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Ethics essentials: sector-specific advice for accountants

Author: ICAEW Insights

Published: 31 Aug 2022

While the fundamental principles are laid down in the Code of Ethics, it may be useful to look to more tailored scenarios when it comes to evaluating potential ethical threats.

In 2021, the CCAB conducted an Ethics survey across its members (ICAEW, ACCA, CIPFA, ICAS and the Chartered Accountants Ireland). The survey found that 27% of respondents indicated that they had been put under pressure or felt under pressure to act in a professionally unethical way. 

These results echo the CIPFA/Public Finance survey in 2018, where 57% felt they had been put under pressure, 36% carried out the unethical task, either partially or fully, and just under half of those surveyed had read the Code.

Ethical failings in corporate scandals have been a familiar theme, from the Enron collapse in 2001 and more recently with RBS, Carillion, Patisserie Valerie, BT, BHS, and Tesco, to name but a few financial accounting scandals. 

No sector has been immune to financial governance failings, many of which have highlighted the importance of integrity and objectivity in financial statements. 

However, displaying integrity and objectivity at all times may be difficult, especially if there is a financial incentive or personal risk for senior management or the accountant if financial results are inflated or overstated. 

The ICAEW Code of Ethics provides a conceptual framework with five fundamental principles: independence, objectivity, confidentiality, professional behaviour, professional competence and due care.

Accountants should constantly be alert to the risks to the fundamental principles. They should identify, evaluate and address threats that might arise from self-interest, self-review, advocacy, familiarity and intimidation.

The CCAB Ethics Group has published a revised and updated range of Ethical Dilemmas Case Studies for professional accountants working across a range of sectors: business, not for profit, public sector, public practice and as non-executive directors.

The case studies are designed to bring the tricky topic of ethics to life. They do not cover every possible scenario, but outline key principles and processes that could be considered when attempting to identify, evaluate and address ethical threats in line with the professional body’s code of ethics. 

There are six or seven such case studies for each sector, covering a broad range of scenarios such as disclosure of malpractice, undisclosed employee benefits, performance information, political pressure and confidential information available during a tendering process.

Professional accountants have the added responsibility to act in the public interest in relation to compliance with laws and regulations ensuring that the firm acts ethically and to not put others under undue pressure. Applying the “reasonable and informed third party” test can guide professional accountants to act ethically.

The first port of call when an ethical dilemma is identified is to raise your concern to the appropriate person. This might be your line manager or someone more senior in the organisation, bearing in mind your confidentiality obligations. In some cases, the dilemma can be successfully resolved internally. 

Unfortunately, not all ethical issues can be resolved internally and, as seen in the 2021 CCAB survey, an accountant may have to discuss with the audit committee, board, auditor or their professional body. Ultimately they may need to consider leaving the organisation and potentially whistleblowing to ensure that the accountant fulfils their ethical obligations.

Each professional accounting body’s website offers support and guidance.

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