Professional Ethics

What is the purpose of accounting?

To provide information to decision makers

Desired Characteristics

• Timeliness
  
• Understandability
  
• Reliability
  
• Truthfulness

What is truth?

Fair
-Not misleading

Unbiased
-Not predisposed in a particular direction

Representational faithfulness
-Conveys an accurate impression of the underlying reality

What Is Integrity?

When a person consistently makes ethical choices across a wide range of situations, over a lifetime, that person has “integrity.”

Forms of Lying

• Saying something that is not so
  
• Overstatement/exaggeration
  
• Understatement
  
• Withholding relevant information
  
• What do these have in common?
  -They all fail to convey a true impression

What are Ethics?

A set of moral principles that guide behaviour.

Ethical Values

Assumptions and beliefs about what constitutes ‘right’ and ‘wrong’ behaviour.

What Is Ethical Behavior?

• "What ought to be?"
  
• The choice that is more right, more good, and more just than the others
  
• To be ethical, a choice must be in accordance with one’s values, AND
  
• Those values must be based upon correct principles
  
• Neither is sufficient; both are necessary

Values

• How each person decides what he/she THINKS is right and wrong
  
• Core beliefs upon which we live our lives
  
• Do vary between individuals and cultures
  
• Because each person’s lens is different
  
• May or may not be based on correct principles
  
• Making choices in accordance with values leads to self-esteem

Business Ethics

The concept of business ethics suggests that businesses are morally responsible for their actions and standard of behaviour and should be held accountable for the effects of their actions on people and society.

Explicit Values

These could be included in organisations mission statements or set out in ethical codes and guidelines. Other values can be part of the Organisation culture: The way we do things around here. The customs or behaviour that develop over time.

Why Behave Ethically

The AAT guidelines on Professional Ethics are in three parts:
-Part A applies to all members
-Part B represents additional guidance which applies specifically to members in practice
-Part C applies specifically to members in business.

Why Behave Ethically

• You are expected to know and apply the civil and criminal law of the country in which you live and work. This is a basic minimum requirement of good practice. The AAT guidelines are based on UK laws.
  
• The AAT requires its members to conduct themselves, and provide services to clients according to certain professional and ethical standards. This is done to maintain reputation and standing and to benefit the members and the accounting profession as a whole.
  
• Professional and ethical behaviour protects public interest. We have a duty to society.
  
• Completely avoid conflicts of interest
  
• Always try to be objective and act in the public interest because your responsibility is not only to satisfy needs of client or employer.
  Keep sensitive information confidential.
  
• Be straightforward and honest in professional and business relationships.
  Maintain professional knowledge, behaviour and skills at the level required by the client or employer.

• The objectives of the Accountancy Profession

The mastering of particular skills and techniques acquired through learning and education and maintained through CPD.

• Rendering services to the highest standards of conduct and performance.

-First, accountants must ensure that they carry out every piece of work to the best of their ability. You must allow yourself adequate time to complete your tasks and NEVER CUT CORNERS.
-Accountants should make sure that they HAVE the skills required to perform a specific task. See the following:

• Development of an ethical approach to work as well as to employers and clients.

This is acquired by experience and professional supervision under training. Your training will also involve learning from managers and supervisors. Qualified accountants should always lead by example and should make sure that all members work to the highest standard expected of a professional accountant.

• Acknowledgement of duties to society as a whole.

In addition to duties to the employer or the client. The accountancy profession understand that they have a duty of care to the general public. That is why when you are working in the field you should always be aware of the implications of your actions

• Achieving acceptance by the public that members provide accountancy services in accordance with these high standards and requirements.

The profession is extremely focused on making sure all members perform to the highest standards and you have to be seen to working in that direction as well. A good case for you to research is that of the American company ENRON that collapsed.

• An outlook which is essentially objective, obtained by being fair minded and free from conflicts of interest.

Someone who is objective therefore bases his/her opinions on real facts and is not influenced by personal beliefs.

Accountants need to always be objective and when faced with conflict of interest, it is your duty not to let your own self interest affect the professional decision that you make.

FUNDAMENTAL PRINCIPLES

• Professional Behaviour
  
• Professional Competence and due care
  
• Confidentiality
  
• Integrity
  
• Objectivity

Fundamental Principles

• Professional behaviour
  
• Members must not bring the profession into disrepute by acting unprofessionally such as giving advice to a client that the member knew did not comply with relevant laws and regulations.

Professional Competence and Due Care

• Accountants have an obligation to their employers and clients to know what they are doing.
  
• You must not agree to carry out a task or assignment if you do not have the competence to carry it out to a satisfactory standard – unless you are sure you can get the help and advice you need to do so.

Due Care

This means that when carrying out work an accountant must always take the appropriate amount of care to ensure that the quality of the work performed meets the high standards required.

Confidentiality

All professions need to maintain confidentiality of client information. It is important to appreciate that confidentiality is an important value in many relationships, both personal and legal. You will not disclose confidential information to others unless:

• You have specific and ‘proper’ authorisation to do so by the client or employer.
  
• You are legally or professionally entitled or obliged to do so. Eg requested by the Court

Integrity

Integrity involves matters such as being open about the limitations of your knowledge or competence, being honest in your relationships and carrying out your work accurately, conscientiously and effeciently.

OBJECTIVITY

This principle is very important for the accounting profession because it protects the interests both of the parties directly involved by an accountant’s services and of the general public (who rely on the accuracy of information and the integrity of financial systems).

Objectivity is the principle that all professional and business judgements should be made fairly:

• On the basis of an independent and intellectually honest appraisal of information
  
• Free from all forms of prejudice and bias
  
• Free from factors which might affect impartiality, such as pressure from a superior, financial interest in the outcome, a personal or professional relationship with one of the parties involved, or a conflict of interest (where one client stands to lose and another to gain by a disclosure).

Terms

• Professional Ethics
  
• Integrity
  
• CPD
  
• Objectivity
  
• Conflict of interest
  
• Professional competence and due care
  
• Confidentiality
  
• Professional behaviour