Every so often, people get to hear news about flaws in financial reporting and auditing among companies all over the world, thereby putting the accountancy profession at the forefront of public scrutiny.
Financial scandals such as the Enron and WorldCom, which revolved around fraudulent transactions involving large sums of money, causes public distrust on the profession and puts into question its ability to actually and consistently uphold integrity.
This scandal is the main reason for the passing of the Sarbanes-Oxley Act which focuses on building a reliable internal control system through a top-down approach, thereby magnifying the responsibility rested upon a company’s management to maintain integrity in their financial systems.
However, the Sarbanes-Oxley Act is not the first and only lawful guidance for accountants to maintain integrity. Accountants know that their profession would bind them to what is called the Code of Ethics for Professional Accountants.
Sadly, this comprehensive list of how accountants should carry out their profession sometimes fades into simple memory work that is soon overlooked and ignored. How then can professional accountants live by what they already forgot?
Here are practical ways by which accountants can apply the Code of Ethics to maintain integrity in their workplace:
Professional accountants should exercise all diligence necessary to avoid being associated with a client with questionable management, background, or financials. The first step towards this awareness is fundamental – reading daily news while having breakfast. For smaller clients, conduct thorough research and a background check first and devote ample time for an initial assessment of the client’s historical financials.
Confidentiality Of Information
Professional accountants are well-trusted by their clients, so more often than not, they would have access to information which is very valuable and highly confidential such as their client’s high profile dealings as well as the real story behind their financials.
Professional accountants cannot just disclose this information to the public, even to the ones closest to them. The only time they can divulge information is when they are called to do so by the courts of justice.
Conflict Of Interest
Professional accountants need to avoid dealing with companies wherein they have relatives or close friends sitting in the board of directors or management as this would pose a threat to the accountant’s objectivity later on. More so, they cannot audit a company wherein they personally sit as part of the finance team or management. Professional accountants are mandated to be independent of their clients especially when they provide audit services.
Confidence In The Expertise
Even though professional accountants are called to maintain continuing professional education, there could be accounting areas or topics which are not their expertise. For example, tax accountants are experts in anything about taxation but may find difficulty when faced with an auditing engagement. Not that they don’t know anything about it, but accountants do have their specializations.
Professional accountants need to be honest about their expertise and have the humility to refer the client to other experienced accountants who can give more fitting and expert opinion.
Professional accountants should never pay or receive referral fees or commissions amongst themselves unless such monetary payments have been made known to the client, evidenced by written agreement. Concerning gifts being received by professional accountants because of the services they offer as such, they can only accept those which are insignificant in the amount from the perspective of a third party and should not be made under the table.
Aside from this, professional accountants should not just endorse or advertise an accountancy firm without regard to the manner of marketing. Accountants cannot make exaggerated claims on the services offered and more so, cannot put other auditing firms in a bad light in front of the public.
These are only a few of the instances wherein the Code of Ethics bind the professional accountants in a manner that would protect their integrity. In the business world where it becomes effortless to manipulate the numbers, we need more accountants who can stand their ground in living by professionalism.