Ethical practices are essential to every business. Money and sensitive information, however, must be handled with the strictest ethical practices and integrity standards. For clients, the media, coworkers and business partners to trust you, your ethics as an accountant are essential. Because accountants have access to financial information, their positions of power carry the risk and potential of misuse of information or manipulation of numbers. For these reasons, the industry — from academia to professional organizations — is committed to maintaining ethical practices in accounting.
Industry Codes of Ethics
General principles such as honesty and integrity are at the foundation of ethical behavior. Accounting codes of professional conduct are rules established by the bodies governing certified public accountants (CPAs). These codes help accountants understand the expectations for honesty and integrity in specific accounting scenarios. Here, we provide an overview of the industry’s major codes of ethics:
CIMA (Chartered Institute of Management Accountants):
This code consists of five fundamental principles: integrity, objectivity, professional competence, confidentiality and professional behavior. It calls upon CPAs to recognize the threats to compliance with these values, including the following threats:
- Self-interest: Conflicts of interest may influence judgment
- Self-review: When accountants must review previous judgments
- Advocacy: When a strongly held opinion compromises objectivity
- Familiarity: When close relationships compromise objectivity
- Intimidation: Influence, perceived or real, deters objectivity and sound judgment
IIA (Institute of Internal Auditors):
This code describes conduct expectations for individuals and organizations regarding internal auditing. It details the following principles internal auditors are expected to consider in their daily work:
- Integrity: Including making appropriate legal disclosures and not engaging in illegal activity, as well as contributing to and respecting legitimate organizational objectives
- Objectivity: Avoiding activities that impair unbiased work and disclosing all material facts so as not to distort fair reporting of accounting activities
- Confidentiality: Prudence in the protection of information and avoiding using information for illegal purposes or personal gain
- Competency: Engaging in work only when accountants have the proper knowledge and skills and performing audit services in accordance with the International Standards for the Professional Practice of Internal Auditing
AICPA (Association of International Certified Professional Accountants):
This code of professional conduct offers highly specific principles, rules and interpretations to guide CPA ethics. It covers these areas of responsibility: the public interest, integrity, objectivity and independence, due care, scope and nature of services. Here is how it describes the terms not covered by the above codes:
- Public interest: Members must act in a way that serves the public, honors people’s trust in accounting institutions and demonstrates professionalism. In resolving conflicting pressures, members stick to the idea that serving the public interest is to serve the clients’ and employers’ interests.
- Independence: In fact, independence refers to factual information, such as whether a CPA owns shares or other investments in the client company. It is usually easy to determine these facts. It is more subjective, however, to define independence in appearance. A reasonable observer’s test resolves a potential conflict of interest Intimidation, self-interest, self-review and longstanding relationships with clients pose threats to independence.
- Due care: This refers to competence, diligence and a continued quest for betterment. Members must perform their services to the best of their abilities, including being prompt, careful and thorough, and observing all relevant technical standards.
- Scope and nature of services: This includes CPAs determining whether services provided to a client would create a conflict of interest, and whether quality control procedures are in place to ensure competent, adequately supervised work.
Growing Industry Concerns That Require Ethics
Ethics become an even more fascinating subject when applying concepts to real-world concerns and scenarios. When accountants recognize opportunities for ethical failure, they become vigilant and cognizant of the codes described above.
For example, the pandemic created a considerable strain for accountants, as many struggled with estimation uncertainties, client pressures and a changing economic environment that could easily weigh on their objectivity and judgments. In addition, during the pandemic, automation became a business solution to problems related to shortages in personnel. Now that accounting involves automation, human oversight is necessary to consider ethics.
Additionally, crime reporting of high-ranking executives within one’s own organization has been a challenge addressed by the AICPA. Whistleblowing protections have been created for CPAs to encourage reporting of crimes committed by clients. Technologies, including artificial intelligence and robotic process automation, are now being deployed to detect and prevent cybercrimes.
The ethics of accounting are woven throughout the curriculum so that graduates are ready to act in accordance with the industry’s highest moral standards. A course in Business Ethics, Law, and Communication examines issues relating to law and ethics that impact the business enterprise, including product liability, contract issues, intellectual property, privacy, agency, officer and director liability, employment discrimination, bribery and the social responsibility of business.
If the prospect of leading an ethical career in accounting appeals to you as much as intellectual stimulation and financial compensation, an advanced business degree with a focus on accounting will prepare you to become an exemplar of ethics within your organization.