Ethics under threat
How to uphold ethical standards during the pandemic
Accounting professionals face new threats to ethical standards during the Covid-19 crisis, including a rise in Government support fraud and pressures to reduce fees, take late payment or work more quickly.
The threats are highlighted in research and guidance from the Association of Chartered Certified Accountants (ACCA), the International Ethics Standards Board for Accountants and the Institute of Chartered Accountants in England and Wales (ICAEW).
The guidance is designed to help accounting professionals steer clients through the challenges of the pandemic while upholding the highest levels of ethical conduct.
Exposure to risk
Many professionals have already felt exposure to ethical risk as clients have battled to deal with the impact of Covid-19 on staff and business. A survey of ACCA and Institute of Management Accountants (IMA) members in September 2020 revealed one in five respondents had directly, or via a work colleague, encountered a situation where ethics were at risk of compromise as a result of Covid-19. The same number of respondents believe they, or a colleague, will be ethically compromised over the next two years due to Covid.
Ethics has always been at the heart of the profession but in times of pressure “it is all the more important”, according to Narayanan Vaidyanathan, ACCA’s head of business futures. In a recent white paper entitled Ethics in a Covid-19 World, he says “Covid-19 has created new challenges that may risk compromising ethical behaviour”.
“Covid-19 has created new challenges that may risk compromising ethical behaviour”.
Narayanan Vaidyanathan, ACCA’s head of business
The paper identifies eight areas in which the pandemic is increasing the risk of ethical compromise:
Time-constrained decision making
Remote working
Reducing staff size
Assurance services
Presentation of financial information
Increase in fraud
Ethics across the supply chain
Facilities management
Time-constrained decision making
Remote working
Reducing staff size
Assurance services
Presentation of financial information
Increase in fraud
Ethics across the supply chain
Facilities management
What to guard against
There is a risk that organisations may make changes during the pandemic without adequate consideration of risks and implications. This poses a threat to accounting professionals if practices are not subject to the usual standards of evaluation, Narayanan Vaidyanathan asserts. Remote working poses further challenges in relation to ensuring the fair treatment and monitoring of staff, and the confidentiality of data. There is a risk of ethical compromise when organisations reduce staff numbers and furlough staff, especially if staff continue working informally. Other Covid-related threats include pressure to reduce fees or take late instalments, the possibility of presenting misleading or inaccurate financial information, or failing to demonstrate professional scepticism when working closely with clients – and suppliers – struggling with cash-flow problems and other Covid challenges.
There is also a need to ensure adherence to guidelines on social distancing, hygiene and other Covid-related facilities management. The ACCA report says accountancy and finance professionals have a duty to address/report incidents where guidelines are not followed and employee wellbeing is compromised. One of the biggest concerns during the pandemic is rising fraud and cybercrime such as identity theft and system hacking. ACCA stresses the need for periodic fraud-risk assessments “to ensure actions are being reconsidered and refreshed”.
ACCA stresses the need for periodic fraud-risk assessments “to ensure actions are being reconsidered and refreshed".
Reputations at stake
The fraud threat is of particular concern. In November, ICAEW urged accountants to be vigilant with respect to government support fraud. It warns: “Reputations will be at stake if experts’ warnings of a heightened scale of fraud surrounding coronavirus government support packages materialise.” This follows a UK National Audit Office investigation into a “bounce back” loan scheme which revealed the potential for fraudulent applications arising from self-certification, multiple applications, lack of legitimate business, impersonation, and organised crime.
The ICAEW says accountants should be mindful of their ethical obligations under the Code of Ethics and must keep in mind they “must always act with objectivity and integrity, which includes not being associated with misleading information”. The institute has published a help-sheet to help accounting professionals navigate some of the ethical issues that may arise during the pandemic in relation to government support schemes.
The ICAEW says accountants “must always act with objectivity and integrity, which includes not being associated with misleading information”.
Achieving balance
The IESBA has also published guidance to help accounting professionals remain vigilant and uphold ethical standards during the pandemic. In a Q&A entitled Covid-19, Ethics and Independence Considerations, IESBA Chairman Dr Stavros Thomadakis, says: “Professional accountants must now, more than ever, remain focused on the public interest and their ethical responsibilities.” Dr Thomadakis says accounting professionals need to balance advising and supporting their clients to adjust and recover “without giving into pressures to act contrary to their ethical responsibilities”.
He adds that “intensified communication with those charged with governance will prove essential” in both private and public sectors. The Q&A highlights the aspects of the International Code of Ethics for Professional Accountants (including International Independence Standards) that might be relevant in navigating Covid-19 related challenges.
“Professional accountants must now, more than ever, remain focused on the public interest and their ethical responsibilities”.
Dr Stavros Thomadakis IESBA Chairman
Collaboration
One way to help minimise exposure to ethical risk is through multi-firm collaboration, especially among independent accounting firms whose clients have cross-border business operations. The ACCA white paper highlights the importance of “working in a collaborative environment with appropriate consultation” to help accounting professionals uphold ethical principles.
This is the approach adopted by independent accounting firms within Praxity Global Alliance. By sharing knowledge and expertise across the Praxity ‘family’ of firms, independent accounting professionals can help each other to ensure that ethics are not compromised during the pandemic and beyond. It’s important to remember that accounting professionals can help each other as well as their clients to navigate Covid-related challenges, and that Praxity provides a platform for professionals to collaborate globally to help clients through the pandemic without compromising ethical standards.