Question

What are the ethical responsibilities of an accountant?

Answer 1

The fundamental Ethical responsibilities for accountants can be found in all the handbooks of the major accounting bodies and are basically the following:

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

In the following paragraphs we will look at each principle and dwell upon certain practical issues that many accountants face during their daily working life:

Integrity:-

1. Accountants are expected to be persons of strong principles and high moral values for whom honesty and integrity always come first. Indeed an accountant whose integrity is put in doubt can consider himself a write-off in our profession since it is a sine qua non characteristic.
2. In their daily routine accountants should lead by example and practice what they preach so that their staff and colleagues may follow in their footsteps. This level of integrity needs to be applied consistently, fairly, and equitably irrespective of the race, sex, nationality, religion or any affiliation of the person concerned. Judgements should not be affected by undue pressures from influential people nor by bribes or favours.
3. The most important feature of integrity is that the accountant can always walk with his head held high and that he does not feel afraid or intimidated in passing judgement or expressing opinions. Moreover he should not be scared to stand up and be counted whenever necessary even when nobody else finds the courage to speak up.

Objectivity :-

1. This principle can be put to test by subjective and strong opinions expressed by people occupying high positions. On their part, accountants need to reach their own conclusions free of any bias, even at the cost of going against the currents of public opinion.
2. Accountants should not rush in reaching their conclusions and they need to reflect carefully and evaluate both sides of the coin. People can be looking at things from a totally different perspective and still bring up seemingly valid arguments. This is in fact seen in many politicians who sing the praises of one side and demonise the other. Actually, counter-arguments to biased positions need to be built up with patience and be carefully articulated so that the accountant can put himself in a strong position to win the argument without giving rise to unnecessary aggravation. This would enhance his reputation of being fair, strong, but yet objective.
3. It is a well-known fact that whereas entrepreneurs tend to be generally over optimistic in justifying their ambitions and projects, accountants tend to be over cautious in the knowledge that an error in being overly optimistic can cost dearly. At the end of the day accountants need to call a spade a spade and yet demonstrate that there is no hidden agenda against anyone or anything. The ultimate respect for the accountant is gained through the adoption of a balanced and fair approach.

Confidentiality :-

1. One of the most sensitive areas where an accountant has to show the highest degree of ethical behaviour and discretion is with insider information. This matter acquires a higher significance in the case of public companies. The accountant has to be the main guardian of sensitive financial information and he therefore needs to prepare, circulate and explain the appropriate guidelines so that whoever is exposed to such information fully understands the relative importance and implications.
2. Another sensitive issue is that relating to remuneration packages where leakages of information can disrupt a harmonious organisation and give rise to jealousies, piques and resignations.
3. Price negotiations with suppliers and contractors submitting tenders for projects can induce these parties to offer various kinds of bribes and sweeteners and the accountant needs to be very vigilant for any sign of such illicit behaviour. Other areas where confidentiality is crucial are trade secrets, intellectual property, distribution lists and employee details, all of which are also vulnerable to these kinds of situations.

Professional behaviour :-

1. Many a time the accountant is assumed to be the dull and nerdish type. While an accountant should always use good manners and etiquette he should also strive to be an interesting person with a pleasant and outgoing personality that belies this stigma. Such a disposition would help him integrate much easier with other members of the organisation.
2. Certain situations make it hard for the accountant to retain a professional behaviour. Living a life filled with deadlines compounded by an ever-changing regulatory environment, the accountant’s resilience is tested to the limits. It is however important that in such situations he remains calm and composed since otherwise he could transmit the wrong signals down the line.
3. Professional behaviour is also expected from an accountant in meeting prescribed deadlines, providing advice, compiling reports, and extending his co-operation whenever necessary. An accountant can win the crowd by delivering whatever he promises on time while at the same time consistently exceeding expectations. This is a characteristic found in many accountants and it is important that it is nurtured on an ongoing basis.
4. The accountant should never try to be a prima donna. On the contrary, he needs to remain humble yet persuasive and assertive. These latter characteristics are not easy to develop especially since most accountants do not receive the appropriate training. Natural aptitudes and experience can help but accountants should be trained to express their views and conclusions in a confident, articulate and convincing manner, particularly when dealing with directors who are normally much more experienced in this area.

Competence and due care :-

1. This is an area in which most employers and clients expect the accountant to be always on top of the situation, knowing everything about his profession including the myriad new technical pronouncements, regulations and compliance obligations being dished out on a regular basis. Since the vast majority of people are averse to financial information, reports, and obligations including tax, many a time they leave it up to the accountant to handle such situations for them.
2. In view of this level of trust placed in them it is important for the accountant to always stay abreast of developments in the accountancy world so that he can alert his clients about the consequential challenges or opportunities that are bound to arise.
3. In a world that is continuously changing and in which an incident in any part of the world can change the ball game in an instant, it is very important that business entities stay abreast of such developments and their potential impact so that they can react to them quickly.
4. The same applies to feasibility studies for new products, projects etc., for which substantial amounts of funds are allocated. These funds can go up in smoke unless the appropriate studies are undertaken in a realistic manner backed up by alternative scenarios to test their sensitivity.

As stated above, many people, including business directors do not relish the idea of reading and even less studying financial reports. The accountant should therefore ensure that he presents his reports in a way that they are easy to follow and understand. Much of this depends on the clarity of the ideas, the way they are expressed and the attractiveness of the wrapper in which they are presented.

Good corporate governance involves adherence to the various legal and statutory provisions and many organisations look upon the accountant to act as the conscience and the champion of compliance that allows directors to sleep well at night without worrying that that one fine day they might find themselves in trouble with the law.