Posted by Paul McDonald on Wednesday, October 8, 2014 - 18:33 | Follow me
Accountants handle a wide range of privileged and sensitive data in their daily tasks. And because they work with numbers that can have repercussions on bonuses and stock prices, they may face ethical issues more often than, say, actuaries or budget analysts.
The ethical dilemmas that accountants sometimes face include conflicts of interest, confidentiality, illegal or fraudulent activities, pressure from management to inflate earnings, and clients who request manipulation of numbers.
When confronted with such dilemmas, accountants need to have the ethical wherewithal to make difficult yet principled decisions. If you find you’re struggling with an ethics question in your accounting job, here are four steps you can take:
1. Identify potential legal issues
Explore whether the issue is regulated by law or policy. The source for information could be your employer, your professional association, a governmental regulatory body such as the U.S. Securities and Exchange Commission — or all of the above. The American Institute for Certified Public Accountants (AICPA) has a Code of Professional Conduct, and Financial Executives International has a Code of Ethics. Both are excellent resources if you’re uncertain about the ethics of a situation you’re confronting.
2. Take an outsider’s view of ethical issues
Consider how you would feel if you saw the issue in the newspaper or heard about it from a friend or family member. Sometimes, separating the issue from your personal and professional feelings can help you see it in a different light.
3. Identify the parties affected
Think about the people, companies or stakeholders who could be affected by the issue — or by your decision to take or not take action. Remember that failure to do something, such as not reporting fraud, can have just as much of an effect as if you yourself were the perpetrator.
4. Get professional advice
If you need to report the unethical or illegal behavior of your accounting colleague or employer, seek legal counsel — either in-house or from an independent firm — or access your company’s whistleblowing resources.
While a person’s professional ethics are certainly important, organizations should also have their own code of ethics and make sure all employees are familiar with it. A CGMA survey of nearly 2,000 finance professionals showed a 10 to 15 percent increase since 2008 in the number of organizations providing ethics training to their employees. The survey also found that more companies are collecting and reporting ethical information — almost a 20 percent increase since 2008. However, in spite of the increased focus on ethical behavior, the professionals surveyed also reported increased pressure to act unscrupulously in recent years.
If your employer does not have a code of ethics, you and your team should advocate for one. An effective protocol will not provide a solution for every scenario, but it will act as a guide for the decision-making process. When creating a code of ethics from scratch, include guidelines on acceptable behavior, examples of ethical dilemmas and solutions, implementation detail, and the consequences for misconduct.
It can be tempting to lie low and not make waves when confronted with accounting violations. However, you owe it to your career, your profession and to society to act on what you discover instead of being complicit in fraudulent activities.
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Editor's note: This blog post first appeared in the CGMA Magazine Update newsletter from the American Institute of CPAs (AICPA) and was updated in 2016 to reflect more current information.