Code of Accountant Professional Ethics - Case Study Example

Introduction Ethics, in simpler words, is the ability of an individual to make moral judgments about what is right and wrong. With the passage of time, organizations have acknowledged the importance of ethics as it helps in identifying the proper course of action for humans. This is the primary reason of ethics being an organizational priority in the 21st century. In today’s business environment, ethics has become the only mean to decide the right direction for individuals as well as organizations. Without ethical consideration, the action of individuals as well as organizations will be aimless and fruitless (Leung & Cooper, 2005). By taking into account the importance of ethics in business, this study will focus upon evaluating the ethical codes and conducts that are essential for professional accountants. Trough the summary of ethical codes and conducts for professional accountants, this study tends to assess that how professional accountants tend to remain ethically and morally sound in making judgments. In addition, the impact of ethical codes and conducts on professional accountants to face ethical dilemmas has also been evaluated within this study. In the end, the possible solutions to the dilemmas faced by professional accountants have also been explained in detail in the last section of this study. Methodology To gain insight regarding the ethical codes and conducts for professional assistants, secondary research has been taken into consideration. For instance, the CIMA code of ethics and APES 110 code of ethics for professional accountants along with IFAC code of ethics for professional accountants has been studied to answer the questions within the research. The literature search will help in gaining insights regarding the importance of ethics within the professional working environment along with the ways through which professional accountants tend to eliminate dilemmas faced during their work. Findings Code of ethics can be defined as set of rules and regulations that bound the professional accountants to follow the standards of integrity, professionalism and confidentiality in their work (AIIC, 2012). Different associations have somewhat different code of ethics for professional accounts, but all of these associations agree on the fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior. Following is a brief but relevant explanation of each fundamental principle that must be ensured by professional accountant in their work (CIMA, 2010; APESB, 2010; IFAC, 2006); Integrity The principle of integrity focuses upon the accountant to be honest and straightforward in work, while maintaining business and professional relationship with all clients within the business environment. Objectivity The principle of objectivity reflects that professional accountants should be fair and unbiased, while eliminating personal interests to significantly reduce the conflict of interests that could eventually impact the judgment of the accountant in business or professional work. Professional Competence and Due Care A professional accountant is liable to perform his/her duties with utmost diligence and competence, while maintaining the set of skills and knowledge required satisfying the requirements of clients or employers. Confidentiality The principle of confidentiality reflects that the critical information gained regarding the business due to nature of the work must not be disclosed to any third party. In addition, the professional accountant must not use any of the information gained for personal advantage or the advantage of any other third party. Professional Behavior Being a professional accountant, this principle implies that compliance with laws and regulations is the foremost duty of accountants. By doing so, the accountants would ensure the respect held for the profession, while avoiding situations and actions that could result in the discredit of the profession. On the other hand, certain codes have been specified for professional accountants in public practice as well as businesses on the basis of fundamental principles. Each of the specified code for professional accountants in public practice and business are as follows (CIMA, 2010; APESB, 2010; IFAC, 2006); a. Public Practice The nature of the work for professional accountants clearly entails the compliance of fundamental principles to utmost level, but practicing accounts in public sector restricts the accountants to comply with the reflection of ethical code of conduct. For instance, taking gifts from the clients to provide them with favorable circumstances is clearly outside the boundaries of professional accountants. Practicing accounts in public sector implies that professional accountants must ensure effective and accurate compliance of fundamental principles. Some of the other ethical codes that are a mere reflection of fundamental principles are as follows; Professional accountants are liable to determine the acceptance of client’s relationship and its threats to compliance with the fundamental principles. To take steps that could help in the elimination of conflict of interests. For instance, the personal interest of professional accountant can impede the fundamental principle of objectivity. The accountant is liable not to receive any gifts that can influence the accountant to provide the client with favorable environment. b. Business Professional accountants in business are often salaried employees, partner, director or manager working for the betterment of organization. Being a part of the organization, professional accountants are liable to address circumstances in which the compliance with the fundamental principles can be compromised for the achievement of organizational goals and objectives. On the other hand, the compliance with the fundamental principles can also be hindered due to broad range of circumstances and relationship including; personal interest, self-review, familiarity, and intimidation. The dominant ethical codes of conduct for professional accountant in business are as follows; The professional accountant must adhere to comply with the fundamental principles. Being a part of business, the professional accountant can be presented with a circumstance where the compliance with the fundamental principles can be at stake. In such situations, the professional accountant shall work towards determining the threats of non-compliance with the fundamental principles. A professional accountant in a business is liable to work honestly and fairly, while meeting the standards set for presenting the accurate information that can be made public or used by other parts of the organization. Being a part of business, professional accountant are provided with critical information regarding the business. This results in the creation of financial interest that can create threats to compliance with the fundamental principles. To reduce the threat, professional accountants must determine the appropriate safeguards to eliminate the threat or reduce it to acceptable level. Discussion and Analysis of Findings Three ethical code of conduct for professional accountants were taken into study. The evaluation of each code of conduct revealed that the APES 110 code of ethics for professional accountant was quite similar with CIMA and IFAC code of ethics for professional accountants. With no significant difference in the code of conduct for professional accountants, it has been revealed that the professional accountants all over the world are liable to comply with similar fundamental principles regardless of business practice or public practice. For professional accountants, it has become very troublesome to define the right balance between the duty and professional requirements. Although, professional accountants are provided with a clear set of instructions and principles regarding their work, but meeting the requirements have become significantly difficult for them due to the pressure from top management (Brooks, 1995). The dilemmas that continually divert professional accountants from fundamental principles can be understood from the following example; The supervisor orders the accountant to provide him with a check of $100 for the expenses incurred during the entertainment of a client. With a receipt from a restaurant and lounge, the accountant is presented with a proof of the expense incurred by the supervisor. During supervisor’s conversation with his girlfriend, the accountant overheard him telling her about the great time they both had at a restaurant the night before. Under such circumstances, the professional accountant’s fundamental principle is at stake if he does not inform the management about the supervisor’s unethical act. This is the most common dilemma for professional accountants to either take action or let it go. Action will eventually result in the suspension of the supervisor, while the cost associated with the investigation will be significantly higher. On the other hand, letting the misconduct pass by will eventually result in the failure to comply with the fundamental principles (Velayutham, 2003). Under such circumstances, there is no feasible solution to such situation. Although, the accountant can eliminate the dilemma by reporting the misconduct to the management but it will require the explanation of the supervisor along with other parties involved in this scenario. This will surely take significant amount of time. This clearly reflects that there is no feasible solution to such dilemma. However, tightening the code of conduct can surely reduce the non-compliance with the fundamental principles (Parker, 1994). Conclusion and Recommendations A professional accountant is one that holds the ethical code of conduct to the highest level, while respecting the code by complying with the fundamental principles. The duties and responsibilities performed by professional accountant may sound easy, but in real world this job is the toughest due to the continually rising dilemmas that have no feasible solutions (Flory, Phillips Jr, Reidenbach, & Robin, 1992). Some of the recommendations that can help in the reduction of continually rising dilemmas for professional accountant are as follows; Review the code of ethics for both the private and business practice. If an organization has already defined code of conduct, it must review the code to eliminate flaws that have resulted in the non-compliance of professional accountant. Similarly, if the organization does not have a code, it must develop the code immediately. To reduce the commonly faced dilemmas, the organizations should work top to bottom and bottom to top. This will help gaining support from the employees as well as the management. As a result, the organization will find out the most feasible solutions to overcome the troublesome situations in which the professional accountants have no other reason than to leave the matter, while non-complying with the fundamental principles. Businesses that operate in today’s atmosphere are highly aware of the unethical acts that supervisors and managers tend to perform due to their position. Eliminating such unethical acts should be the foremost priority for such organizations. In order to effectively do so, the organizations must tighten their code of ethic and conduct to provide the professional accountants with an opportunity to report unethical acts regardless of the position or the power held by the individual (Leung & Cooper, 2005). List of References AIIC. (2012). Code of professional ethics. Available from http://aiic.net/page/54/code-of-professional-ethics/lang/1 [Accessed 5 November 2013] APESB. (2010). APES 110 Code of Ethics for Professional Accountants. Available from http://www.apesb.org.au/attachments/1-APES%20110%20Code%20of%20Ethics%20for%20Professional%20Accountants%20December%202010%20-%20Final.pdf [Accessed 5 November 2013] Brooks, L. J. (1995). Professional ethics for accountants (pp. 9-24). West Publishing Company. CIMA. (2010). CIMA code of ethics for professional accountants. Available from http://www.cimaglobal.com/Documents/code%20FINAL.pdf [Accessed 5 November 2013] Flory, S. M., Phillips Jr, T. J., Reidenbach, R. E., & Robin, D. P. (1992). A multidimensional analysis of selected ethical issues in accounting. Accounting Review, pp. 284-302. IFAC. (2006). Code of ethics for professional accountants. Available from http://www.ifac.org/sites/default/files/publications/files/ifac-code-of-ethics-for.pdf [Accessed 5 November 2013] Leung, P., & Cooper, B. J. (2005). Accountants, ethical issues and the corporate governance context. Australian accounting review, vol. 15, no. 35, pp. 79-88. Parker, L. D. (1994). Professional accounting body ethics: in search of the private interest. Accounting, Organizations and Society, vol. 19, no. 6, pp. 507-525. Velayutham, S. (2003). The Accounting Profession’s Code of Ethics: Is It a Code of Ethics or a Code of Quality Assurance?. Critical Perspectives on Accounting, vol. 14, no. 4, pp. 483-503. Read More