Ethics are an important aspect of almost any profession. Ethics can simply be defined as a system of moral principles. Accountants are expected to uphold a high standard of professional conduct and take into consideration the public interest.
Accounting Ethics are the principles used by any accounting professionals. They are important because they are the foundation of building public trust. They are also used by international accounting bodies to set industry standards.
The Code of Ethics for Professional Accountants is used to form the ethical codes used by many accounting bodies. ICAEW’s Code of Ethics identifies five fundamental principles. This article will discuss these principles and how implementing them will support your business.
What are the Five Fundamental Principles?
Below is a passage from the ICAEW Code of Ethics 2020 that defines each principle:
(a) Integrity – to be straightforward and honest in all professional and business relationships.
(b) Objectivity – not to compromise professional or business judgments because of bias, conflict of interest or undue influence of others.
(c) Professional Competence and Due Care – to:
- (i) 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
- (ii) Act diligently and in accordance with applicable technical and professional standards.
(d) Confidentiality – to respect the confidentiality of information acquired as a result of professional and business relationships.
(e) 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.
Integrity
Accountants are expected to be truthful and accurately present all information. Your reputation as an accountant relies heavily on the publics ability to trust you. If you are found to be dishonest with a client this can result in consequences for you and your business.
Professional accountants should never produce reports that contain false or misleading statements or omissions that could mislead the reader. Remember verbal agreements are binding. Going back on any type of agreement can cause relationships to break down and destroy trust.
Independence and Objectivity
Independence and objectivity are closely linked. It’s always expected that people will have some level of bias but it’s unacceptable to allow any bias to interfere with your professional conduct. You should not allow opinions or preferences to affect your judgement.
Professional accountants have a responsibility to communicate information fairly and objectively. All information should be disclosed fully, whether you believe the client should know or not. This allows clients to make informed decisions and exhibits that you are a competent and trustworthy individual.
There is a difference between personal ethics and professional ethics. Members of the public cannot measure how ethical you are but they place their trust in you because you have been appointed by a trusted accounting body. So, when you qualify as an accountant you have a responsibility to accounting bodies to be ethical.
Professional Competence and Due Care
Professional competence and due care are related to an accountant possessing a level of skill that meets the technical and professional standards. ‘In agreeing to provide professional services, a professional accountant implies that there is a level of competence necessary to perform those services and that his or her knowledge, skill and experience will be applied with reasonable care and diligence.‘
If a client requests your services, you should only accept under the circumstances that you or someone on your team possesses adequate knowledge of the task. Lack of competence can come across as deceptive and cause clients to lose trust in your services. Clients are also more likely to re-use your service if they trust that you are reliable and honest.
You gain professional competence when you acquire the correct qualifications such as the AAT qualification. You further gain competence by maintaining industry knowledge and knowledge of any national or international changes. You can also assure potential clients that you are a competent accountant by continued professional development.
Confidentiality
Accountants deal with personal information from individuals or businesses. Professionals should protect their clients and uphold the principles set out in the code of ethics. If an accountant discloses confidential information to an outside party, this can have multiple negative effects.
In some cases, releasing information prematurely can affect the public interest and even the economy. Confidentiality can also apply to using information for personal advantage. It is crucial for an accountant to protect all information and not use it for personal gain.
Equally, an accountant should ensure all employees below you are aware of confidentiality. If a subordinate discloses information, the ultimate responsibility falls on you. However, it is acceptable to disclose confidential information in circumstances where it is necessary such as if required by the law.
Professional Behaviour
As an accountant, you are expected to demonstrate a high level of professionalism. Professional behaviour can be distinguished by several characteristics. This includes mastery of a particular intellectual skill, adherence to a common code of values or conduct and acceptance of a duty to society as a whole.
Professionalism refers to how you are perceived by colleagues and peers as well as clients and the public. Fellow accountants should be able to recognise that you are a credible accountant who maintains the industry standard. This is best demonstrated through your performance and your interactions with clients.
Final Thoughts
There are clear benefits to adhering to the code of ethics. Accountants who assert themselves as competent, reliable and respectable individuals build a reputation that helps their business. It’s important for professional accountants to follow the five fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.
Accountants who do not demonstrate these qualities can face consequences from the law and lose business. Therefore, ethics are a very important aspect of being an accountant. Count takes business ethics extremely seriously – after all, it’s our job!
If you would like to learn more about accounting ethics, and see how our ethical practice could benefit your business, contact us today for more information.