How Do Ethics Apply to Accountants?

Ethical behaviour is characterised by honesty, fairness and equity in relationships with others. In the business environment, ethical behaviour applies to everybody. It means the whole team operates according to fair and transparent standards, not just complying with legal rules or regulatory requirements, but going above and beyond to ensure decisions are applied through an ethical lens.

In this blog post, we look at why accountants should be ethical in how they practice and examine the codes they should follow.

Moral principles

According to the Oxford English Dictionary, ethics are the moral principles that control or influence a person’s behaviour.

In a business setting, ethical behaviour applies to all employees, including managers, team leaders and supervisors. They should all display behaviour that is honest and fair in their relationships with colleagues and clients.

Displaying good ethical behaviour can boost both morale and client relations. This can have a positive impact on staff retention and client loyalty.

Vital to ensure compliance

Within accountancy, ethical behaviour is vital to ensure compliance with the profession’s commitment to the public interest. The nature and complexity of what accountants do means their work has to be trusted to be of value.

The Institute of Chartered Accountants in England and Wales’ (ICAEW’s) Code of Ethics provides guidance to help accountants meet these obligations.

The Code adopts a principles-based threats and safeguards approach, which focuses on the spirit of the guidance and encourages the exercise of professional judgement.

The Code can be applied to all circumstances that arise in practice and can be adapted to the rapid changes of the modern business environment. It applies to all professional and business activities, whether remunerated or voluntary.

The fundamental principles

The ICAEW’s Code of Ethics is based on five fundamental principles, as outlined below.

• Integrity – to be straightforward and honest in all professional and business relationships. Integrity also means that members must not knowingly be associated with misleading information.
• Objectivity – not to compromise professional or business judgements because of bias, conflict of interest or undue influence of others. If undertaking an assurance engagement, members must also be and appear to be independent.
• Professional competence and due care – to attain and maintain professional knowledge and skill at the level required to ensure that a client or employing organisation receives competent professional service, based on current technical and professional standards and relevant legislation, and act diligently and in accordance with applicable technical and professional standards.
• Confidentiality – to respect the confidentiality of information acquired as a result of professional and business relationships. Confidential information must not be disclosed outside the organisation without authority, unless there is a duty or right to disclose, or disclosure is in the public interest and permitted by law.
• Professional behaviour – to comply with relevant laws and regulations and avoid any conduct that the professional accountant knows or should know might discredit the profession.

Verifiable CPD

The ICAEW is revising its CPD regulations with the aim of building and maintaining trust in the audit, accountancy and tax professions.

The new regulations have been prompted by the increased level of scrutiny the profession has experienced in recent years.

As part of the new standards a minimum of one hour’s verifiable CPD on ethics must be completed. This hour must be aligned to the ICAEW’s Code of Ethics and can include topics such as anti-money laundering; corporate governance; data protection and privacy; modern slavery; company law; economic crime; fraud; and whistleblowing.

Mercia’s Ethics Update and Refresher course

Mercia’s Ethics Update and Refresher course covers the ethical rules governing the range of work performed in practice and suggest suitable approaches to tackle the risks. 

This course looks at both the technical requirements and the practical implementation, including the risks of accidental breach of the requirements. It considers sources of guidance for ethics, fundamental ethical principles and the threats and safeguards approach.