Challenges and difficulties confronting the Profession’s Ethical future
In the last issue I dealt with the ethical way ahead for the profession. Similar to endless literature on the subject I laid out some ideas as to what needs to be done for a successful future. The challenge however is putting the words into action. In this article I dare to delve a bit deeper into the actions, the challenges and the difficulties of how to take the profession forward ethically.
Driving along a country road abroad recently I heard the radio announcer claim that ‘the greed for money leads to destruction but so does the lack of it’. This I thought is at the base of every ethical issue that exists. We do not want to be caught lacking money and when we overcome this challenge we press on and create yet another challenge, the need for more money.
A damaging challenge is that of indifference. Being ethical is not at the forefront of our mind. There are more important things to achieve such as results, wealth, success, fame, travel and all the needs that we create more than the needs that we really need. Ethics stands in the way of these achievements.
Ethical issues present themselves regularly. They can be regarded as ethical issues and dealt with as such. Alternatively they can be viewed as business issues requiring business decisions excluding any other form of ethical consideration.
There is the challenge of knowing you’re wrong but the urge or pleasure of accomplishment is stronger. Like eating or speeding. While enjoying it one tends to forget the risks and the dangers and the damage to others.
Another challenge is that of relying on ethics as an inherent element in our nature, unseen but there, which will govern all our actions without us necessarily needing to think about it. We justify our actions by depending on this and if it is good for me, it must be my ethics saying it and it is therefore right. This mentality also lures man into playing down all situations as not serious enough to stop. For example a professional accountant might think that omitting important information is less harmful than manipulating numbers. Who says so?
The difficulty of self-awareness, knowing who we exactly are and what our role in society is. The pace of life, unforeseen problems and circumstances, competition, fear of failure, ambition, they all come in the way of a serene reflection of who we are and what we stand for in our profession and as professional persons. The real, beautiful objectives of our abilities, technical, assisting, doing the right thing, knowledge, objective reporting and other virtues of our profession, tend to be palled by the presence of the above distractions.
It tends to be smarter to be deceptive rather than correct. The temptation is that helping clients obtain what is not theirs by means of clever ideas present more excitement and financial reward than keeping the client on the straight and narrow. Success fees may lead to such a situation and as such should be approached with maturity and a sense of responsibility.
Auditing is really an opportunity to independently give the client an ethical examination about his conduct of the business and reporting to society at large. Pressure to have the examination compromised is a reality of life and unavoidable. What is avoidable is the auditor’s giving in to such pressures and compromising his professionality without antagonising the client. That is the skill of an experienced auditor guided by only wanting to do good, confident in his abilities and skills and a believer in the long term. That is some real valuable service to clients.
Opportunism is very difficult to beat. It however harms the individual, the client and the profession. Man tends to hold himself out to know more than he actually does, grabs an opportunity for an engagement without being prepared for it, thinking that once he starts he will find the way, only to realise as time lapses that he is under unbearable pressure and cannot cope, the client is not served and the profession whom the accountant is representing is unfairly blamed for the failure. Unless we have a solution at the outset of an approach we should not enter into agreement with a client for the provision of a solution.
Self interest comes in the way of solidarity. The accountancy profession is all about solidarity. Clients call us because they need our assistance and our professional technical solutions to their problems. In so doing we show solidarity with the law maker, the standard setter, the user of financial reports, the banker, the investor, the employees and all stakeholders we can possibly think of. Lack of sense of solidarity in the widest sense would impair our societal role and the long term survival of our profession.
We are technical but also human. We interact with all members and staff of our clients. I remember very fulfilling moments during my career, interacting with client personnel on factory floors or front desks or warehouses and all sorts of environments, hostile or friendly, and always found them to be a source of knowledge, experience and insight so useful and necessary for perfecting our services. We do not only interact with those who pay us and understand us in the board room and CFO’s office.
It is good to see our professional structures more open to talent and acknowledgement of dedication with wider corridors of career paths than the narrow ones prevalent three decades ago. The future of the profession, like in many other areas, lies in the employees all the way from young technically charged graduates to the more mature and experienced senior staff and management. The tendency is for the owners to unknowingly and unwillingly come apart from the employees due to potentially different objectives. Indeed the objectives converge and there is no future for a profession run only by owners.
The profession is very active in assessing control and financial reporting environments at the organisations which they audit or advise. It is not so prevalent to assess the ethical tone at the top even if there is awareness of the importance of such an element. This is either relegated or overtaken by ostensibly more important issues. The profession would do well to also heed ethical culture issues when conducting engagements. It is pertinent to note in this regard that ethical culture does not consist solely of codes, statements of ethical values, ethical training, hotlines, and incentives but also of exemplary behaviour, discipline and active engagement from the top in matters to do with ethical consideration.
The opportunity for bending financial reporting justified by stretched interpretation of standards is rife. The biggest danger lies in emerging economies but this does not exclude countries in the European Union. It is good that standards have become more stringent even if I for one am not a sympathiser of prescriptive standards and prefer them to be principles-based. It remains a fact of life that pressure for manipulation in specific situations may force persuasion or worse, coercion on professional accountants. Independence and resilience in the long term interest of society and the client remain the solution for lasting respect towards the profession.
It has become a practice to adopt accounting for ethics by organisations in the wake of recent debilitating scandals. It is however already felt that it is a matter of time before we start cooling off such a practice given the insufficient legislation and regulation in this area.
The world of business is extensive and so are the issues that come with it. The accountancy profession is directly (even if not exclusively) connected with the business world. The business issues become the profession’s issues. The recent years’ increase in anti-corruption regulations, whistle-blowing regulation, governance reporting and such likes are a stark indication of the prominence of issues like bribery, unethical behaviour, false reporting and non-disclosure, wrongful trading and withholding information from the public. Accountants have to wade through an infinite pool of such issues and will be continuously in need of authoritative guidance and assistance. This is available, and standards like IFAC’s Code of Ethics for Accountants will continue to flourish. The pillar of these standards is the concept of threats and safeguards which guide the accountant in recognising the threats and use professional judgement to devise the necessary safeguards without necessarily following checklists to feel safe and protected by blind compliance. The problem though is not the availability of guidance but whether members of the profession turn to such guidance as a matter of direction rather than only during distress. In this whirlwind environment of business and development it is easy to forget about the ‘less relevant’ ethics. The future of the profession depends largely on continuous awareness of ethical standards over and above our conscience.
Another challenge is the importance that the leaders of the profession give to the subject of ethics. We have seen in recent years a tide of activity by Institutes and Associations in favour of members ethical conduct. Again despite all the good intentions these bodies may become overwhelmed with issues of higher importance such as guiding members through labyrinths of legislation and technical standards, global issues and regulation. When it comes to ethics, structures are in place but, I feel, more to transpose ethical rules than to uphold the high moral ground of day to day ethical performance of its members. The latter seems to be taken for granted.
This is by no means an exhaustive list of challenges facing the profession in approaching an ethical future. A lot depends on the ethical mentality, sense of discipline and control of its members. However I do wish to leave you with some provoking thoughts from Pope Francis’ 2013 Exhortation Evangelii Gaudium which I consider to be relevant to all of us in the practising world:
Of course these are much deeper thoughts than I may be implying here. However I wish to prompt you that beyond pronouncements by accountancy bodies there is other ethical guidance which can help us immensely with facing challenges and difficulties; for the good of the future of the profession amongst other things.
“Unethical business practices harm organisations and economies. Large-scale business failures such as Enron-as well as the more recent failures related to the global financial crisis-highlight the consequences of unethical business practices and amoral management. Professional accountants, as stewards of transparency and trust, and subject to a professional code of ethics, have a key role to play not only in upholding but in encouraging and influencing ethical behavior and decision making within their organisations.” (IFAC Global Knowledge)