Ethics – the only way is the right way!

A recent article by Chartered Accountants Worldwide notes that “A Chartered Accountant’s training imbues them with values and ethics that help them to resist external pressure and to do the right thing at all times.”

As Chartered Accountants (CAs), we should always live by a set of core values that motivates us to do the right thing, and be vigilant and accountable always. This grounding becomes increasingly important given the ethical challenges facing a Chartered Accountant, as the person who must deliver the business results. If the business isn’t delivering what it hopes to achieve, then there might be pressure to make them look better than they are. The situation is more complicated because of the subjectivity involved in preparing financial statements. There is pressure to reflect positive results, so a CA is always under pressure to produce favourable results. It is important for CAs to stick to the code of conduct and behave in an ethical manner.

Ethical questions aren’t limited to presenting financial results. Tackling difficult situations calls for strong character as a business leader. You need to be able to say no, you need to be able to ask tough questions and make difficult decisions - and you need to do what is right. Chartered Accountants must uphold the values they learn during their training. They have a responsibility and integrity to upkeep…It’s important to have this inner compass to be true to this belief and be able to overcome the pressures from the other people who expect us to compromise on this integrity.

To learn more, read the article “The only way is ethics: how Chartered Accountants can steer firms the right way” and listen to the YouTube videos presenting what other CAs have to say about ethical matters. Also, refer to previous blog postings on “ethics and professional judgment.”

A Message for All CAs - Living our Values

Pierre Brunet, FCA

On February 22, 2003, Pierre Brunet, FCA (Chair - The Canadian Institute of Chartered Accountants) gave a brief speech to new CA graduates at the Institute of Chartered Accountants of Ontario about Living Our Values as Chartered Accountants.

He noted that, “We are highly regarded as knowledgeable financial experts. And our standards – in disclosure and assurance, education, discipline, practice inspection, and professional conduct are recognized around the world. But it’s not only our standards that have won us the public’s trust. It’s the values we stand for. Honesty, integrity, objectivity, reliability. And in the future, these values will be even more important as the reliability of financial data becomes even more critical in our society.”

“Each of us in a position of trust, regardless of age or occupation, needs an ethical gyroscope. …The truth is, however, that rules and regulations have never been able to address the root of the problem … a problem that results from the obsession of certain individuals with accumulating power and wealth. This problem is at once timeless, universal, and all too human. And no matter how much we strengthen the system as a bulwark against abuse and greed, there will always be people who want to take advantage. This is why the efforts of individual CAs are perhaps even more important than actions we take as a profession. CAs such as yourselves, who work responsibly, every day, and live up to the values of our profession.”

“Most importantly, be proud to be a CA. Be proud not only of where we’ve been, but most of all of where we’re going. So put that CA on your business card. Because it stands not just for what we know. It stands for who we are. So, go forward with pride, and with the strength and sureness that only values will provide.”

ICAS – Ethical Decision-Making Framework

According to the Institute of Chartered Accountants of Scotland (ICAS), “There has been a lot in the media recently about Artificial Intelligence (AI). One of the most difficult tasks for any AI designer will be to replicate the ability to place ethical considerations into the decision-making process. Whilst this might be easier for certain aspects, such as determining compliance with a set of rules on auditor independence, it will be much trickier in other areas where a real understanding of the circumstances, and possible available courses of action, is required.”

The ICAS has prepared guidance for those faced with such dilemmas by publishing a Discussion Paper on Ethics Principles and an Ethical Decision-Making Framework. To learn more, read the ICAS discussion paper, The Five Fundamental Ethics Principles: Time for Evaluation? and the ICAS guidance on an Ethical Decision-Making Framework. In addition, review the guidance entitled, What Do You Do Now? Ethical Issues Encountered by Chartered Accountants, and the ICAS ethical dilemmas series called Shades of Grey.

New Code of Professional Conduct for Ontario CPAs

In a June 2016 communication, the executive of the Chartered Professional Accountants of Ontario (CPAs) stated that: “As CPAs, we hold ourselves to a high standard in everything we do. We conduct ourselves at all times according to the shared values and ideals of our profession, regardless of position, sector or tenure, and we commit to our profession 24 hours a day, seven days a week. That’s why I am pleased to inform you of a new CPA Code of Professional Conduct  that was recently approved by CPA Ontario’s Council and is now in effect. It will be presented to members for ratification at the next Annual General Meeting in September 2016."

"While most members will not be impacted, the new CPA Code recognizes that our membership provides professional services beyond public accounting. Members providing these services may note a number of changes, such as in the Rules that govern relationships amongst professional colleagues and in Rule 210 Conflicts of Interest, as well as greater guidance provided to clarify common areas of confusion."

"As CPAs, we share common interests, ethics and concerns; now, we share a common philosophy, principles and, indeed, rules of the profession. The inclusion of all professional accountants under a common code — one that reflects the most stringent requirements of the legacy bodies — is one of the benefits of unification."

"Though the CPA Code is built upon foundational pillars — the fundamental principles of professional behaviour, integrity and due care, objectivity, professional competence and confidentiality — the whole is greater than the sum of its parts. Our commitment to its principles is not situational; it does not stop at the end of the working day. In short, as CPAs, we live our lives according to our personal values and professional code — the CPA Code of Professional Conduct. Its purpose is clear, its principles timeless, and its vision defines us not only as a profession but as a community."

For an overview of the new CPA Code, refer to the article, A New Code of Professional Conduct, on page 8 of the Spring 2016 issue of the publication Discussion and Analysis, available online.

Chartered Accountants Worldwide welcomes The Institute of Chartered Accountants of India

The Institute of Chartered Accountants of India (ICAI) has joined as an Associate Member of Chartered Accountants Worldwide. During its 66 years of existence, ICAI has achieved recognition as a premier accounting body for its contribution in the fields of education, professional development, and maintenance of high accounting, auditing and ethical standards. Associate Member status is a recognition that ICAI has demonstrated a commitment to the highest professional and ethical standards.

ICAI is the fourth institute to join Chartered Accountants Worldwide as an Associate member, making a key contribution to the global expansion of the organization. The rest of the Chartered Accountants Worldwide family are founder members; Chartered Accountants Australia and New Zealand, Chartered Accountants Ireland, the Institute of Chartered Accountants of England and Wales, Institute of Chartered Accountants of Scotland, The South African Institute of Chartered Accountants, the Institute of Singapore Chartered Accountants (who joined as an Associate Member in June 2015), The Institute of Chartered Accountants of Pakistan (who joined as an Associate Member in February 2016), and the Zambia Institute of Chartered Accountants (who joined in March 2016).

Chartered Accountants Worldwide brings together like-minded Institutes who continuously contribute to the enhancement of the value of the brand and the profession of Chartered Accountants. For more information, read the June 2016 Chartered Accountants Worldwide Press Release.

Professionalism is Primary

In December 2003, Douglas R. Carmichael, Director of Professional Standards at the Public Company Accounting Oversight Board (PCAOB) was invited to speak about professionalism at the AICPA Annual National Conference in Washington, DC. In his presentation, he noted that: “Most organized professions have duties to clients and to the public. A lawyer has responsibilities to the court and the law as well as to individual clients. A doctor has responsibilities for public health as well as to individual patients. Poor management of duties to the public versus to individual clients can cause a lack of respect for a profession.”

Furthermore, “Some would say that is what happened to independent auditors. Intense pressure on the management of public companies to meet the earnings expectations of analysts led to intense pressure on auditors to help clients meet those expectations. There were economic incentives to preserve the relationship with the client. Building the client relationship had become the service ideal. Accommodation on questionable accounting practices was one result. There was a widespread erosion of professionalism and the profession lost the confidence of investors. This decline in professionalism did not happen overnight. Some would say it started decades ago.”

In concluding his presentation, he suggested:“One step that could be taken is to amend the ten basic auditing standards to add a new general standard that might be worded as follows: The auditor shall, in all matters related to the audit, act in a manner that places primary emphasis on protection of investors and the furtherance of the public interest in the issuance of informative, fair, and independent audit reports. This would make dedication to professionalism an overriding and mandatory obligation for the auditor of a public company.”

Learn more about professionalism by reviewing the presentation on Professionalism is Primary. Also, refer to previous postings about professionalism as part of this blog on Professional Judgment Matters.

Professional Attitude

A thought-provoking discussion of professional attitudes was posted online at Clancy’s Quotes dated March 26, 2009. The discussion suggests that Professionalism is one of those words that’s rather hard to define. Consequently, people have different viewpoints on what characteristics constitute professionalism.

According to Clancy, “Professionalism consists of certain attitudes, beliefs, and behaviors sometimes known collectively as “virtue” or “good character.” Attitudes and behaviors have two things in common. First, both are produced by our beliefs. Second, we have the power to choose our attitudes and behaviors.”

Furthermore, “Becoming a professional is an attitude adjustment process that begins by understanding what it means to be a professional, creating a personal vision of professionalism, and aligning one’s values in accordance with that image. Another way to say this is “change on the outside begins on the inside.” If you were to understand professionalism, then claim it as your set of personal values, where would you start to begin your professional tune-up? A good place is with the attitude called “respect” and a person must start by respecting oneself. Professionalism also insists on respect toward others, explained best by “The Golden Rule.”

Critical success factors for tomorrow’s business leaders: Perspectives from the UK

The latest report from Chartered Accountants Worldwide has called for business to instill a culture of ‘moral courage’ from the boardroom downwards. In Critical Success Factors for Tomorrow’s Business Leaders: Perspectives from the UK, the international body states that social media and the 24-hr scrutiny of the digital age mean that there is a direct link between ethics and value creation that business needs to acknowledge.

The report follows the latest Chartered Accountants Worldwide Critical Success Factors Summit in London. The summits gather senior CEOs, CFOs and executives, together with the heads of global Chartered Accountancy bodies, to discuss key issues facing future finance professionals. The report covers issues ranging from geopolitical tensions to the need for tax simplification and also draws on research surveying chartered accountants leading UK businesses.

According to Pat Costello, Chairman of Chartered Accountants Worldwide: “The digital age means that everyone is under scrutiny, all of the time, and issues can escalate through social media like wildfire. The right decisions need to be taken in real time – it’s no longer enough to rely on the traditional hierarchies. This means we need to foster a culture where people are trained to know what the right thing to do is when a challenge presents itself. A culture of ethics certainly starts in the boardroom, but it can’t stop there.”