We often think of business ethics, but what about accounting ethics?
The International Ethics Standards Board for Accountants (IESBA) recently issued the International Code of Ethics for Professional Accountants (including International Independence Standards.) That’s quite a mouthful! In sum, it’s a document many accountants have been looking forward to, that will help guide ethics throughout the profession.
IESBA, the professional body behind the revised code of ethics, is often viewed as the standard-setter for the industry. Their recommendations often impact professional codes of ethics in both for-profit and not-for-profit accounting. Many professional groups, including accounting professional groups in the United States, review the accounting ethics recommendations and apply them in their specific recommendations.
The Updated Accounting Ethics: Old-Fashioned Ideas Applied to Modern Accounting
The revised IESBA international code focuses on several key areas of accounting ethics:
- Professional conduct and the concept of “due care”
- Professional behavior
Throughout the revised code, IESBA stresses independence. Accountants must always be independent when performing audits, reviews, or other professional services. This ensures that accountants won’t be swayed by personal or professional ties to those who request their services. They can review facts and figures objectively and provide clear, unbiased guidance if they remain independent.
The revised code stresses independence and suggests the so-called ‘third party’ test to determine whether or not circumstances meet the test. For example, consider all appearance concerns when determining if a situation meets the third-party test. Is there any appearance of bias, conflict of interest, or personal ties to one’s work? Would a neutral third party, upon viewing the situation, agree that the relationship between accountant and client meets this test?
Only by keeping one’s work completely free of all biases and ties can accountants offer their best advice to clients. A nonprofit client, for example, depends on their accountant for unbiased audits that will eventually be published as part of their due diligence for potential donors. It’s important for all to ensure a fair, just and unbiased audit, but perhaps even more so for nonprofits who depend on public trust and goodwill.
Professional Conduct and Confidentiality
Like a doctor or lawyer, an accountant also has a duty to provide professional conduct, due care, and confidentiality. For clients, this means they can trust that their accountants will behave honorably with their private information. “Due care” means that care and attention will be applied to an accountant’s work, so that, to the best of their knowledge, their work has been completed to professional standards. Yes, mistakes may be made, but not intentionally. Accountants have a responsibility to their clients to keep abreast of new tax laws, accounting standards, and other changes that impact their business and that of their clients.
Lastly, accountants must maintain confidentiality over all records, information, and financial information provided by their clients. Confidentiality forms the backbone upon which accountants and clients build long-term relationships. It ensures that clients’ information is protected and secure from competitors and others who should not access it.
Accounting Ethics Ensure Consistency
The new accounting ethics published by IESBA ensure consistency in the accounting profession’s actions and behaviors worldwide. For accountants, it offers them a rubric from which they can build an independent practice that meets the needs of their clients. For clients, it provides peace of mind and establishes expectations of duties, responsibilities, and relationship frameworks. Accounting ethics are an integral part of the profession and the new ethics provided by IESBA make a big difference.
At Welter Consulting, we believe strongly in shared ethical frameworks that guide our work and our clients’ expectations of us. Our goal is to bridge people and technology together for practical solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.