Professional

Ethics and Integrity-

A Management Accountant's Perspective
Akhtar Sanjida Kasem FCMA FCA CFE
Partner, A. Qasem & Co.
Chartered Accountants
[email protected]

This paper is prepared on the premise that Ethics Robert H. Montgomery, describing ethics in
and Integrity are not concepts that exist only in the accounting has said that:
textbooks and corporate Code of Conduct, these "Accountants and the accountancy profession exist
are values ingrained in our mind and heart and brain, as a means of public service; the distinction which
and as essential and indispensable as the air we separates a profession from a mere means of
breathe. livelihood is that the profession is accountable to
standards of the public interest, and beyond the
In this context, I quote the great visionary leader compensation paid by clients."
Lee Kuan Yew who said that:
The nature of the work carried out by
"We don't have to be lawyers to understand right, wrong, accountants and auditors requires a high level
good, evil. This is basic and fundamental in the values of of ethics and integrity, mainly for the reason
a people". that external stakeholders and users rely
heavily on the work that we perform as
-Lee Kuan Yew (1967) management accountants (in preparing the
financial statements) and auditors (in verifying
Ethics is a vast field of study that raises the most and expressing an opinion on the statements).
basic question that any human can ask: How should
I live my life? Shareholders, potential shareholders, and other
users use this information to make an
One reason to study ethics is to help you to decide informed decision about investment.
right from wrong, to decide what you should do. Knowledge of ethics can help accountants and
Another reason is to help you to decide they type of auditors make a right choice which, although it
person you should be. may not benefit the company, will benefit the
All professions ……..medical, legal, engineering and public who relies on the accountant/auditor's
reporting. This puts us, the professional
of course accounting, have their own code of ethics, accountants, often in an ethical dilemma
evolving over the ages. In our case, there appears to because the choice we are required to make,
have been a reference to ethics even is Luca Pacioli's may cost us an attractive job, or a lucrative
book, the first book in the world on book-keeping client.
and accounting. To quote the Wikipedia entry on
Accounting ethics…..it " is primarily a field of And may be that is the reason why some great
applied ethics, the study of moral values and thinkers say that "Integrity" does not only
judgments as they apply to accountancy. It is an mean Honesty, it means both Honesty and
example of professional ethics. Accounting ethics Courage………….to make the right choice, to
were first introduced by Luca Pacioli, and later defend it, and to accept the consequences.
expanded by government groups, professional
organizations, and independent companies."

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Ethics and Integrity for a contributing to the development of high-quality
Management Accountant standards and guidance; facilitating the adoption
and implementation of high-quality standards and
More often than not, when we talk about guidance; contributing to the development of
Professional Ethics for Accountants, we mean the strong professional accountancy organizations
accountants in practice. Indeed, the code of and accounting firms, and to high quality practices
ethics for practicing accountants is much more by professional accountants, and promoting the
formalized, publicized, monitored, and enforced. value of professional accountants worldwide; and
However, the management accountants or speaking out on public interest issues.
alternatively, the accountants in profession (i.e
working in industry and business as employees) Part C of the Guidelines deals with Professional
also need to follow professional ethics, and have Accountants in Business, it has several sections,
to nurture a strong sense of professional integrity. namely:
Unfortunately, this is easier said than done, often Section 300 Introduction
there is an apparent conflict between Section 310 Potential Conflicts
professional/business ethics and business strategy Section 320 Preparation and Reporting of Information
and decision making. Perhaps no other discipline Section 330 Acting with Sufficient Expertise
faces the amount of skepticism that commonly Section 340 Financial Interests
confronts business ethics. Many people view Section 350 Inducements
ethics as a mixture of sentimentality and personal
opinion that gets in the ways of efficient The Guidelines, originally issued in 2013, have
functioning of business. After all, if anything is been amended, and this paper contains the
seriously wrong, the law would prohibit it, right? extracts of the Guidelines as an Annexure.
Well, it is not right to let things go on until, or if
at all, the law is enforced. If things are allowed to ICMAB Code of Ethics
go out of hand………we know what happens.
ICMAB's Professional Ethics and Code of
Enron, for example. Enron is more than a story
Conduct is a very valuable and comprehensive
about a company going bust, it is about a business
document, which provides detailed guidance for
system that is characterized by power abuse,
our members, both in practice, and in
conflict of interest and an aggressive in-your-face
employment. The fundamental principles are the
attitude towards laws and rules of accounting and
same as that on other international professional
basic accounting ethics.
bodies, e.g CIMA.
Not only Enron, the accounting profession around
The Code of Ethics recognize that the
the world suffered a massive blow to their image
objectives of the accountancy profession are to
as well. CFO Andrew Fastow was condemned as
work to the highest standards of professionalism,
much as the Chairman Ken Lay, and CEO Jeffrey
to attain the highest levels of performance and
Skilling. New laws were promulgated to bring
generally to meet the public interest requirement.
CFOs under more strict scrutiny, and last but not
These objectives require four basic needs to be
the least, the mighty Arthur Andersen, one of the
met:
then Big 6 Accounting Firms, collapsed.
(a) Credibility in information and information
Various Guidelines for Professional systems;
Ethics and Integrity (b) Professionalism identified by employers,
clients and other interested parties;
IFAC Guidance for Professional Ethics
(c) Quality of service carried out to the highest
and Integrity
standards of performance; and
Our main guidance for Professional Ethics and
(d) Confidence that there is a framework of
Integrity is the Handbook of the Code of Ethics
professional ethics to govern the provision of
for Professional Accountants, published by the
services.
International Ethics Standards Board for
Accountants (IESBA). This Handbook was
In order to achieving the objectives of the
published by the International Federation of
accountancy profession, Cost and Management
Accountants (IFAC). According to the Preface, its
accountants have to observe fundamental
mission is to serve the public interest by:

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principles, which are: material facts known to such Member in order not
to make such cost / financial reports or statements
(a) Integrity misleading, acquire sufficient information to
A cost and management accountant should be warrant an expression of opinion and report all
straightforward and honest in performing his material misstatements or departures from
services. generally accepted accounting principles.
(iv) not disclose or use any confidential
(b) Objectivity information concerning the affairs of such
A cost and management accountant should be fair Member's employer or client unless acting in the
and should not allow prejudice or bias or the course of his or her duties or except when such
influence of others to override objectivity. information is required to be disclosed in the
course of any defense of himself or herself or any
(c) Competence associate or employee in any lawsuit or other
legal proceeding or against alleged professional
A cost and management accountant must refrain misconduct by order of lawful authority or any
from performing any service which he is not committee of the Society in the proper exercise
competent to carry out unless proper advice and of their duties but only to the extent necessary
assistance is obtained to ensure that the service for such purpose;
is performed to the satisfaction.
(v) inform his or her employer or client of any
(d) Confidentiality business connections or interests of which such
Member's employer or client would reasonably
A cost and management accountant must not expect to be informed;
disclose information acquired during the course
of his engagement and should not use or disclose (vi) not, in the course of exercising his or her
any such information without proper and specific duties on behalf of such Member's employer or
authority or unless there is a legal or professional client, hold, receive, bargain for or acquire any fee,
right or duty to disclose. remuneration or benefit without such employer's
or client's knowledge and consent; and
(e) Professional Behaviour (vii) take all reasonable steps, in arranging any
A cost and management accountant should act in engagement as a consultant, to establish a clear
a manner consistent with the good reputation of understanding of the scope and objectives of the
the profession. work before it is commenced and will furnish the
client with an estimate of cost, preferably before
As professionals in the field of Cost and the engagement is commenced, but in any event
Management Accounting, the members of the as soon as possible thereafter.
Institute are bound by a code of professional
ethics. This code stipulates and binds them to the (viii) conduct himself or herself toward other
highest level of care, duty and responsibility to Members with courtesy and good faith;
their employers and clients, the public and their (ix) not accept any engagement to review the
fellow professionals. work of another Member for the same employer
ICMAB Guidelines are hereby setting standards except with the knowledge of that Member, or
for code of ethics of Cost and Management except where the connection of that Member
Accountant such that a member will: with the work has been terminated, unless the
Member reviews the work of others as a normal
(i) maintain at all times independence of thought part of his or her responsibilities;
and action;
(x) not attempt to gain an advantage over other
(ii) not express an opinion on cost / financial Members by paying or accepting a commission in
reports or statements without first assessing her securing management accounting work;
or his relationship with her or his client to
determine whether such Member might expect (xi) not act maliciously or in any other way which
her or his opinion to be considered independent, may adversely reflect on the public or professional
objective and unbiased by one who has reputation or business of another Member.
knowledge of all the facts; and (xii) at all times maintain the standards of
(iii) when preparing cost / financial reports or competence expressed by the Institute from time
statements or expressing an opinion on cost / to time;
financial reports or statements, disclose all (xiii) undertake only such work as he or she is

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competent to perform by virtue of his or her CIMA Ethics Checklist
training and experience and will, where it would There is another valuable reference material,
be in the best interests of an employer or client, which is the CIMA Ethics Checklist, which is
engage, or advise the employer or client to reproduced here. This is concise,
engage, other specialists. comprehensible, and easy to follow. It's message
is simple:
CIMA Code of Ethics
Another important source of guidance is the "YOU NEED TO ACT QUICKLY WHEN
CIMA Code of Ethics, January 2015 edition. This is FACING AN ETHICAL DILEMMA"
a 58 page document, which discusses Ethical The longer you leave it, the more chance there is
Issues in detail. This is available on the internet, for repercussions for the organisation, yourself
and may be downloaded for self-study. and the standing of the profession. CIMA's Code
CIMA is committed to upholding the highest of Ethics can help you identify and deal with
ethical and professional standards and to situations where professional integrity may not
maintaining public confidence in management exist.
accounting. CIMA members and students are
required to comply with the CIMA Code of
Ethics and to adopt its five fundamental principles CHECK ALL
to their working lives. YOUR FACTS -
and document
POSSIBLE COURSE
OF ACTION -
where possible internal and SEEK
professional of
(a) Integrity - to be straightforward external escalation
legal advice
and honest in all professional and
business relationships.
IS IT ETHICAL -
IDENTIFY
have you considered
the ethical issues the affected
(b) Objectivity - to not allow bias, involved? parties

conflict of interest or undue influence

of others to override professional or IDENTIFY
business judgments. which fundamental
REFUSE
principles
to remain
are affected
IS IT LEGAL associated
(c) Professional Competence and with the
Due Care - to maintain professional conflict

knowledge and skill at the level required

to ensure that a client or employer
receives competent professional services
based on current developments in The Checklist is as follows:
practice, legislation and techniques and
act diligently and in accordance with 1. Check all your facts - and document
applicable technical and professional
where possible
standards.
a. Identify all relevant facts.
(d) Confidentiality - to respect the
confidentiality of information acquired b. Do not rely on word of mouth, or
as a result of professional and business assumptions. Is it really your problem?
relationships and, therefore, not c. Can anybody else help?
disclose any such information to third
parties without proper and specific 2. Is it ethical - have you considered the
authority, unless there is a legal or ethical issues involved?
professional right or duty to disclose,
a. Does it feel right?
nor use the information for the personal
advantage of the professional
b. How would you feel if you saw it in a
accountant or third parties. newspaper?
c. How would you feel about your peers,
(e) Professional Behaviour - to friends, family knowing about it?
comply with relevant laws and
regulations and avoid any action that
d. Have you referred to the CIMA Code of
discredits the profession. Ethics?
e. Have you referred to your internal Code of
Ethics/Conduct and other internal policies?

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3. Is it legal?
a. Is the issue in question regulated by the law
- national and international? OUR PERSONAL
b. Does it comply with rules, policies,
standards and contracts imposed by
VALUES, AND THE
relevant regulators/bodies and by your WAY WE ACT
employer?
ACCORDING TO
4. Identify which fundamental principles
are affected
THEM, ARE OUR
a. Integrity ETHICS. OUR ETHICS
b. Objectivity
c. Professional competence and due care ARE DISPLAYED IN
d. Confidentiality
e. Professional behavior WHAT WE DO, WHAT
See next page for the fundamental principles in more WE SAY, HOW WE
detail.
DEAL WITH PEOPLE,
5. Identify the affected parties
a. Who are the individuals, organizations and
AND GENERALLY, IN
key stakeholders affected? THE WAY WE LIVE
b. In what way are they affected?
c. Are there conflicts between different OUR LIFE.
stakeholders?
d. Understand the effects of non-action to the
organisation, to yourself and to society. IMPLEMENTING PROFESSIONAL
ETHICS AT THE WORKPLACE
6. Possible course of action - internal and
external escalation The Guidelines and the Codes provide us the
a. Escalate internally; consider grievance rules and regulations. However, practical
procedures. implantation of these guidelines in the workplace
b. Document every action you take to resolve requires our own judgement. We have to apply
the conflict. these considering many practical factors. The
c. Escalate externally to auditor, legal advisors, starting point would be to develop good work
professional body. ethics.
Our personal values, and the way we act
7. Seek professional or legal advice according to them, are our ethics. Our ethics are
a.Your internal whistle-blowing or speak up displayed in what we do, what we say, how we
helpline. deal with people, and generally, in the way we live
b. Legal advisors. our life. The following are some of the ways we
c. CIMA ethics helpline: free to members and can demonstrate good ethics in the workplace:
students.
1. Maintain personal dignity by wearing proper
clothes, using proper language, and practicing
8. Refuse to remain associated with the
good manners.
conflict
a. If resolution seems unlikely, disassociate 2. Be sincere and competent in your work. Make
yourself from the issue - in writing if efforts to improve your efficiency.
necessary. 3. Be punctual. Any changes and delays in
b. Legal advice may be needed if this affects meetings or other programs must be
your employment status or if you are communicated to your counterpart without
implicated in any way with the issue. delay. Always apologize for unintentional and
unavoidable delays.
4. Be courteous and respectful to superiors; and
polite and gracious to your subordinates. Be
sensitive and considerate of other people.

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5. Be honest in your financial dealings. Do not
use company resources for your personal RISK OF WEAK ETHICS AND
purpose. Do not accept bribes from, or get INTEGRITY
into any private deals with company clients Holding a position of power without having
and suppliers. Do not inflate expenditures or strong ethics and integrity makes us vulnerable to
submit fake documents. Do not tamper with many temptations, which, in the worst case
the accounts. scenario, may lead to fraud and corruption. In
6. Be pleasant and positive in your relationship this context, we refer to certain findings of the
with your colleagues. Be a good team player. 2014 Global Fraud Study entitled "Report to the
Appreciate other people's achievements, and Nations on Occupational Fraud and Abuse"
do not be jealous. Offer constructive conducted by the Association of Certified Fraud
criticism and recommendations, only if Examiners (ACFE), the largest Anti-Fraud
considered necessary and appropriate. organization in the world. Some of the findings
Encourage and help others to do their best. were as follows:
7. Accept criticism in a sporting manner. Pay 1. 42% of occupational frauds were committed
attention to valuable advice and constructive by employee-level perpetrators, 36% by
criticism, and make efforts to improve Managers, and 19% by owner/executives.
yourself. 2. It takes about 12 months to detect a fraud
8. Do not avoid responsibilities, and dump your committed by an Employee, frauds committed
work on others. If any of your colleagues has by Managers remain undetected for as long as
shared your work in case of an unavoidable 18 months.
emergency, be thankful, and return the favour 3. About 50% of the perpetrators of fraud were
some other time. within the age limit of 36-50 years.
9. Do not participate in office gossip. Do not try 4. A fraudster's tenure with his or her employer
to victimize anyone else. Do not pry into, or tends to have a strong correlation with the
interfere in the personal affairs of other size of the fraud. Individuals who have
people. worked for an organization for a long time
10. Make an effort to preserve the dignity of might engender trust from their co-workers
another. Keep confidences and maintain or supervisors, which can mean their work is
confidentiality not reviewed as closely as it should be. Long-
11. Do not try to take credit for other people's term employees might also be more familiar
achievements. Do not try to steal other with an organization's anti-fraud controls -
people's ideas. and the gaps in those controls.
12. Honour your commitments to the company, 5. Perpetrators with a university degree caused
colleagues and the clients. Be loyal and do median losses that were twice as high as
not try to sabotage the reputation of your those with only some university education,
company, its products, and its employees. If and two-and-a-half times higher than those
you have access to confidential information, with high school degree or less.
the company may require you to sign a non- 6. There were seven departments that each
disclosure agreement. Do not violate the accounted for 5% or more of all fraud cases:
agreement. Accounting, Operations, Sales,
13. Remember that you are responsible for the Executive/Upper Management, Customer
work performed by your subordinates, so Service, Purchasing and Finance. The
review their work carefully, and accept department with the greatest incidence of
responsibility if any mistakes are discovered. fraud was Accounting.
Take corrective action promptly.
14. Be aware of situations which may cause BRINGING A CHANGE IN THE
conflict of interest, e.g a close relative is an WORKPLACE
applicant for a position, and you are one of With a sound background in professional
the interviewers, or a close relative has education, and awareness of professional ethics,
submitted a bid where you are the evaluator. the management accountants can bring a positive
Make proper and timely disclosure, change in the organizations they work for. They
voluntarily. should lead from the front in creating an ethical

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environment. They may achieve this by the
following means:

❏ Formulate a Code of Ethics and Code of

Conduct
❏ Ensure that the existing employees and
new joiners are aware of the Code
❏ Hold periodic training on Code of Ethics
❏ Establish a sound screening system at the
time of recruiting employees
❏ Establish a system of risk assessment for
fraud and corruption
❏ Be alert about the red flags of corruption,
fraud and other malpractice
❏ Establish a reporting system
(Whistleblowing / Hotline)
❏ Make sure that the information received
from whistleblowers are verified,
discreetly, take adequate follow up action,
and ensure that nobody is reprimanded or
punished without proper evidence

CONCLUSION
As members of a respectable and honourable
profession, as responsible members of the society,
and most importantly, as parents and heads of
families, it is essential for us to be constantly
conscious to maintain our professional integrity
and ethics. Lack of ethics has far reaching impact,
as Mr. Vinod Rai, former CAG of India has said in
his book Not Just An Accountant:
"History is witness to the fact that any dilution of
morality has eventually led to degeneration of societal
values, pushing the country into a quagmire from
which it takes ages to emerge. In fact, any ethical
lack leads to inefficient or even bad governance. As a
direct and immediate consequence, economic growth
bypasses the poor, and we fail to reap the full
potential of development. "

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