Ethical conduct is not a “nice to have” for accountants, but a crucial professional competence, writes Professor Patricia Barker
Global Ethics Day will be celebrated on 16 October 2024. This initiative, founded by the Carnegie Council for International Affairs, is now in its eleventh year. This year’s theme is “Ethics Empowered”.
The Consultative Committee of Accountancy Bodies (CCAB) Ethics Group believes it is important to reflect on the significance of ethics for the accountancy profession and to emphasise three key messages:
1. Empower through education and self-reflection
Ethics should be viewed as a professional competence. This requires accountants to undertake regular CPD on ethics, self-reflection activity, and to familiarise themselves with frameworks to guide their ethical decision-making.
2. Be true to ethical values and model ethical behaviour
Compliance should not be confused with ethical behaviour.
3. Follow your North Star
Accountants should always use the five fundamental ethics principles, as set out by organisations such as Chartered Accountants Ireland, as well as 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, accountants, and the clients they work for, must deal with an ever-increasing tide of regulation.
In addition to financial reporting and auditing standards – and alongside legislation governing taxation, anti-money laundering and sanctions – the profession is expected to be familiar with legislation, standards and regulations ranging from those relating to employment, competition and procurement to sustainability, data protection and corporate governance.
This is the price to pay for being a trusted advisor. So great is the volume and weight of regulation today, however, that it pervades much of the profession’s decision-making and innovation.
More than just compliance
It is important that accountants do not become complacent and that they remember that professional ethics is about much more than mere compliance.
Indeed, they 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 facing accountants can be regarded, broadly, as either regulatory or judgemental in nature.
Law and regulation provide the framework for ensuring compliance with regulatory issues.
As the body of rules and regulations grows unevenly across different jurisdictions, however, opportunities for regulatory arbitrage increase, potentially distorting markets.
More importantly, not all dilemmas can be dealt with directly by a clear regulation. Ethical issues that fall outside clear rules must be judged in the context of the value framework the individual professional believes in.
This framework is provided by the ethical education and self-awareness of the accountant, supported by a Professional Code of Ethics and experiential/reflective learning.
The role of personal values
In determining how to deal with any ethical dilemma, the accountant will be strongly influenced by their individual moral perspective.
When considering whether a particular action is potentially good or bad, some accountants may prefer to emphasise the ultimate outcome, taking the view that the end will justify the means.
Others may believe that the action itself must be judged, rather than its consequences.
Still others may believe that humans are inherently self-centred and competitive, and will make decisions in their own interests, albeit complying with the law.
Ethical behaviour, therefore, requires that each professional accountant undertakes detailed self-reflection to fully understand how their values influence their approach to decision-making and how they are likely to react under pressure.
When there is a conflict between our conscience, our ethical reasoning, the requirements of our workplace and our limited ability to influence outcomes, cognitive dissonance is inevitable.
Ethical self-reflection and close scrutiny of the guidance provided by the Code of Ethics for Professional Accountants can help the professional accountant forge a trajectory to ethical decision-making when under pressure.
Importance of Code of Ethics for professional accountants
Professional accountants who are members of one of the bodies comprising the CCAB must adhere to the Code of Ethics for Professional Accountants.
This includes the International Independence Standards issued by the International Ethics Standards Board for Accountants (the Code).
Perhaps inevitably, to accommodate the increase in regulation and standards, the Code has expanded exponentially in recent 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.
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 set out in the Code, are broad enough to deal with most of the challenges accountants face in their daily professional lives – particularly when combined with informed ethical self-reflection.
This article was written by Professor Patricia Barker, FCA, Lecturer of Business Ethics at Dublin City University, on behalf of the Consultative Committee of Accountancy Bodies
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