A code of ethics is a guide of principles designed to help professionals conduct business honestly and with integrity. A code of ethics document may outline the mission and values of the business or organization, how professionals are supposed to approach problems, the ethical principles based on the organization’s core values, and the standards to which the professional is held.
If the problem remains unresolved, the accountant should take legal advice and/or advice from their professional body (e.g. ACCA).
If the situation still cannot be resolved, the accountant should consider reporting to the relevant authorities (if there is a legal or professional obligation to do so) and withdrawing from the engagement.
Ethical issues are rarely clear-cut in the real world. There may not be only one correct approach to take. In the exam, make sure you read ethics scenarios and the options you are given carefully. Make sure you don’t suggest a course of action that would breach the fundamental principles.
Benefits of a code:
– Provides framework for conflict resolution.
– Provides guidelines for similar ethical disputes and methods of resolution.
– Provides the ‘boundaries’ across which it is ethically incorrect to pass.
Drawbacks of a code:
– Is a code only – therefore may not fit the precise ethical issue.
– As a code, it can be interpreted in different ways – two different conflicting actions may appear to be ethically correct to two different people.
– Punishment for breaching the code may either be unclear or ineffective.
Effectiveness of corporate and professional codes:
The effectiveness of the code will be limited due to factors such as:
– The code can be imposed without communication to explain what it is trying to achieved; this will only lead to resentment, particularly amongst employees
– Some codes are written, launched and then forgotten as it is now ‘in place’. Unless there are reminders that the code is there, then it will not be effective in promoting ethical decision making
– Codes that are implemented, and then breached by senior management without apparent penalty are not going to be followed by more junior staff.
To be effective, the code must have:
– Participation from all groups as the code is formed (to encourage ‘buy-in‘)
– Disciplinary actions for breach of the code
– Publicity of breaches and actions taken, as this is effective in promoting others to follow the code
– Communication and support from top-down to ensure that the code is embedded into company cultur
According to the CFAI’s website, Members of CFA Institute, including CFA charter holders, and candidates for the CFA designation must adhere to the following code of ethics (found here):
– Act with integrity, competence, diligence, respect and in an ethical manner with the public, clients, prospective clients, employers, employees, colleagues in the investment profession, and other participants in the global capital markets.
– Place the integrity of the investment profession and the interests of clients above their own personal interests.
– Use reasonable care and exercise independent professional judgment when conducting investment analysis, making investment recommendations, taking investment actions, and engaging in other professional activities.
– Practice and encourage others to practice in a professional and ethical manner that will reflect credit on themselves and the profession.
– Promote the integrity and viability of the global capital markets for the ultimate benefit of society.
– Maintain and improve their professional competence and strive to maintain and improve the competence of other investment professionals.
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