Why ethics are fundamental to good accounting

Professional integrity is now more important than ever.

Post-GFC, the spotlight has swung firmly onto ethics in business and the development of “soft” skills.

Although most accountants have always adhered to a Code of Ethics, the importance of professional integrity has arguably never been more acute.

In a world littered with corporate financial scandals, the “greed is good” mantra – immortalised by actor Michael Douglas as stockbroker Gordon Gekko in the 1987 movie Wall Street – as well as many of the dubious practices uncovered in wake of the global financial crisis (GFC), are increasingly shunned.

Regulators have made it clear that blatant corporate greed and the pursuit of money at all costs is not acceptable.

The collapse of insurer HIH and Storm Financial, among others, has heightened awareness and scrutiny of the ways a company or industry behaves.

Eva Tsahuridu, CPA Australia policy adviser for professional standards and governance, says ethics have always and will always be fundamental to good accounting.

“Professional accountants rely on their reputation and the trust of their clients and society in general,” Tsahuridu says.

“For the profession, integrity and honesty, being objective, and having expertise and skills are part and parcel of a professional accountant. In terms of importance, we can’t distinguish ethics from competency.”

CPA Australia members are governed by the Code of Ethics for Professional Accountants of international independent standards-setter IESBA (International Ethics Standards Board for Accountants). The code is adopted in a number of countries by members of the International Federation of Accountants (IFAC).

Tsahuridu believes there is more awareness of, and greater attention to, ethics as a result of the GFC.

“We are becoming more aware of the importance of talking about and using ethics as part of our communication, both in public practice and in business, public sector and not-for-profit sectors,” she says.

University of South Australia’s Professor Christine Helliar, who heads the university’s business school, agrees.

Like Tsahuridu, Helliar says ethics have always been integral to being a good accountant, but the post-GFC world has ensured the topic now has a much higher profile.

Unfortunately, however, it seems ethical issues often only surface after a catastrophe – especially one the size of the GFC.

“A scandal comes along regularly to crystallise how important they really are,” Helliar says.

She notes there has also been a noticeable shift towards accountants fulfilling the need for non-technical or “soft” skills, such as communication, the ability to engage with social technology and – above all – best practice on ethical issues.

“These days, it’s about trying to bring more issues into the classroom,” she says. “Business is global and much more complex now.”

Technology has also not been without influence in accounting, significantly changing an accountant’s role.

“Most firms have systems in place so that the role of the traditional accountant – writing up records – is now undertaken by computers,” Helliar says. “The role of the accountant as a bean-counter and book-keeper has completely gone.

“Now, accountants are more involved in the running of the business: It’s all about communication and making business decisions.”

Helliar emphasises that it’s also no longer enough just to produce accounting graduates with strong technical skills.

“We don’t spend enough time on the non-technical skills, which are becoming more and more important,” she says.

“Our graduates are good at numbers, but can they write about them in a coherent way for non-accountants to understand? Can they think critically and question people? Do they have an enquiring mind? Do they think critically and are they skeptical? Do graduates have good interpersonal skills?

“More and more, we are trying to embed ethics in courses.”

Helliar has joined five other Australian academics to research the future of accounting education. The objective is to make accounting offerings more relevant to today’s business world.

“We’re looking at the role of tertiary education and research to identify what skills will be needed by the accounting profession In the future,” she says.

RMIT University’s Professor Brendan O’Connell is co-chief investigator with Professor Garry Carnegie of the Shaping The Future of Accounting and Business Education in Australia project, which is expected to deliver its recommendations early next year.

O’Connell expects the project’s findings will be used to help tweak accounting education at most of the 42 public universities and some of the private education institutions in Australia. Changes will be gradually introduced, beginning in 2015.

Other academics involved in the project, which is funded by CPA Australia, include Phil Hancock, University of Western Australia; Paul deLange, Curtin University; and Kim Watty, Deakin University.

“The research will focus on the key challenges and opportunities in the sector and develop feasible, innovative and productive ways to meet the challenges and take full advantage of the opportunities identified,” O’Connell explains

 As part of the research, which commenced in February this year, people in business and the accounting profession, as well as academics and policy-makers in government and the higher education sector, are being consulted.

O’Connell says initial findings show a growing disconnect between teaching staff and real-world business roles for accountants, as they increasingly move into management. There is, he says, real concern about the gap between what is going on in the business world and what is being taught to accounting students.

“Many of the university teachers lack up-to-date business knowledge and connections with industry,” he maintains.

“One of the project’s recommendations is expected to be to develop initiatives to get more practitioners directly involved in the classroom.”