In Australia, ethics in accounting are governed by the Code of Ethics for Professional Accountants (the Code), which is issued by CPA Australia. The Code sets out the standards of ethical and professional conduct expected of CPA Australia members in their relationships with clients, employers, employees, colleagues, the profession and the community.
The Code is based on four fundamental principles: integrity, objectivity, professional competence and due care, and confidentiality. These principles are underpinned by a set of core values: honesty, fairness, independence and respect.
Why Are the Code of Ethics for Accountants Important?
The accounting code of practice is important because it helps to ensure that financial statements provide an accurate and fair view of an entity’s financial position and performance. It also helps to protect the public interest by ensuring that accountants act professionally and responsibly.
Accounting ethics are also important because they help to build trust and confidence in the profession. This is essential for the smooth functioning of markets and the economy as a whole.
The Code of Ethics for Professional Accountants is an important part of the professional framework within which Australian CPAs operate. The accountant Code provides guidance on how CPAs should behave in order to maintain public trust and confidence in the profession.
Fundamental Principles
As previously mentioned, the Code is based on four fundamental principles: integrity, objectivity, professional competence and due care, and confidentiality.
Integrity – Requires CPAs to be honest and straightforward in all their dealings, both with clients and others. Integrity in accounting means they must uphold accountants ethics even in the absence of supervision or monitoring.
Objectivity – Requires CPAs to be impartial and objective in their professional judgement. Ethical accounting means doing what is right, regardless of who the accountant is working with and no matter the circumstances surrounding the commitment.
Professional Competence and Due Care – Requires CPAs to maintain the necessary level of knowledge and skill and to apply that knowledge and skill diligently in order to provide high-quality professional services.
Confidentiality – Requires CPAs to respect the confidentiality of information entrusted to them by clients and others. There are instances where accounting ethical issues arise because CPAs do not draw the line when it comes to client information and think that a family member or a friend with no interest in other people’s financial affairs are ‘harmless’ and therefore safe to open up to.
These principles keep accountants straight and reliable in their chosen profession. In addition to these ethical principles of accounting, the Code is underpinned by a set of core values: honesty, fairness, independence and respect. These values represent the essential character traits that underpin the work of CPAs.
Honesty – Requires CPAs to be truthful and candid in all their dealings.
Fairness – Requires CPAs to act equitably and without bias in their dealings with others.
Independence – Requires CPAs to be free from conflicts of interest in their professional judgement.
Respect – Requires CPAs to treat others with courtesy and consideration.
Why Do Accounting Ethics Matter?
Accounting ethics are important because they help to ensure that financial reporting is accurate and transparent. Ethical accounting practices help to build trust between businesses and investors and can help to prevent financial fraud. The importance of ethics in business also demonstrates the personal ethics held by accountants.
When making decisions about accounting practices, accountants should always consider the potential impact of their actions on stakeholders. Stakeholders include shareholders, employees, customers, suppliers, and the wider community. Accounting decisions should be made in a way that protects the interests of all stakeholders.
There are a number of different bodies that provide guidance on accounting ethics, including the International Federation of Accountants (IFAC) and the Institute of Chartered Accountants in England and Wales (ICAEW). These organisations develop codes of ethics that set out standards for professional behaviour.
Accountants who breach ethical principles can face a range of sanctions, including censure, suspension, or expulsion from professional bodies. In some cases, they may also be liable for criminal charges.
What Can Happen if You Violate These Accounting Ethics?
If you violate accounting ethics, you could face severe consequences. These can include civil and criminal penalties and disciplinary action from professional organisations. In Australia, there are a number of possible penalties for breaching accounting ethics. These include:
– Disciplinary action from professional bodies such as the Chartered Accountants Australia and New Zealand (CAANZ) or the Institute of Public Accountants (IPA).
– Civil penalties from ASIC or other regulatory bodies.
– Criminal charges and imprisonment.
The specific penalties that may apply in a particular case will depend on the nature and seriousness of the breach and any mitigating factors. For example, a breach that results in financial loss or damage to another person is more likely to attract stronger penalties than a technical breach that did not cause any harm.
Similarly, a deliberate or premeditated breach is more likely to be treated more harshly than an accidental or inadvertent one.
Penalties for breaches of accounting ethics can be divided into three main categories: disciplinary action, civil penalties, and criminal charges.
Disciplinary action is usually taken by professional bodies such as the CAANZ or the IPA. This can involve anything from a formal warning to expulsion from the organisation.
Civil penalties are usually imposed by regulatory bodies such as ASIC. They can take the form of fines, bans from providing financial services, or orders to compensate victims of the breach.
Criminal charges can be brought by ASIC, police, or other law enforcement agencies. A person may face jail time, a fine, or both if convicted.
Violating accounting ethics can also damage your reputation and make it difficult to find work in the future. Potential employers may be reluctant to hire someone with a history of ethical violations.
This is why it’s important to be aware of the ethical principles that guide the profession and to always act in accordance with them. Doing so will help protect you from potential consequences and allow you to maintain a positive reputation in the field.
Work Your Way Into Becoming an Ethical Accountant
The ethical principles of accounting can be achieved with mindfulness and training. For professional competence, you can find ways to ensure that you are doing everything necessary to make it happen. That means proactively learning about the field and the profession through continued education.
You can get a Certificate IV in Accounting and Bookkeeping online from the Australian Institute of Finance Training to learn mid-level accounting concepts and practical bookkeeping skills to perform more accounting and bookkeeping roles in various industries. Talk to us for details
