Maintaining ethics leadership

More than half of accounting professionals have personally witnessed unethical behaviour in the past three years, and one in four have come under pressure to act unethically, according to a new ACCA study into ethical challenges in a rapidly changing world.

The report, The new era of ethical challenges for professional accountants, draws on the findings of a survey of more than 1,100 finance professionals worldwide. It aims to assess the impact of globalisation, regional developments and increased regulatory scrutiny on the ethical responsibilities of accountants, and gather insight into the support that ACCA members might need today and in the future.

Growing complexity

It is essential that the accounting profession maintains its reputation for high ethical standards – a reputation that has been dented by a succession of business scandals in recent years. It is clear from this report that the ethical challenges that professional accountants face every day are growing more complex.

‘This complexity,’ says the report, ‘demands a nuanced understanding of ethical issues for professional accountants – who must navigate diverse regulatory requirements and ethical norms across continents, further complicated by advancing technology.’

The report reveals that 55% of accounting professionals surveyed have witnessed unethical behaviour in the past three years.

Male accountants were more likely to say they have witnessed unethical behaviour than their female colleagues – and were much more likely to come under pressure to act unethically. While 24% of all respondents said they had come under pressure to act unethically, just 19% of female respondents agreed, compared with 27% of male respondents.

Drivers

When asked what factors they felt were contributing to breaches of ethics and independence in accounting firms, respondents identified three main drivers:

• Financial pressure. The pressure to meet financial targets and retain high value can be intense. Conflicts of interest from providing multiple services to the same client were also identified as a threat to objectivity and independence.
• Workload pressure. Tight deadlines, understaffing and excessive workloads can contribute to a temptation to cut corners on due diligence and oversight, and compromise ethics. Some respondents added that client demands and expectations can have an influence on the behaviour of auditors.
• Organisational controls, culture and leadership. Lack of leadership commitment to integrity, prioritisation of profits over ethics, and a lax ethical culture are all seen as enabling unethical practices. Weak internal controls and ineffective monitoring allow unethical behaviour to go unchecked. Respondents also pointed to insufficient training around ethical requirements and what constitutes unethical behaviour as a risk.

Some respondents also raised concerns about the complexity of regulations and standards, and inconsistent interpretation of requirements. But there was also an awareness that individuals have a responsibility to ensure their own personal financial interests or career aspirations do not override their professional obligations.

Respondents were asked to identify the biggest three ethical challenges they face today. Fostering an ethical leadership and culture was the top priority for 41%, followed by sustainability-linked challenges (such as operating sustainably and balancing profitability with sustainability), and AI and technology.

On this last point, respondents were particularly concerned about ensuring the unbiased, transparent and accountable use of AI in decision-making, and with balancing the benefits of AI with potential job displacement.

Audit vs non-audit

The report highlights a marked difference in the ethical priorities of auditors and non-auditors which, it argues, reinforces the need for a tailored approach to ethics.

While auditors and non-auditors had some common ground – such as the impact of evolving technology on ethics and a feeling that they are unprepared for what is to come – their views diverged in a number of areas.

Auditors, for example, said leaders should set the ethical tone from the top, and stressed the importance of a strong ethical culture within auditing firms. Non-auditors said it is the collective responsibility of all employees to uphold ethical standards.

The two groups also differ on how ethical behaviour should be monitored and enforced. Auditors called for stronger organisational monitoring mechanisms, along with robust enforcement. Non-auditors said regulatory frameworks and strong internal controls are needed to support ethical behaviour.

They also have differing views on how ethics should be taught. Auditors emphasised the value of professional development, including scenario-based training (although some believe ethics is inherent and cannot be taught). Non-auditors put their faith in accessible and affordable ethics education integrated into CPD courses as a core component.

An overwhelming majority of respondents (94%) said they have the skills needed to identify, assess, evaluate and minimise threats, and a similar number (95%) agreed that ongoing CPD is essential to maintaining their skills in this area. But the differences of opinion between auditors and non-auditors, along with a variation in ethical priorities depending on geographical region, says the report, ‘highlight the need for customised ethics education and support systems to effectively address the profession’s diverse and evolving ethical challenges’.

Three-quarters of respondents to the survey said the ACCA code of ethics and conduct is their main support when facing an ethical challenge, but the report acknowledges there is ‘a clear demand for more practical, accessible ethics training and real-time support mechanisms to help accountants navigate complex ethical dilemmas’.