Wikipedia says, on ethics in the world of accounting: “Due to range of accounting services and recent corporate collapses, attention has been drawn to ethical standards accepted within the accounting profession. These collapses have resulted in a widespread disregard for the reputation of the accounting profession. To combat the criticism and prevent fraudulent accounting, various accounting organisations and governments have developed regulations and remedies for improved ethics among the accounting profession.”
Earlier this week, the Consultative Committee of Accountancy Bodies (CCAB for short) published guidance, called Developing and Implementing a Code of Ethical Conduct. It is aimed at professional accountants intending to develop or enhance codes of conduct within their organisations, but CCAB believes that the advice and guidance could be applicable to a wider audience, in the private, public and not-for-profit sectors. The guidance can be found here.
CCAB say that the effective introduction of a code will be of value to a wide range of stakeholders and must have relevance to, and communicate effectively with:
- employees and subcontractors of the organisation
- directors and those charged with governance
- customers and suppliers
- agents of the organisation
- third party strategic partners
- investors and the wider business community
- others engaging with a public sector or charitable organisation
- members of the general public who may wish to engage with the organisation in the future
The UK is not alone. In the US, a revised AICPA Code of Ethics is on the way. In an article in the February 2014 edition of Journal of Accountancy, Ellen Goria writes about the AICPA Code of Professional Conduct (ethics code). If all goes as planned, the revised code will be adopted by the Professional Ethics Executive Committee (PEEC) and will be issued in electronic format by the third quarter of 2014 to be effective on 15 December, with a delayed effective date for the implementation of two conceptual frameworks. The Executive Summary in this paper says that the AICPA’s existing Code of Professional Conduct is not structured for quick and easy navigation. A reformatting is meant to change that. The changes are mostly organisational, but some are substantive.
The reformatted ethics code is organised into three parts. Part 1 applies to AICPA members in public practice; Part 2 to members in business; and Part 3 to all other members, including those who are retired or between jobs. The most significant substantive change is the incorporation of conceptual frameworks for members in public practice and business.
Further details are here.
The accountancy bodies and ethics guidance
- ICAEW’s Code of Ethics applies to all members, students, affiliates, employees of member firms and, where applicable, member firms, in all of their professional and business activities, whether paid for or unremunerated. You can find the ICAEW Code here.
- Accountants north of the border have to abide by the ICAS Code of Ethics which applies to employees of and that they are responsible for seeing that the Code is complied with. The ICAS code is here.
- Chartered Institute of Management Accountants (CIMA) members (and registered students) throughout the world have a duty to observe the highest standards of conduct and integrity, and to uphold the good standing and reputation of the profession. The CIMA code of ethics is here.
- The AAT code of ethics, here, says its members are bound by the fundamental principles of professional ethics and requires members to have integrity, to be straightforward and honest in professional and business relationships and to be objective – not compromising professional or business judgment because of bias, conflict of interest or the undue influence of others.
- The International Federation of Accountants (IFAC) set out their code here.
- The principles governing Chartered Institute of Public Finance Accountants (CIPFA) members’ professional conduct are set out in their Membership Handbook and includes the ethical and technical standards with which all CIPFA members and students are expected to comply.
- The Certified General Accountants Association of Canada have a code called the Code of Ethical Principles and Rules of Conduct, here, whilst CPA Australia members have a responsibility to act in the public interest and comply with the fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour in all their dealings – their code is here.
If you want a good overview on this subject, I suggest you read Mark Lee’s article on accountingWEB here. He sets out what is required for compliance with the common set of fundamental principles adopted by the CCAB Accountancy bodies:
- Professional competence and due care
- Professional behaviour
As an ACCA case study says, professional accountants have a vital role to play in commercial success, by using their increasingly valuable knowledge in a way which gives their organisations or clients a competitive advantage. But it is critical that this information is used in a way which is both fair and honest. Read it here.