Do the right thing

9 Jul 09
Having a code of ethics becomes even more important in a tough economic climate, to defend against outside pressures

Having a code of ethics becomes even more important in a tough economic climate, to defend against outside pressures

Since 2006, CIPFA members have been subject to the International Federation of Accountants’ code of ethics. The institute formally adopted the code as a standard of professional practice after lengthy discussions with professional colleagues from around the world. It means that the same levels of conduct are to be expected from any member of any accountancy body that is recognised as being of a suitably high standard to join the IFAC fraternity.

Agreement of the principles involved was not easy. Not least of the obstacles to be overcome was the common perception that the term ‘accountant’ equates to ‘auditor’. Yet in many ways, the ethical issues facing a professional accountant working in business are more severe than in the world of practice.

Auditors, both in the national agencies in the UK and in the commercial world, have many checks and balances to ensure the highest level of ethical behaviour.

These range from legal duties set out by statute, through clear, objective requirements that are designed to ensure independence (such as partner rotation), to organisational support structures that would make it difficult for a rogue auditor to get away with unethical behaviour for long.

Little of this applies, at least to the same extent, in the world of the accountant in business or in a finance team in the public sector.

The auditor has one great advantage over the accountant working within an organisation – he or she does not depend directly for employment on any single client. The business accountant can be under extreme pressure from superiors to take unethical actions. If he or she is the senior person in the finance function, they might have limited sources of support.

It is all the more important for this group to have a robust set of principles to turn to that explain the standards with which they must comply.

CIPFA flagged up its adoption of the IFAC code by sending out a booklet, Ethics and you, to every member and student.

It also featured professional ethics on its events calendar, and it was at such an event that someone asked why the institute was addressing the membership ‘on a dead subject’.

It is tempting to reply that if a professional accountant can’t see the need for every member not only to comply with but also actively promote ethical principles, that person is a lost cause.

Ethics is important; it should be part of our DNA. Colleagues and other stakeholders rely on accountants’ professionalism, a term that goes far beyond technical ability. The pressures grow when the economic climate worsens.

The publication of the CIPFA Manifesto is, therefore, very timely (see Steve Freer’s feature, ‘It’s a vision thing’, June 19–25). Previous communications might have failed to show the central role ethics plays in the infrastructure of management.

In the introduction to the manifesto, there is a call to explore ideas that will lead to positive change – better governance, better financial management and better public services.

It raises questions about the way we are governed, and how public money should be managed and controlled. There is a clear desire to improve trust, confidence, openness and accountability.

The manifesto then sets a range of ethical issues within a broad context of performance, improvement and efficiency. The issues include transparency in remuneration and expenses and the development of public confidence through clear and comprehensive communication.

IFAC is working on an updated version of the ethics code, and accountancy bodies will be asked to adopt it in 2010. The principles of the existing code still hold. Most of the changes are details, and relate more to audit than to acccountants in business, but more information will be provided to CIPFA members in due course.

Tom Lewis is assistant director, health, third sector and professional regulation at CIPFA

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