Regardless of their job roles, professional accountants have a primary accountability to the public. In their ethical capacity, the more than three million professional accountants around the world play a critical role in building trust in business and the public sector. This means that throughout all activities, professional accountants must be anchored by their fundamental ethical principles of integrity, objectivity, professional competence and due care, confidentiality, and professional behavior.
For professional ethics and integrity to serve as a strong foundation for responsible business, accountants working in business and the public sector have to stand up to ethical improprieties or deal with ethical dilemmas, which requires moral awareness, competence, and courage. When this occurs, an accountant in business can face a situation of adversity and find themselves swimming against an incoming tide of pressure to ensure that a decision or communication has a strong moral basis in addition to being economically sound.
The biggest challenge is that moral courage usually comes at a price. In some situations, the price might appear too high, especially if it means resigning or facing personal threats. Alternatively, in some cases, a fundamental lack of ethical awareness and competence can lead to important ethical issues not being addressed, ultimately serving to compromise the reputation of the organization and accountant.
At its March 2019 meeting, IFAC’s Professional Accountants in Business (PAIB) Committee considered the kind of support accountants in business need and how professional accountancy organizations (PAOs) can better support them.
Beyond adopting the International Code of Ethics for Professional Accountants, which establishes the standard of behavior expected of a professional accountant, PAOs can undertake various activities to support their members.
To set the scene at the PAIB Committee meeting, The Royal Netherlands Institute of Chartered Accountants (NBA) highlighted several innovative activities they have undertaken to enhance support of their members. In terms of education, their services include:
- Mandatory ethics component in post-qualification training;
- An application for mobile devices which supports awareness and problem-solving by presenting a new dilemma every week;
- Sharing member dilemmas in group conversations, which fuel case study publications; and
- Participation in an annual Fraud Film Festival and using relevant films in member events.
In terms of reinforcement activities, the NBA provides:
- A moral case studies database;
- Courses on moral courage and competence;
- A member helpline and confidential counselors’ group; and
- A “Moral intervision model”, which is an action-based approach using a series of key questions that are addressed in a group setting to help accountants reflect on the ethical issues they face at work.
PAIB Committee members reflected on real-life ethical dilemmas they had faced and considered what enabled and inhibited them to make the right choice and do “the right thing”.
Enablers included ‘tone from the top’ and strong purpose and values, as well as support from key individuals such as the Audit Committee Chair. Character traits including a strong moral compass and strong beliefs were also emphasized as important, to the point of resignation if faced with actions that belie one’s professional ethics or character.
Inhibitors included actions by those in power to obstruct an ethically-sound outcome, which can be particularly prevalent if those in key board positions have a political agenda, or if the CEO and/or CFO is part of the problem. A lack of personal confidence and conviction can prohibit accountants with a more limited sphere of influence within the organization to exercise their ethics and integrity.
From this basis, the committee discussed recommendations on what PAOs can do better to promote ethics and support their members working in business and the public sector. Their recommendations span four areas (below), and the examples are drawn from IFAC members represented on the committee, and from information provided through IFAC’s Compliance Program.
1. Ethics education and training
- Incorporating ethics as a distinct part of member competency in their initial professional education and development and continuing professional development (CPD). For example, the ACCA introduced a specific Ethics and Professional Skills Module into its qualification, which includes realistic business situations, to help develop the complete range of ethics skills employers need.
- Ethics education and training needs to focus on the professional and ethical mindset needed to support decisions, as well as provide the tools to address dilemmas and difficult situations.
- Training using scenario-based case studies enhances the usefulness of ethics training and helps focus on exploring the root causes of unethical behavior and potential actions to mitigate these. Online and self-study training needs to include interaction with trainers, and must be delivered through a variety channels, such as podcasts and webinars, to enhance accessibility to members. As an example, RMIT University provides an innovative approach to ethics training with its serious accounting ethics game.
- Training should explicitly consider how to deal with cultural considerations and social norms, which can inhibit accountants’ ability to uphold their ethical duty.
- PAOs need to consider identifying or generating enhanced content on ethical dilemmas and storytelling based on real–life examples, including positive success stories. For example, the Institute of Cost Accountants of India has included real case studies in its syllabus to educate and prepare members on potential issues they may encounter. The IMA runs the Carl Menconi Ethics Case Competition involving educators, practitioners, and teams, which enables the development of teaching cases in ethics.
International Education Standard 4, Initial Professional Development-Professional Values, Ethics, and Attitudes
2. Delivering member support
- Leverage the PAO member network to provide support and counseling, such as mentoring opportunities with senior members.
- Constructively support whistleblowing in the public interest. For example, a financial fund to support members’ legal and other expenses for speaking out can provide practical support to whistleblowers and be an additional incentive to communicate to external sources. Practical guidance on whistleblowing is generally highly valued.
- Using innovative approaches to raise awareness and connect to members. These can take various forms, for example apps (e.g., NBA), podcasts (e.g., CPA Canada), films (e.g., ICAEW’s “Without question" and “False Assurance” films highlight the challenges of directors and professional advisors seeking assurance on difficult issues), and CFO-targeted forums (e.g., ICAZ).
- Thought leadership on contemporary issues (e.g., ACCA’s Ethics and Trust in a Digital Age and Machine learning: more science than fiction), and frequent communication on matters related to professional ethics, such as regular articles in a monthly magazine (e.g., The IMA publishes a monthly ethics column in Strategic Finance).
- The provision of helplines and live support services to deliver relevant and real-time ethical support, which an increasing number of PAOs are making available to their members.
- A group learning method using ethical decision-making frameworks can help members think through and reflect on ethical problems and dilemmas. The PAIB Committee felt that the Royal NBA’s “Moral intervision model” is an excellent starting point for such an approach.
3. Effective investigation and discipline of misconduct and breaches of professional standards by PAOs
Some PAOs have implemented annual member declarations of adherence to professional ethics, and mandatory public declarations of working in the public interest. Such declarations can be an effective way of placing professional ethics at the front-of-mind.
However, raising awareness of the Code of Ethics for Professional Accountants is insufficient in itself to bolster trust in the accounting profession. Members of the profession need to understand the consequences of breaches. The consequences, whether from the PAO, regulator, or other appointed authority, need to be sufficient to act as a deterrent.
Public perception of disciplinary processes is a critical factor in the confidence and trust in the profession. A number of PAOs have been working on enhancing their investigation and disciplinary activities. For example, the Institute of Chartered Accountants in Pakistan told their story in this article: If There Is a Poor Public Perception of Disciplinary Processes, Is It Truly Serving the Public Interest? How ICAP Made a Good I&D System Great.
4. Ethics advocacy
Ethics campaigns help to raise awareness among members and others on the importance of ethics and trust in the profession (e.g., ICAS’s The Power of One, and the CPA Ireland report on Ethical awareness, challenges, concerns and decision making) and highlight key messages to be widely communicated through social media and other channels.
We encourage IFAC members to continue to share examples of their successful practices to support professional ethics through the IFAC Gateway. Please get in touch to share an article covering your story.
Going forward in 2019, look out for
- A global advocacy campaign for the roll-out of the IESBA’s revised and restructured Code of Ethics in June
- A deep dive into the global adoption and implementation support of the International Code of Ethics for Professional Accountants, which will utilize information and successful practices submitted by IFAC member organizations through their participation in IFAC’s Member Compliance Program and related to fulfilling IFAC’s Statement of Member Obligations
- More information on the Gateway on the Royal NBA’s ‘Moral Intervision Model’ that can be used internationally to support accountants in business address ethical dilemmas.