Question:
Discuss About The Discipline Its Members Differently Scrutiny?
A company’s code of ethics and professional behaviour include the principles every staff member is expected to follow. Such principles are aimed at guiding the decision-making and behaviour at the workplace. Typically, such codes considerably impact workplace practices, as the employees will comply with these principles while working, however, the accounting of impact a code has, is based on how the company uses it. This is because, without strict execution by the business, the employees may not even be aware of the ethics code in the company. Hence, it becomes the responsibility of people in authoritative positions, like a manager, to lead by example so that their subordinates can learn from them and inculcate ethics in their work (Baker & Comer, 2011). In the present report, a financial accountant working at a managerial level has been interviewed face-to-face to understand how the code of ethics impact their work life and attitude toward work. This financial accountant is employed with a private firm. Besides this, research has also been conducted on a professional accounting body to comprehend the issues that arise from it and how it polices its codes.
As the goal of the present report is to investigate how professional behaviour and ethics impact individuals in their real work life, hence below mentioned interview questions have been formed:
Q1. Does your company have a well-documented code of ethical conduct and professional behaviour?
Q2. If your answer to the above question is “Yes”, then what is your awareness level regarding concerned policies and procedures?
Q3. Does your company require ethics training?
Q4. Are there adequate procedures in place to report an unethical behaviour?
Q5. Is ethical behaviour a norm in your company?
Q6. If yes, how does it impact your working attitude and professional behaviour?
Q7. Is unethical behaviour penalized in your company? What are the implications of breaching the company’s codes?
Q8. Does the presence of a penalizing system impact how you approach ethics at the workplace?
Q9. Is ethical conduct rewarded in the company?
Q10. Do the senior managers of the company display high ethical standards?
Q11. What is the amount of pressure you feel in your company to get involved in what is deemed as unethical behaviour?
A1. The company has a properly documented and communicated code of ethics in place. This Code outlines the basic ethical do’s and doesn’t and it also outlines what a member should do when faced with an ethical dilemma. There are several courses of action; one is required to take as per the Code when faced with some ethical issue. Though this does not provide a complete solution to a problem, it definitely guides in decision-making.
A2. My personal awareness level with the company’s Code of Conduct policy is very high. I am totally aware of what is expected out of me in terms of my professional conduct and behaviour. Apart from me, I strongly believe that my colleagues and subordinates are also aware of the company’s policies because it reflects in their workplace behaviour. Moreover, our organization ensures that every member is introduced with the Code at the time of Induction.
A3. Ethics training is given time-to-time because accounting ethics education is seen by our management as a promising remedy for addressing the ethical crisis facing our profession. Despite having a full-proof code of conduct, we also face ethical issues time and again and hence provision of ethics training is imperative.
A4. Yes, there are clearly defined procedures for reporting any unethical or illegal behaviour observed in the company. There are whistleblower resources which an employee can use to bring to notice any such act. The identity of the whistleblower is completely confidential, and hence people do not have a second thought about making waves regarding any such unprofessional conduct. In fact, our organization has set up an Office of Ethics and Compliance for overseeing these matters. Hence, employees are always encouraged to report their concerns.
A5. I would not say it is 100% a norm, but the majority of us try to embody ethics in our workplace behaviour. Most of the managers try to lead by example, and their subordinates try to follow the lead. However, we have not been immune to any unethical or unlawful act. There have been instances when a few people place their self-interests above the professional requirements. They get induced by gifts, self-interest, self-review or familiarity to the client.
A6. Personally, I always stick to ethical norms and rules of professional conduct at work. I stay away from any such thing that can hamper my objectivity and integrity. Moreover, being on a managerial level, I have to set an example for my subordinates. I work with professional competence and due care, always defend the confidentiality of information at hand and comply with applicable rules to avoid doing anything which may discredit my position and profession.
A7. Yes, ethical behaviour is definitely penalized at our company. The case is first overseen by the Office of Ethics and Compliance. The people there look at the severity of the misconduct and then decide a suitable punishment. If the breach is regular, then the employee is given a warning and his work is monitored for a long time. If the violation is severe, the Office takes the case to a review panel in the management, or an independent review panel if the management is at fault. The maximum punishment ranges from suspension to expulsion.
A8. Although I am naturally guided to work ethically, the presence of a penalty system definitely helps me stay away from even the thought committing a wrongful act.
A9. There is a proper mechanism for rewarding people who report unethical misconduct because the information of the whistleblower is kept confidential and hence no one can know reported the issue. However, that individual is definitely appreciated by the management, and this thing is considered during his/her performance evaluation. So, it is not completely the case that there is no motivation behind reporting unprofessional behaviour.
A10. To the extent I know, most of the senior people in my company practice and preach ethical and professional conduct. The managers are very cautious about their position in the company and do not want to disparage it.
A11. I definitely feel the pressure to not engage in any unethical activity because the people around me are also acting in moral ways plus there is always the fear of negative implications associated with the violation.
All through 2001 and 2002, financial scandals in Australia and the USA exhibited how the efficacy of the financial market is underpinned by the assumptions of ethical behaviour and trust of corporate managers. The collapse of firms like OneTel and HIH Insurance in Australia, and Global Crossing, Enron and WorldCom in the US has resulted in a loss of trust in the system of financial accountability and reporting by the investing parties. The CPA Australia was researched to identify the ethical issues facing the accounting profession and how it polices its codes (BPP Learning Media, 2016).
In discharging their professional duties, members of the body, i.e. the CPAs are expected to comply with auditing and accounting standards outlined in the AASB respectively. They are also obligated to conform to tax rules promulgated by regulatory and government bodies. Like in other professions, some accountants face ethical dilemmas. Most cases of violations could be categorized as either regular ethical dilemmas which are simple to resolve or as complicated cases who resolutions are difficult to achieve (CPA Australia Staff, 2013). These ethical dilemmas include payroll confidentiality, conflict of interest, fraudulent or illegal activities, pressure from the top to inflate earnings, and customers requesting manipulation of financial records to name a few. Compliance with the basic principles and code of ethics laid down by the Accounting Professional and Ethical Standards Board (APESB) might be potentially threatened by a wide spectrum of circumstances (Leung, Coram & Cooper, 2012). Several threats belong to the below-mentioned categories:
Self-review – E.g. discovering considerable error while re-evaluating work of professional accountant; reporting operation of financial systems after being part of their design and/or execution; prepared the initial data utilized for generating records which pertain to the engagement (Marley & Pedersen, 2015).
Self-interest – E.g. monetary interest in a client or having joint monetary interest with a client; contingent fee pertaining to an assurance engagement; having close ties with the client, likely future employment with the client (De Cremer et al., 2011).
Familiarity – E.g. an engagement team member having immediate family or close relations with client officer or employee, who can exert significant and direct influence on the subject matter; accepting preferential treatment or gifts from client, unless the gift value is evidently immaterial, long-term connection of senior people with assurance client (Shafer, 2013).
Advocacy – E.g. promoting shares in a listed company when the company is a client; serving as an advocate on the part of an assurance customer in disputes or litigation with third parties (Bazley, Hancock & Robinson, 2014).
Intimidation – E.g. being coerced with litigation, replacement or dismissal pertaining to client engagement; being forced to decrease the amount of work wrongly to mitigate fees (Cunningham et al., 2014).
Exhibit 3 emphasizes the different violations done by practising CPAs. As identified by Tidrick, there were 327 cases where the institute penalized members between 1980 and 1990. Of these:
170 ethics cases were identified from Jan 1994 to December 1995 in 32 states in the country by Badawi and Rude who surveyed the body’s CPA letters during that period. The most often breached rules were:
Of these 170 cases, 38 involved crime and criminal-related convictions, spanning from making incorrect claims to a federal agency to mail fraud to conspiracy and bank fraud. Rest of the cases involved everything from hiding assets, impediment of justice, money laundering, bribery and theft, and even murder (Trevino & Nelson, 2016).
APESB, is an autonomous body which was set up in 2006 by CPA Australia and Chartered Accountants in Australia and New Zealand, to reorganize its Rules of Conduct and set up the APES 110 Code of Ethics for Professional Accountants (Code) in 2006. This is the code that members of this professional body know and follow now. Exhibit 2 states the contents of the Code which has two segments. The first one titled Principles has six articles concerning the basic norms of ideal conduct, widely highlighting the responsibility of accounting profession to the clients, public and other practitioners (Bennie & Mladenovic, 2015). This Code is binding on every practising as well as non-practising CPA who is a member of the Institute. They should conform to the majority, but not all, of the norms mentioned in the conduct in every type of engagement or be ready for disciplinary actions.
Besides entering a Joint Ethics Enforcement Program, the CPA Australia, as well as several state CPA societies, have an ethics committee for hearing complaints. Both these societies can also act autonomously on a case or can consent to taking the case to CPA Australia trial board panel. This panel has the authority to: a) acquit the member; b) admonish the member; c) suspend the membership for two years; and d) expel the member (Van Akkeren & Tarr, 2014).
The CPA Australia bylaws (not the Code) rule automatic expulsion of members who have not file tax returns, committed a crime or assisted in the preparation of fraudulent and false tax returns. CPA Australia penalties for ethical misconduct and wrongdoing range in severity. In several cases, the panel suspends or reprimands a CPA, obligating the member to finish a definite number of hours of continued professional education. The objective is to help the member acquire a suitable degree of professional awareness and competence (Bampton & Cowton, 2013). Though aimed at a positive resolution, the CPE demands are same as “serving time”. People who do not meet these CPE conditions are made responsible for “acts discreditable to the professions” and debarred as “second-time offenders”.
State accountancy boards also have their individual norms of conduct and panels for enforcing them. These boards can reprimand a member, but, they can also revoke or suspend the license to practice. This is a very severe penalty because the punished individual will no longer be able to use the title “CPA” and hence will not be able to sign audit reports. On the other end, when the CPA Australia expels a CPA, it does not prevent him/her from continue practising accounting (Abbott, 2014). However, the body can suspend or expel the membership, and the person should eliminate any mention of his/her connection with the CPA Australia or the state’s CPA society from their website, letterheads and other materials used in the office. CPAs whose violation of ethics need some kind of corrective measures might also be subject to more monitoring by the body. For instance, the CPA may have to recruit an unaffiliated accounting company to audit the former’s work, like financial statements he made for a customer. Such monitoring might go on a frequent basis for a long-time period (Henderson et al., 2015). ;
While there are some differences in the way professional bodies and individuals working in accounting profession adhere to codes, there are some similarities as well. It is believed that supported by a robust ethical culture, every accountant could be immensely effective in playing his/her key role – drawing on both their comprehension and training of professional ethics, plus their abilities in auditing, assessing and acting on management information – to help their companies and clients in achieving long-run sustainability. While some accountants may get induced to go the unethical way, professional bodies are always very strict as far as their rules are concerned (Cameron & O’Leary, 2015). Compliance with these rules is their top-most agenda, and they have stringent measures in place to police any wrongful behaviour.
On the other hand, some accounting professionals may not keep their interests first before that of their profession and hence not follow the ethical path. It could be alluring to lie low and not respond as required when faced with an ethical issue. However, for accountants with high integrity, they owe it to their profession, career and community to react to breaches they may find rather than being complicit in illegal activities (Knechel, & Salterio, 2016). Barriers to proper adherence to codes of professional conduct could be a) the organization does not have a well-documented and communicated code of standards and ethics; b) if there is a code of ethics, it is not advocated by the leaders; c) the individual does not understand the code of ethics and has ethical dilemmas; and/or d) despite awareness of code of ethics, the person chooses to give priority to self-interest (Muzio et al., 2016).
Thinking about my career in the accounting industry, I have come to realize that as an Accountant, I will be handling a broad spectrum of sensitive and privileged data in my routine tasks. Moreover, because I will be working with numbers which may have implications on stock prices and bonuses, I might also be faced with ethical issues. However, I need to make sure that I never let such dilemmas get to me and I always follow the path of ethics. This is because, if during the very beginning of my career, I indulge in fraudulent activities or get induced, I may face serious repercussions like being suspended or even expelled (Sheehan & Schmidt, 2015).
In order to always perform in the correct interests, if ever I am faced with a dilemma or issue, I will first identify whether it is regulated by policy or law. For this, I would look up the Code established by the APESB plus the policies and procedures book of my employer. These will help me if I am not certain about the ethics of a case I am confronting. Secondly, I would assume an outsider’s view, i.e. when I was a student, what I learnt about accounting ethics. Separating the issue from the professional and personal feelings will help me view the issue in a different light (Half, 2017).
I will also think about the stakeholders, people or companies that will be impacted by the issue or by my decision to take or not take a certain action. Lastly, if I am required to report an illegal or unethical conduct of my employer or colleague, I would seek legal counsel – either from an autonomous firm or in-house – or will resort to the whistleblowing resources of my company. Though an in-house protocol may not provide a sure-shot solution, but it will certainly direct my decision making (Baïada-Hirèche & Garmilis, 2016).
Conclusion
Accounting offers vital and valuable services to both private and public sectors – essentially to everyone who utilizes information. These services are normally discharged by honourable, qualified professional with a robust sense of public duty. Nonetheless, similar to other professions, there are unethical professionals whose behaviour must not belittle the whole profession (Mescall, Phillips & Schmidt, 2017). For regulating such critical profession and assure its integrity, people licensed to practice accounting are subject to rules and laws of the professional bodies like CPA Australia and State Boards of Accountancy. Such boards are government bodies comprising of non-CPA and CPA officeholders. CPAs who work for private companies are also subjected to the code of ethics of these groups. Although there is not sufficient literature on this matter, violations of accounting codes are being looked into, judged and being exposed publicly. The penalties for violations range from suspension to expulsion (Shafer, Simmons & Yip, 2016).
References
Abbott, A. (2014). The system of professions: An essay on the division of expert labor. University of Chicago Press.
Baïada-Hirèche, L., & Garmilis, G. (2016). Accounting Professionals’ Ethical Judgment and the Institutional Disciplinary Context: A French–US Comparison. Journal of Business Ethics, 139(4), 639-659.
Baker, S. D., & Comer, D. R. (2011) “Business ethics everywhere”: An experiential exercise to develop student’s ability to identify and respond to ethical issues in business. Journal of Management Education, 36, 95-125.
Bampton, R., & Cowton, C. J. (2013). Taking stock of accounting ethics scholarship: A review of the journal literature. Journal of Business Ethics, 114(3), 549-563.
Bazley, M., Hancock, P. & Robinson, P. (2014) Contemporary Accounting PDF. Cengage Learning.
Bennie, N. & Mladenovic, R. (2015) Investigation of the Impact of an Ethical Framework and an Integrated Ethics Education on Accounting Students’ Ethical Sensitivity and Judgment. Journal of Business Ethics, 127(1), 189-203.
BPP Learning Media. (2016) CPA Australia Ethics and Governance: Passcards. BPP Learning Media.
Cameron, R. A., & O’Leary, C. (2015). Improving ethical attitudes or simply teaching ethical codes? The reality of accounting ethics education. Accounting Education, 24(4), 275-290.
CPA Australia Staff. (2013) Auditing, Assurance and Ethics Handbook. Pearson Australia.
Cunningham, B., Nikolai, L., Bazley, J., Kavanagh, M., Slaughter, G. & Simmons, S. (2014) Accounting: Information for Business Decisions. Cengage Learning.
De Cremer, D. D., Dick, R. V., Tenbrunsel, A., Pillutla, M., & Murnighan, J. K. (2011) Understanding ethical behavior and decision making in management: A behavioral business ethics approach. British Journal of Management, 22.
Half, R. (2017) Ethical Issues in Accounting: 4 Pieces of Advice. [Online]. Available through: <https://www.roberthalf.com/blog/salaries-and-skills/ethical-issues-in-accounting-4-pieces-of-advice >. [Accessed on 26 September 2017].
Henderson, S., Peirson, G., Herbohn, K., & Howieson, B. (2015). Issues in financial accounting. Pearson Higher Education AU.
Knechel, W. R., & Salterio, S. E. (2016). Auditing: Assurance and risk. Taylor & Francis.
Leung, P., Coram, P. & Cooper, B. (2012) Modern Auditing and Assurance Services, Google eBook. John Wiley & Sons.
Marley, S. & Pedersen, J. (2015) Accounting for Business: An Introduction. Pearson Higher Education.
Mescall, D., Phillips, F., & Schmidt, R. N. (2017). Does the Accounting Profession Discipline Its Members Differently After Public Scrutiny? Journal of Business Ethics, 142(2), 285-309.
Muzio, D., Faulconbridge, J. R., Gabbioneta, C., & Greenwood, R. (2016). Bad barrels and bad cellars: a ‘boundaries’ perspective on professional misconduct.
Shafer, W. (2013) Ethical Climate, Social Responsibility, and Earnings Management. Journal of Business Ethics, 126(1), 43-60.
Shafer, W. E., Simmons, R. S., & Yip, R. W. (2016). Social responsibility, professional commitment and tax fraud. Accounting, Auditing & Accountability Journal, 29(1), 111-134.
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Trevino, L. & Nelson, K. (2016) Managing Business Ethics: Straight Talk about How to Do It Right. John Wiley & Sons.
Van Akkeren, J., & Tarr, J. A. (2014). Regulation, compliance and the Australian forensic accounting profession. Journal of Forensic and Investigative Accounting, 6(3), 1-26.
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