It's well established that members of the accountancy profession have a responsibility to serve the interests of many stakeholders in society, including those of the general public. For example, the first words of the Handbook of the Code of Ethics for Professional Accountants (Handbook) mention the interests of the public: “A distinguishing mark of the accountancy profession is its acceptance of the responsibility to act in the public interest.” The Handbook is published annually by the International Ethics Standards Board for Accountants (IESBA), a part of the International Federation of Accountants (IFAC).
IFAC’s broad definition of the public interest in IFAC Policy Position 5 is “the net benefits derived for, and procedural rigor employed on behalf of, all society in relation to any action, decision, or policy.” Because the accountancy profession touches on every aspect of society, the public includes all groups and individuals—consumers, investors, taxpayers, and citizens. According to IFAC, determining whether an action, decision, or policy is in the public interest involves two phases: assessing net benefits (to see if benefits outweigh the costs) and considering whether the issue was evaluated with transparency, public accountability, independence, competence, adherence to due process, and participation of a wide range of societal groups.
IMA ETHICS STATEMENT
Management accountants in particular have diverse responsibilities to serve the needs of a variety of constituencies. They must maintain the highest standards of ethical conduct while serving the requirements of the organization where they are employed and the public at large. They also must be responsible to themselves and their families while acting in the best long-term interests of the profession as a whole.
IMA® (Institute of Management Accountants) members are required to behave ethically, according to the IMA Statement of Ethical Professional Practice (the Statement). When joining the organization or renewing, members must commit to complying with the Statement, which includes overarching principles that express values as well as standards to guide conduct. The overarching principles include honesty, fairness, objectivity, and responsibility. Members face disciplinary action for failure to comply with 13 specific standards for competence, confidentiality, integrity, and credibility. Additionally, the Statement outlines guidance and specific steps to consider when resolving ethical conflict.
OTHER ETHICS CODES
The Financial Executives International (FEI) Code of Ethics contains obligations for its members that are very similar to those in the IMA Statement. These include honesty and integrity, completeness of information, compliance with laws, action in good faith and due care, and confidentiality. There are other obligations as well, such as to “proactively promote ethical behavior as a responsible partner among peers, in the work environment and the community” and to “achieve responsible use of and control over all assets and resources employed or entrusted.”
The FEI Code of Ethics includes the mission of expending “significant efforts to promote ethical conduct in the practice of financial management throughout the world.” Further, the FEI code embodies rules “regarding individual and peer responsibilities, as well as responsibilities to employers, the public, and other stakeholders.”
The Code of Ethics for internal auditors published by the Institute of Internal Auditors (IIA) contains four principles: integrity, objectivity, confidentiality, and competency. Each has several rules of conduct that prescribe actions that internal auditors must take to remain in compliance with the IIA ethics code. The IIA definition of internal auditing points out that the function is an “independent, objective assurance and consulting activity” within an organization that is “designed to add value and improve an organization's operations.”
Finally, the IESBA Handbook contains five fundamental ethical principles with which all professional accountants are expected to comply, including those employed in business. The principles are integrity, objectivity, professional competence and due care, confidentiality, and professional behavior. The Handbook groups threats to compliance with those fundamental principles into one or more of the following categories: self-interest, self-review, advocacy, familiarity, and intimidation.
Safeguards that eliminate those threats or reduce them to an acceptable level may be created through external factors like the profession, legislation, or regulation or through factors internal to the work environment. The underlying approach of the Handbook is to describe how professional accountants should deal with ethical issues by evaluating threats and safeguards. It discusses conflicts of interest and lists steps the professional accountant in business should take if he or she can’t resolve an ethical conflict, including resigning from the employing organization.
ACCOUNTANTS IN PUBLIC PRACTICE
In contrast with those for management accountants, the ethical responsibilities of independent public accountants, particularly those serving publicly held audit clients, are more restricted. Rule 2-01 of the Securities & Exchange Commission (SEC) Regulation S-X was “designed to ensure that auditors are qualified and independent of their audit clients both in fact and in appearance” so that their services are entirely focused on the mission of protecting the interests of investors, creditors, and the general public.
More than 70% of the IESBA Handbook deals with ethical matters important only to accountants in public practice rather than those employed in business. Because of its importance, the subject of independence takes up the bulk of these pages. Other matters covered include professional appointment, conflicts of interest, second opinions, fees and other types of remuneration, marketing professional services, gifts and hospitality, custody of client assets, and objectivity for all services. Although philosophically a principles-based document, the book seems to be full of detailed and prescriptive rules.
As these various codes demonstrate, accountants have a number of sources to draw from when examining the ethics aspect of the profession. The prescriptive, concise communication of specific behavioral standards, as seen in the IMA Statement of Ethical Professional Practice and some of the other ethics codes discussed, effectively enables management accountants to act ethically and to consider their responsibilities to all groups in society.
IMA ETHICS HELPLINE
For clarification of how the IMA Statement of Ethical Professional Practice applies to your ethical dilemma, contact the IMA Ethics Helpline.
In the U.S. or Canada, dial (800) 245-1383. In other countries, dial the AT&T USA Direct Access Number from www.usa.att.com/traveler/index.jsp, then the above number.
The IMA Helpline is designed to provide clarification of provisions in the Statement of Ethical Professional Practice, which contains suggestions on how to resolve ethical conflicts. The helpline cannot be considered a hotline to report specific suspected ethical violations.