Are you prepared to tackle ethical dilemmas?
November 25, 2024
When it comes to ethical practices, multiple grey areas call for even greater understanding of the rules. Yet industry feedback highlights the need for a better grasp of ethics in the sector to reduce risk, particularly when boundaries are blurred, says Jonathan Barber, Executive Director – UK for the Institute of Financial Accountants (IFA).
In a world where questionable accounting practices frequently dominate the headlines, it’s crucial for accountants to avoid ethical missteps. This highlights the importance of having a core understanding of the Code of Ethics. However, research indicates that slightly more than 16% of accounting professionals are unsure of where to locate the Code of Ethics, while an additional 29.6% are not familiar with it at all. Moreover, 41% admitted they would need to refresh their knowledge of ethics before feeling prepared to address related challenges.
What are the five fundamental principles?
The Consultative Committee of Accountancy Bodies (CCAB) is committed to providing accountants with the essential skills and knowledge for making ethical decisions. Their case studies explore a range of ethical issues, scenarios, and dilemmas, helping individuals navigate the questions they should consider when faced with decision-making.
The resources offered by CCAB are in line with the Code of Ethics that professional accountants, including those from IFAC member organisations like the IFA, are required to follow. This Code is founded on five core principles that create its conceptual framework: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour.
These principles play a crucial role in assessing possible risks to ethical behaviour and maintaining compliance with ethical standards. They should act as a framework for accounting professionals and firms to implement safeguards.
According to the IFA’s questionnaire, 73% of participants acknowledged these five principles. When asked about potential threats to these core principles, 41.1% responded correctly regarding all five. The most common mistake was misidentifying ‘self-review’ as a threat. While it isn’t formally classified as one, it remains a valuable ‘orange flag’ to keep in mind.
What is an ethical dilemma?
It’s that unnerving situation at work when you sense something is amiss, which often triggers what is the start of an ethical dilemma. Sometimes a client might ask for something that doesn’t sit right with you, or you might feel like they’re not being completely open with you.
When you encounter a challenging ethical dilemma, it can be beneficial to begin with some simple questions. Reflect on what seems unsettling about the situation and think about which fundamental ethical values could be compromised. Also, consider how your personal interests might be influencing your perspective. These inquiries can assist you in addressing the ethical challenge effectively.
In the field of accounting, professionals often face ethical challenges due to the conflict between their loyalty to clients and the necessity of keeping an impartial viewpoint on their financial situations.
What’s a real-life example of one?
The way you document information can greatly impact your client’s business, your firm, and beyond. There are many legal loopholes, so is it right to exploit them, such as adjusting figures to satisfy specific revenue requirements? Additionally, if you encounter a situation where a CEO is listing dubious expenses under ‘sundries’, would you reflect on their responsibilities and probe the CEO for more details? You might also encounter external pressure from a client to behave unethically, or even face intimidation aimed at swaying you from maintaining your objectivity.
This same scenario was shared with IFA members in a questionnaire. The feedback was decisive, with 90.4% of respondents stating they would ask the CEO for more clarification and consider their responsibilities and just under a further 4% indicated they would opt to resign.
While stepping down may seem like the simpler choice, the ethical standards do not support this decision. The right approach is to explore the matter further and consider your ethical obligations.
Take accountability
As an employee in a firm, you might think your impact is somewhat restricted. Nevertheless, it’s crucial to recognise and get to know the policies in place, grasp the reporting hierarchy, and appropriately tackle any ethical issues that arise. Make the most of your opportunities through your accounting responsibilities and collaborative efforts to advocate for and exemplify ethical behaviour. If you come across instances of non-compliance, it’s your responsibility to speak up and take action, safeguarding not only your own integrity but also that of your workplace and the profession as a whole.
When faced with these kinds of challenges, it’s important to recognise any possible legal concerns and determine if the situation is governed by specific laws or policies. Make sure to consult the Code of Ethics provided by your organisation, association, or membership group. The IFA’s Code of Ethics serves as a valuable resource for its members, students, affiliates, and firms, guiding them in fulfilling their professional responsibilities through a solid ethical framework.
[Institute of Financial Accountants]
