World Ethics Day in the accounting industry

October 16, 2023

18 October is World Ethics Day, a global observance that promotes ethical practices and principles across various domains. At Kreston Global, we wish to use this opportunity to celebrate the crucial role of ethics in accounting, tax, and auditing. In these professions, ethics is more than a guideline; it’s the bedrock of trust, transparency, and accountability. It reminds professionals to uphold the highest moral and professional standards, particularly in our complex and interconnected world.

We spoke with Jenny Reed, Director of Quality and Professional Standards at Kreston Global, about the significance of ethical conduct within the accounting industry.

What is the role of ethics in the accounting industry?
Ethics is of the utmost importance in accountancy. We are one of only a few industries with a Code of Ethics that sets out how professional accountants in practice and business should behave and act. It’s the cornerstone of our profession, guiding us in doing the right thing, even when no one is watching or would even notice.

You recently shared the 2023 edition of the International Ethics Standards Board for Accountants (IESBA) Code of Ethics. Are there any noteworthy updates you would like to comment on?

Yes! The IESBA Code of Ethics is usually updated annually to keep it up to date with all the latest developments in the profession, including consequential and conforming amendments resulting from changes to auditing standards, etc.

This year’s update includes two key revisions relating to (a) the definition of engagement team and (b) group audits. The revisions deal with the independence and other implications of the changes made to the definition of “engagement team” in the Code to align with changes to the definition of the same term in the ISAs and ISQMs. The revisions also address the independence considerations in a group audit situation. Both changes are effective for audits with periods beginning on or after 15 December 2023.

Ethics is at the heart of what you do. Have you any advice for managing ethics globally?

Perspective is critical. Sometimes, we can all get so close and involved with an issue that it can be challenging to keep a perspective on our actions. Having someone available within a firm to provide an independent view and opinion is really helpful.

Building the right culture within a firm is also essential, as it fosters openness, trust and confidence that if an issue is raised, it will be dealt with appropriately and not swept under the carpet. The right culture has to be built top-down and permeates the whole organisation. Ethics should be integrated into everything we do as accountants.

What challenges do members of the accounting industry face in today’s global environment?

There is ever-growing commercial pressure on accountants, sometimes resulting in incentives to do the wrong thing. Standing up for what is right can be incredibly difficult, sometimes to personal detriment, but it’s important that we do, as this encourages others to behave similarly. I’ve been in such situations, and it’s never easy, but the one thing we always carry with us is our reputation, and I treasure mine over and above any promotion, bonus or job prospect.

What are your key top tips for ethics in daily practice?

In a difficult situation, I always try to ask myself how my action (or inaction) would look to someone else. This is the core of the “reasonable and informed third party” concept, i.e. that even if something was technically not prohibited by the detailed rules, if a reasonable and informed third party would think it unethical, then you shouldn’t do it. It helps us not to try and bend the rules or look for loopholes; if it wouldn’t look right to a third party, we shouldn’t be doing it.

The best approach, though, is not to get into a tricky situation in the first place and thus avoid putting oneself into a situation which may result in an ethical dilemma. Avoiding temptation is much easier than resisting it!

Click here to read the 2023 edition of the International Ethics Standards Board for Accountants (IESBA) Code of Ethics.

Learn more about Kreston Global’s Impact plan here.