Lecture 3
Core Values of the
Accounting Profession
Core Values
• Auditing and other traditional services have become mature
products.
• Value is migrating upstream to higher level services.
• Competition from non- ICAN (ACA) for example is increasing.
• There are more competent non-ACAs performing financial
advisory and other higher level services.
• Information technology has changed the environment in which
ACAs work.
• IT has become a source of competition, but it has also vastly
expanded business opportunities for ACAs.
Being Professional
While a definitive set of ‘professional characteristics’ has
proved elusive, most scholars agree that:
‘Professions are supposed to be groups of individuals who
come together because they ascribe to a common set of
values and have a general consensus about ho to promote
those values within society’ (McPhail & Walters, 2009)
Professions are characterized by:
a knowledge base
a commitment to public service
independence, and
education as opposed to training
Being Professional
• These characteristics will be express both through attitudinal
dispositions and structural configurations (Walkers, 1991;
Downie,1990).
• Frankel (1989) sums up the strongly ethical nature of
professions:
• Develop social and moral ties among their members who
enter into a community of common purpose. A profession can
be conceived as:
– ‘A moral community whose members are distinguished as
individuals and a group by widely shared goals and beliefs about
the values of those goals …. about the appropriate means of
achieving them, and about the kinds of relations which in general
should prevail among themselves’
The Five Core Values
• Integrity
• Competence
• Commitment to excellence
• Continuing education and life long learning
• education
Ethical Characteristics
• The three of the more obviously ethical
characteristics normally associated with being
professional in the context of accounting
• The public interest and self-interest
• Independence, and
• Codes of professional conduct
The public interest and self-interest
• The accounting profession does claim to be
operating in the interest of the public.
• Public interest claims were at the heart of the
profession’s efforts in securing professional Charter.
• In the UK, Royal Charter (Sikka et al., 1989)
• In Nigeria,
– ICAN Charter, ICAN Act 1965
– ANAN Charter, ANAN Act 1993
– CITN Charter, CITN Act 1992
The public interest and self-interest
• For example, ICAEW stated:
– ‘The furtherance of the aforesaid objects would be facilitated and the public
interest served’
• Institute of Chartered Accountants of Scotland makes reference to the
organisation:
– ‘being desirous of furthering…. and serving the public interest’
• The American Institute of CPA’s code of professional ethics states that:
– ‘CPA’s should act in a way that will serve the public interest, honour the
public trust and demonstrate commitment to professionalism’
• It is a claim that continues to be reiterated.
• The accounting profession therefore claims that what it does is good,
not for a specific group of investors or companies, but for society in
general. But in what sense?
Independence
• The characteristics of independence is closely related to the idea of
public interest.
• Independence is the first rule in most professional code of practice.
• It is ‘the key ethical concept’ (Claypool & Colleagues, 1990).
• Yet when the profession talks about professional independence, the
discussion is generally restricted to thighs like:
– Single client dependency
– Non-audit services, and
– Separation of business and professional relationship (Likerman,
1998).
• This narrow conception of independence, although an important
ethical issue, has often lacked substance (Bruce, 1996).
Independence
• The demise of Enron and Andersen’s indicates both that auditor independence
is a critical issue and that much of the pre-Enron discourse surrounding
independence may have lacked substance.
• The provisions of the Sarbanes-Oxley Act, implemented partly in response to
the Enron debacle, similarly construes audit independence as a structural issue.
• Yet while the enforced rotation of audit partners and restrictions in certain non-
audit services may be important, they do little to develop the profession’s
capacity to identify intellectually and engage critically with the idea of
independence
• Nor do they help individual accountants ethically manage often subtle and
complex conflict of interest in specific circumstances.
• This is because the notion of independence is vastly wider and more ethically
challenging than maintaining an arm’s-length relationship with clients. It is
broader than client independence.
Independence
• Scholars have argued that:
– Because the financial reporting function is based on
property rights, it therefore serves the interests of capital
providers within a free-market model.
– Accounting is therefore, not independent in its present
form, but is biased towards a particular set of values.
Regardless of whether these are good or bad values, given
its current function, it makes sense to talk of independence
of accounting only in a bounded sense.
Professional Codes of Conduct
• You cannot be a profession without a code of professional ethics (Abbott,
1988).
• A key characteristic of a profession is its self-regulation by code of ethics
(Claypool & Colleagues, 1990).
• While these codes are generally associated with a compliant-based
enforcement system where members are encouraged to report misdemeanours,
the evidence suggests that professionals are generally reluctant to report
breeches by their fellow practitioners (Beets & Killough, 1990).
• Some other scholars have suggested that:
– Rather than serving the public interest, codes of professional ethics have tended to
serve the interests of the profession (Preston et al., 1995; Jamal & Bowie, 1995).
• Others were of the view that:
– The code of practice and its associated ‘practice-monitoring program’ represented a
specific attempt to address growing public concerns over substandard audit work
(Huff & Kelly, 1989).
Professional Codes of Conduct
• Most of the professional accounting institutes’ ethical guidelines find
expression in both principles and rules. For instance, CIMA’S by -
laws, which warn members against ’dishonourable or unprofessional
conduct. Its ethical guidelines require accountant to:
– ‘Refrain from any conduct which might bring discredit to the profession’
• The ACCA requires accountants to:
– Refrain from …… misconduct which……. [is] likely to bring discredit to
themselves, the association or the accountancy profession’
• Similarly, the ICAN states that:
– Chartered Accountants should observe and comply with the ethical
requirements of the code.
• These implicit rules, by comparison, are derived societal expectations
in relation to the professional’s role in society.
Professional Codes of Conduct
• Therefore, the issue is the way in which ethical dilemmas are negotiated, not the
specific values themselves.
• While a considerable amount of time and effort has been expanded on discussing and
developing codes of ethics, other empirical evidence seems to suggest that they often
have little practical impact on professionals anyway.
• Accountants working in business, suggest that accountants drew more on factors in
their business environment to help with ethical decision-making rather than the
resources offered by their profession – i.e informal organizational climate; for
example immediate boss, company culture, and so on.
• It is interesting to note the ay codes of professional conduct have changed over time.
• Yet there has been something of a renaissance in the ideals of professionalism
recently.
• Enron, WorldCom and Parmalat have caused us to reflect again on the important,
informal function that professions play within society and he economic system in
particular.
ICAN Members’ Code of Conduct
• ICAN issued ‘members’ Code of Conduct’ for
entry and existing membership of the Institute.
• This document articulate the:
– Knowledge
– Skill
– Professional values
• That new ACAs need to have in order to
successfully face the challenges of today’s
changing environment and the future.
Knowledge
• General knowledge
• Organisational and business knowledge
– Administration capability and efficiency
– Decision modeling
– Risk analysis and management
– Measurement
– Industry/sector perspective
• Information technology knowledge
• Accounting Knowledge
