework that the individual professional believes in.  That framework is provided by the ethical education and the self awareness of the accountant, supported by a Professional.

The personal values of the Professional Accountant

In determining how to deal with any ethical dilemma, the Professional Accountant will be strongly influenced by his or her individual moral perspective. Some accountants, in considering whether a particular action is potentially good or bad, may prefer to emphasise the ultimate outcome; and consider that the end will justify the means.  Others may believe that it the action itself that must be judged and not its consequences.  Still others may believe that humans are inherently self-centered and competitive, and will make decisions in their own interests, albeit complying with the law.

Ethical behaviour, therefore, requires that each individual undertakes detailed self reflection, in order to fully understand how their values influence their approach to decision making and therefore how they are likely to react under pressure.

When there is conflict between our own conscience; our ethical reasoning; the requirements of our workplace; and our limited ability to influence outcomes, cognitive dissonance is inevitable. Undertaking ethical self-reflection, alongside a close scrutiny of the guidance provided by the Code of Ethics for Professional Accountants, equips the individual professional accountant with a matching paired trajectory to decision making when under pressure.

The importance of the Code of Ethics for Professional Accountants

Professional accountants who are members of one of the five individual bodies that make up the CCAB, must adhere to the Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA) (“the Code”),
Perhaps inevitably, to accommodate the increase in regulation and standards, the Code has expanded exponentially over the last few years.

However, it is important to remember that the application material and more detailed sections of the Code are simply an expansion of the five fundamental ethics principles.  It is useful to remind ourselves of these:

1. Integrity – to be straightforward and honest in all professional and business relationships.
2. Objectivity – to exercise professional or business judgement without being compromised by:
   • Bias;
   • Conflict of interest; or
   • Undue influence of, or undue reliance on, individuals, organisations, technology or other factors.
3. Professional competence and due care – to:
   • Attain and maintain professional knowledge and skill at the level required to ensure that a client or employing organisation receives competent professional service, based on current technical and professional standards and relevant legislation; and
   • Act diligently and in accordance with applicable technical and professional standards.
4. Confidentiality – to respect the confidentiality of information acquired as a result of professional and business relationships.
5. Professional behaviour – to:
   • Comply with relevant laws and regulations;
   • Behave in a manner consistent with the profession’s responsibility to act in the public interest in all professional activities and business relationships; and
   • Avoid any conduct that the professional accountant knows or should know might discredit the profession.

Professional accountants should be guided not merely by the terms but also by the spirit of the Code.  These principles, together with the overarching professional duty to act in the public interest which is set out the Code, alongside an informed ethical self-reflection, are broad enough to deal with most of the challenges that accountants face in their daily professional lives.

Key takeaways

Being a member of a profession entails clear rights and also duties. One of these duties is the requirement to act ethically. Ethics should be considered as a professional competence that must be regularly maintained, not a “nice to have”.

In consciously choosing to act ethically, the Professional Accountant must exercise judgement.

In “grey areas” or where specific laws or regulations do not provide an obvious pathway, the professional judgement and ethical values of professionals, informed by a close adherence to the principles of the Code and the Public Interest must be their central guides.