- Integrity.
- Objectivity.
- Professional competence and due care.
- Confidentiality.
- Professional behaviour.
The Association of Chartered Certified Accountants (ACCA) is a leading international accountancy body whose ethical framework is foundational for the practice of professional accountancy. The ACCA’s framework is built around five ethical principles designed to guide accountants and finance professionals in their conduct and decision-making processes. Understanding these principles is vital for students of IB Business & Management, as they apply universally across the business world, influencing practices from small enterprises to multinational corporations. Below, we explore each of these principles in detail, illustrating their application with industry examples.
Integrity
Definition: Integrity demands honesty and straightforwardness in all professional and business relationships. Accountants must not be associated with reports, returns, communications, or other information where they believe the information contains materially false or misleading statements, includes statements or information furnished recklessly, or omits or obscures information required to be included where such omission or obscurity would be misleading.
Industry Example: Enron’s collapse in 2001, due to fraudulent financial reporting, underscores the catastrophic consequences of lacking integrity. In contrast, companies like Patagonia, which transparently reports its environmental impacts alongside financials, exemplify integrity, building trust with stakeholders.
Objectivity
Definition: Objectivity requires accountants to not allow bias, conflict of interest, or undue influence of others to override professional or business judgments.
Industry Example: An audit firm assessing the financial statements of a major client must not let any personal or financial relationships with the client cloud their judgment. The collapse of Arthur Andersen alongside Enron highlights the dangers when objectivity is compromised. In contrast, firms like Deloitte and PwC emphasize independence and objectivity in their audit and consulting practices, often declining lucrative consulting jobs to avoid conflicts of interest.
Professional Competence and Due Care
Definition: Accountants have a continuing duty to maintain professional knowledge and skill at a level required to ensure that a client or employer receives competent professional service. They must act diligently in accordance with applicable technical and professional standards.
Industry Example: The adoption of International Financial Reporting Standards (IFRS) across many countries requires accountants to continually update their knowledge and skills to provide accurate financial reporting. Companies like IBM provide extensive training and professional development opportunities to ensure their finance teams uphold the highest standards of competence and care.
Confidentiality
Definition: Accountants should respect the confidentiality of information acquired as a result of professional and business relationships and should not disclose any such information to third parties without proper and specific authority unless there is a legal or professional right or duty to disclose.
Industry Example: When HP acquired Autonomy in 2011, the confidentiality of financial information and due diligence reports was paramount. Accountants and advisors involved were under strict obligations to maintain confidentiality, demonstrating how business transactions rely on the discretion of financial professionals.
Professional Behaviour
Definition: Accountants should comply with relevant laws and regulations and should avoid any action that discredits the profession. This includes actions both in their professional work and in their personal lives that may impact their professional standing.
Industry Example: The Volkswagen emissions scandal, where vehicles were programmed to cheat on emissions tests, not only violated legal and regulatory standards but also significantly harmed the professional reputations of involved executives and auditors. Contrastingly, companies like Ernst & Young have established rigorous compliance and ethics programs to guide professional behavior in complex global regulatory landscapes.
Conclusion
The ACCA’s five ethical principles of Integrity, Objectivity, Professional Competence and Due Care, Confidentiality, and Professional Behaviour form the bedrock of ethical conduct in accounting and finance. These principles are not just theoretical concepts but are deeply embedded in the practices and policies of reputable firms worldwide. They serve as a guide for making ethical decisions in the face of complex business challenges. For IB Business & Management students, understanding and applying these principles is essential for navigating the modern business environment ethically and successfully. Through industry examples ranging from Enron and Arthur Andersen to Patagonia and Deloitte, we see the profound impact of these principles on businesses, economies, and society at large.
