The Accountant in Society
It does not matter where accountants carry out their work from. It doesn’t matter what means you use to work. What matters is that you reach your destination safely, punctually, steadfastly and pay due consideration to the interests of others.
The notion of Accountants as a new profession in Malta at the middle of the last century was that of someone who keeps books and later also prepares the tax return. Whilst the original notions remain, today’s notion of an Accountant is far wider and more sophisticated.
Getting here was arduous. The business world has positively changed the way people live today, albeit sometimes hurting people in the process. It has also changed the Accountant’s role from one of detecting, to that of preventing, damage to society through unethical practices. Today’s Accountant is surrounded by volumes of standards, rules and regulation which channel the members of the profession into a narrow band of how to do things. This however by no means narrows the variety of disciplines that Accountants engage in, but a red line of ethics runs through all that they do. So for instance if Accountants maintain books of accounts they are prohibited from also auditing them and if they advise on a key number in the balance sheet they cannot then also provide assurance thereon unless they have all the necessary safeguards in place.
This state of affairs has not dampened the Accountants’ character though and their sense of judgement based on their extensive professional training and experience remains of undeniable value to business owners and company directors who report to society on their financial performance and health, as well as the readers of those reports; to the users of public money as well as the providers of capital, that is to society as a whole.
Today’s Accountant has a role that brings him much closer to society. The culture, the social dilemmas, the regulation of the financial, business and accountancy worlds turned Accountants into guardians of correct behaviour both within their own profession as well as of ethical conduct in their clients’ interaction with society.
At the core of the Accountant’s culture are, professional training and the ethical framework as set out in the Accountancy Board’s Code of Ethics (‘the Code’). This Code, which the Accountant is bound to follow in his day to day practice is detailed and extensive. Moreover it is continually changing even if unfortunately it takes a few years to transpose the changes made by international bodies from time to time, into our laws and regulations. In November 2001, the International Federation of Accountants (‘IFAC’) started converting the old code from a set of recommendations into a conceptual framework and effectively making it a standard for ethical practice behaviour of Accountants in whatever sphere they work. IFAC started by making extensive revisions to the independence requirements for assurance engagements. During the following eight years to 2009 IFAC produced an updated principles based (or ‘Framework’) Code addressing all Accountants both in public practice and in business. As indicated in the opening memorandum of our transposed Code, the IFAC process has been accompanied by the development of similar guidance, with particular emphasis on Auditor independence, which has been issued by various regulatory and other authorities, including the European Commission.
The description of the Accountant in the above paragraphs can be taken as representing the life of each and every one of us as we go along our daily paths. Some may regard this as wishful thinking. The truth is probably somewhere in between. Our Accountant comes from all parts of this range. There are those who practice ethically all the time, those who sometimes can’t help the occasional slip in the interest of their own or to favour others’ motives and those who simply are indifferent as they are either vulnerable or the circumstances do not allow them. All of these scenarios are subject to the provisions of the Code which we are bound to follow.
So what exactly does this Code represent and what is it telling us? The Accountancy Board has recently launched an updated Code following years of deliberation of changes made by International Ethics Standards Board for Accountants (‘IESBA’), which is the Board within IFAC that is tasked with Ethics. Although the effective date of the original Code issued by IESBA was 1 January 2011, the effective date of this update for Maltese Accountants is March 2015, to allow for the delay in publishing.
The opening pages of our Code make it clear that this document represents a set of principles which should guide us in our day to day practice. There are sections however which are prescriptive in order to provide the public with peace of mind that ours is an orderly and organised profession. This, opposed to a free for all application of ethics with the danger of moral relativism creeping in, with different Accountants rating behaviour differently. The prescriptive limitations are aimed at unequivocally checking relativism in areas of utmost importance to the public.
The most important aspect of the Code is that it provides a conceptual framework which sets forth a set of principles which the Accountant continually applies in the public interest at the exclusion of all other interests. The major responsibility for the Accountant, which emanates from this framework approach is that if the accountant judges that a particular principle is threatened then he should either walk away from a particular engagement or search for and apply sufficient safeguards in order to bring down the level of threat to an acceptable level and thus protect the public interest. Notice the ability for the Accountant to apply judgement which in my opinion is the strongest pillar of our profession as opposed to a rules based approach which, however much discipline it affords, also tends to encourage a degree of circumvention.
The Code depicts a number of situations which an Accountant might find himself or herself in, the threats that may be present and some safeguards that he / she may apply. In its spirit of encouraging professional judgement, the Code does not purport to apply a set of circumstances and the respective solutions, but gives examples of how to apply the component principles in various situations. The Code starts by reminding us of the old pillars of ethics namely integrity, objectivity, competence and due care, confidentiality and professional behaviour. These fundamental principles lay down the basics of behaviour such as honesty, trust, discretion, respect, ability, skill, sobriety, charity in the sense of being of service to others, diligence, fortitude, thoughtfulness and humility.
Independence is conspicuous by its absence in the opening fundamental principles laid down by the Code. This is no relegation of the principle; indeed it is the Code’s elevating the principle into a conceptual framework in itself rendering what was hitherto a basic principle, to a continual state of mind of the accountant. When applied to independence, this conceptual framework articulates two important areas of independence, namely that of the mind and that of appearance. This is all a matter of authentic trust building; the Accountant’s innate ways of building trust with those around him as well as the Accountant’s effortless appearance of independence. There is no room for pretention, as this is wrong, deceitful and the public will anyway detect it and it leads nowhere other than to discredit the whole profession. The independence conceptual framework fortifies the integrity, objectivity and professional scepticism aspects of the accountant.
The Code provides extensive direction to Accountants in public practice in order to assist the practitioner in avoiding the threats of self-interest, self-review, advocacy, familiarity and intimidation. These threats, if left unchecked, would severely impair the quality of the practitioner’s work as a service to society as a whole. At the outset of an engagement the practitioner assesses the extent of the presence of such threats and builds the necessary safeguards to mitigate damage to quality, reputation and all.
The Code also provides extensive direction to members of the profession in business paying particular attention to their role in preparing financial information for public consumption. The Code recognises other organisational responsibilities, which the Accountant in business assumes, such as the in the areas of financial management and advice which impact organisations which rely on them. The Code first and foremost reminds the Accountant of the importance of being reliable in the services offered to those immediately around him/her. This however not at the cost of the integrity and reputation of the profession as a whole and accordingly also in this case highlights the threats which may afflict the Accountant in practice and charges the Accountant with the responsibility of setting up the necessary safeguards to prevent or reduce to acceptable levels the threats of self-interest, self-review, familiarity and intimidation.
One very important aspect in the Code for the Accountant in business is when he is a key figure in an organisation and is entrusted with governance. The Code places on such Accountants the responsibility of creating and cascading an ethical culture down their organisation and this is an important demand given that many accountants also end up fulfilling the role of business leaders in our communities.
To conclude I would like to make a rather onerous statement. Accountants lend credibility in whatever they do. A responsibility which demands not only a lot of professionalism but also deep constant consideration as to why the Accountant goes to work to practice the profession beyond keeping books and tax returns.
An accountant’s place is in society.