ACCA SBR ^UK Syllabus A. Fundamental Ethical And Professional Principles - Ethical And Professional Issues In Complying With Accounting Standards - Notes ^{2 / 4}

Accounting professionals are expected to be:

1. highly competent

2. reliable

3. objective

4. high degree of professional integrity.

A professional’s good reputation is one of their most important assets.

Accountancy as a profession has accepted its overriding need to act in the best interest of the public.

This can create an ethical/professional dilemma.

As accountants also have professional duties to their employer and clients.

Where these duties are in contrast to the public interest, then the ethical conduct of the accountant should be in favour of the public interest.

This can create problems particularly on an audit, whereby you provide a service for the client, yet may have to make public information which is detrimental to the company but in the public interest.

There is a very fine line between acceptable accounting practice and management’s deliberate misrepresentation in the financial statements.

The financial statements must meet the following criteria:

• Technical compliance:

  Generally accepted accounting principles (GAAP) used.

• Economic substance:

  The economic substance of the event that has occurred must be represented (over and above GAAP)

• Full disclosure and transparency:

  Sufficient disclosures made

Management often seeks loopholes in financial reporting standards that allow them to adjust the financial statements as far as is practicable to achieve their desired aim.

These adjustments amount to unethical practices when they fall outside the bounds of acceptable accounting practice.

In most cases conformance to acceptable accounting practices is a matter of personal integrity.

Reasons for such behaviour often include

1. market expectations

2. personal realisation of a bonus

3. maintenance of position within a market sector