Despite the robust Code of Professional Conduct within the accountancy profession locally and internationally, the reputation of the accountancy profession has received backlash over the years with a number of corporate failures and accounting scandals.
Some more well-known corporate failures locally include Steinhoff where accounting irregularities were identified by the auditors that resulted in the share price plunging by 98%, and Tongaat Hulett where the company’s equity had been overstated by between R3,5 billion and R4,5 billion and therefore did not reflect the company’s performance accurately. These corporate scandals brought the profession into disrepute, with the value and reputation of professional accountants being questioned.
As a result of the corporate failures internationally, the International Ethics Standards Board for Accountants (IESBA) recently emphasised the importance of ethical behaviour for all professional accountants: ‘Ethics is fundamental to public trust in the work of all professional accountants and it must always be at the heart of their judgments, decisions, and actions when performing professional activities or services,’ said Gabriela Figueiredo Dias, IESBA Chair. ‘The high-quality ethics standards in the Code are a cornerstone to ethical behaviour in business and organisations, and they underpin the accountancy profession’s longstanding good reputation. It is therefore crucial that all accountants fully understand and comply with all their ethical obligations under the Code.’
PURPOSE OF THE CODE
Many professions such as the legal and medical profession adopt a Code of Ethics which demonstrates what the profession expects from its members and links behaviours to the profession’s value. The purpose of a Code of Ethics within these professions includes maintaining an internal focus, guiding members and ensuring the profession’s integrity with the general public.
The SAICA Code of Professional Conduct is no different and is the foundation of the profession to guide members’ behaviour, with its key purpose being:
- Setting out fundamental principles of ethics for professional accountants, reflecting the profession’s recognition of its public interest responsibility. These principles establish the standard of behaviour expected of a professional accountant.
- A conceptual framework that professional accountants are to apply in order to identify, evaluate and address threats to compliance with the fundamental principles.
- In the case of audits, reviews and other assurance engagements, the Code sets out independence standards, established by the application of the conceptual framework to threats to independence in relation to these engagements.
IMPACT OF THE CODE ON THE PROFESSION
The implementation of and adherence to the Code have far-reaching implications for the accounting profession and is the cornerstone of ensuring its success. The significance of the Code includes:
- Enhanced reputation − A profession known for its ethical practices gains credibility and respect within the business community and society at large. This reputation can attract clients, investors, and stakeholders who value transparency and accountability which is beneficial to the members of the profession.
- Trust and confidence − A strong code fosters trust and confidence in the financial information provided by professional accountants. Investors, creditors, and regulators rely on accurate financial data to make informed decisions, and an ethical approach helps maintain that trust enhancing the employability of professional accountants.
- Reduced legal and reputational risks − Adhering to ethical guidelines can mitigate legal risks by ensuring compliance with regulations. It also reduces the likelihood of reputational damage due to scandals or unethical behaviour which can be detrimental to the profession.
- Professional development − The Code encourages ongoing professional development. Professional accountants are more likely to seek continuous education to stay up to date with evolving industry standards, ultimately improving the quality of their services.
- Stronger professional culture − When members within a profession adhere to a code, it cultivates a culture of integrity that resonates throughout the profession.
- Global consistency − Many professional accounting organisations have adopted global codes of ethics. This fosters consistency and comparability in the practices of accounting professionals across different countries and jurisdictions.
NAVIGATING THE COMPLEXITIES OF THE CODE
Professional accountants, including academics, finance managers, tax advisors, internal or external auditors and technical specialists, play various roles within business and are required to undertake various decisions on a daily basis in risk management, stakeholder communications, project management, financial reporting, strategy, internal control, governance, assurance, information technology … the list goes on. All of this whilst considering the public interest, which can attract a number of complexities and dilemmas as follows:
- Balancing competing interests − One of the foremost complexities of the Code is the need to balance competing interests by professional accountants. Professional accountants often find themselves in situations where the interests of clients, employers, regulatory bodies, and the public collide. Striking the right balance between stakeholders’ demands while adhering to ethical principles requires careful consideration and judgement whilst remaining unbiased.
- Grey areas and interpretations − Ethical dilemmas rarely come in black and white; they often reside in the grey areas of decision-making. The Code provides a framework, but its application can be open to interpretation. Professional accountants may face situations where the line between ethical and unethical conduct seems blurry. Deciphering these nuances requires a deep understanding of the Code, critical thinking, and a willingness to seek guidance from peers or professional organisations.
- Evolving standards and regulations − The accounting profession is constantly evolving. New technologies, business models, financial reporting standards and regulatory changes introduce new challenges to ethical decision-making. Professional accountants must adapt the principles within the Code to these changing circumstances. Keeping pace with evolving standards and regulations while ensuring ethical conduct requires a commitment to continuous learning and a proactive approach to staying informed.
- Pressure and professional judgment − Professional accountants often work under tight deadlines and intense pressure to deliver accurate financial reports and analyses. This pressure can sometimes lead to compromised ethical judgements, such as overlooking potential discrepancies to meet a deadline. Maintaining the highest ethical standards in the face of such pressure requires strong professional judgement and a commitment to upholding integrity.
- Enforcement and reporting − While the Code sets the standards, enforcing its provisions can be challenging. Reporting ethical violations can have far-reaching consequences affecting careers, professional relationships, and even legal liabilities. Deciding when and how to report violations while protecting one’s own interests and maintaining professional integrity is a complex decision that professional accountants may face.
NAVIGATING THROUGH ETHICAL DILEMMAS
Navigating through ethical dilemmas is not easy, and it is therefore important that you have your toolbox available when needed. This could be:
- Maintaining a copy of the Code of Professional Conduct that is easily accessible.
- Referring to appropriate guidance documents. SAICA has technical resources to support members on the website.
- Keeping up to date with amendments to the Code. SAICA communicates amendments to the Code on a regular basis through email and webcasts.
- Consulting (as required) with −
- Others within the firm or employing organisation
- Those charged with governance
- A professional body. SAICA has a member portal where members can log queries and receive guidance. Refer to SAICA’s website for the member portal
- A regulatory body
- Legal counsel
The Code in the accounting profession is not merely a set of rules; it is a reflection of the values that underpin the responsibilities and obligations of professional accountants. It guides professional accountants’ conduct, decision-making and interactions, ultimately influencing the credibility, trust and reputation of the profession. By upholding the fundamental principles of integrity, objectivity, professional behaviour, confidentiality, professional behaviour and due care, professional accountants contribute to the stability and growth of the financial ecosystem, earning the respect and trust of those who rely on their expertise.
Natashia Soopal CA(SA), Executive: Ethics Standards and Public Sector