Ethics in professional accounting is of the utmost importance. Now that the business and financial world is adopting international accounting and auditing standards, it is increasingly necessary to adhere to a certain Code of Ethics prescribed by national and international accounting bodies. Before arguing for the topic, let’s take a look at a few basics:

Profession

A profession is an occupation that requires extensive training and the study and mastery of specialized knowledge, and generally has a professional association, a code of ethics, and a certification or licensing process; for example, engineering, medicine, social work, teaching, law, finance, military, nursing and accounting, etc. Classically there were only three professions: military, medicine and law. Each of these professions adheres to a specific code of ethics, and members are almost universally required to take some form of oath to uphold that ethic, thus “professing” a higher standard of responsibility. Each of these professions also provides and requires extensive training in the meaning, value and importance of your particular oath in the exercise of that profession.

Accountant

Practitioner of Accountant is known as Accountant. Qualified Accountant, Bookkeeper, Professional Accountant, or Practicing Accountant is a legally certified accounting and financial expert. Accountants not only work in public practice, but many of them work in private corporations, in the financial industry, and in various government agencies. Accounting (profession) or accounting (methodology) is the measurement, disclosure or provision of assurance on financial information that helps managers, investors, tax authorities, lenders and other interested parties and decision makers to make decisions about resource allocation and decision making. decisions.

Like many other professions, there are many professional accountancy bodies around the world. Some of them are legally recognized in their jurisdictions, such as British Chartered Accountants, including Chartered Certified Accountants (ACCA or FCCA), Chartered Accountants (CA, ACA or FCA), Canadian Chartered Accountants, and Certified General Accountants (CA or CGA) . and US qualified accountants, such as Certified Public Accountants (CPAs), etc. Some other legal and non-legal accounting qualifications are Certified Management Accountant (CMA), Associate Cost and Management Accountant (ACMA), Certified Financial Analyst (CFA), and Certified Fraud Examiner (CFE), etc.

In Pakistan, the Pakistan Institute of Chartered Accountants is the only accounting and professional body entitled to grant the designation of Chartered Accountant. ICAP is a member of IFAC (International Federation of Accountants, IASB (International Accounting Standards Board), Confederation of Accountants of Asia and the Pacific (CAPA) and Federation of South Asian Accountants (SAFA). Data as of 1 2007.

Role of professional accountants:

Accountants are independent business advisers. Accountants can offer a wide range of services. Accountants can be registered auditors, can configure client accounting systems, can be tax planning advisors or fraud and embezzlement detectors, can perform financial statement and budget analysis, advise clients on financial decisions, provide specialist knowledge, and can help maintain an ethical environment.

After discussing the basics and role of professional accountants, we are in a better position to reflect on what professional ethics is and why it is important in the field of accounting.

Definition of ethics

The word “ethics” is derived from the ancient Greek word ethikos; means customs and habits. An important branch of philosophy that is the study of the values ​​and customs of a person or group and covers the analysis and use of concepts such as good and evil, good and evil, and what should and should not be do.

Ethical code:

In the context of a code adopted by a profession or by a government organization to regulate that profession, a code of ethics can be defined as a code of professional responsibility, which can dispense with difficult questions about what behavior is “ethical”. A code of ethics is often a formal statement of the organization’s values ​​on certain ethical and social issues related to the profession and the practice of professional knowledge. This also includes the principles and procedures for specific ethical situations.

Ethics in Professional Accounting:

The general ethical standards of society apply to people in professions such as medicine, law, nursing, and accounting, etc. as much as anyone else. However, society places even higher expectations on professionals. People need to have confidence in the quality of the complex services that professionals provide.

Ethics in the accounting profession is invaluable to accounting professionals and those who rely on their services. Stakeholders, including clients, creditors, governments, tax authorities, employees, investors, the business and financial community, etc., perceive them as highly competent, trustworthy, objective and neutral. Therefore, professional accountants must not only be well qualified, but also possess a high degree of professional integrity. Due to these high expectations, professionals have adopted codes of ethics; also known as codes of professional conduct. These ethical codes require that their members maintain a level of self-discipline that goes beyond the requirements of laws and regulations. Each of the major professional accountancy associations has a code of ethics.

As mentioned above, professional accountants can be of two types. Who works in firms or independently manages those firms that provide accounting, auditing and other advisory services to clients; these are called public practitioners. Others are those who are employees of organizations and may serve as internal auditors, management accountants, financial managers, and financial analysts. Regardless of the role of accountants, they adhere to the code of ethics that applies to their professional conduct, although there are some special provisions for those who practice public practice. [Reference: Code of Ethics for Professional Accountants-International Federation of Accountants (IFAC)].

International Federation of Accountants-IFAC:

The International Federation of Accountants (IFAC) is a federation of all the accounting bodies in the world. All major national and international associations such as ACCA, AICPA, ICMA, ICAP, IASB, etc. they are all its member organizations. IFAC’s mission, as stated in its constitution, is “the development and improvement throughout the world of an accounting profession with harmonized standards, capable of providing high-quality services in the public interest.” [Ref: Code of Ethics for Professional Accountants-IFAC]. In fulfilling this mission, the IFAC Board has established the IFAC Ethics Committee to develop and issue, under its own authority, high-quality ethical standards and other pronouncements for professional accountants for use throughout the world. The Code of Ethics establishes ethical requirements for professional accountants. A member body or a firm cannot apply standards less strict than those established in this Code.

The objective of establishing this code of conduct is to harmonize these standards and practices in a global perspective. The public can only trust these highly professionals when it is mandatory to observe and follow strict regulations and codes around the world. A Certified Public Accountant is required to comply with the following fundamental principles mentioned in this Code of Ethics:[Ref: Section 100.4 Code of Ethics for Professional Accountants]

Integrity: A professional accountant must be honest and direct in all his professional and business relationships.

· Objectivity: A professional accountant should not allow bias, conflict of interest, or undue influence of others to override professional or business judgments.

Professional Competence and Due Care: A professional accountant has a continuing duty to maintain professional knowledge and skills at the level required to ensure that a client or employer receives competent professional service. A professional accountant must act diligently and in accordance with applicable technical and professional standards when rendering professional services.

Confidentiality: A professional accountant must respect the confidentiality of information acquired as a result of professional and commercial relationships and must not disclose such information to third parties without due and specific authority, unless there is a legal or professional right or duty to disclose it. This information should not be used for personal gain by the professional accountant.

Professional behavior: A professional accountant must comply with relevant laws and regulations and must avoid any action that discredits the profession.

The Code of Ethics defined in the ‘Member Handbook’ for ICAP Pakistan members is in compliance with:

IFAC Code of Ethics and International Auditing Standards

International Accounting Standards

Institute of Chartered Accountants of Pakistan – ICAP

Relevant legislation

[Ref: Members Handbook-ICAP]

This Code of Ethics has discussed in detail the role of Public Accountants in specific situations. For example, there are clear directives on prohibiting the acceptance of gifts, long association with clients, advertising the company name in excess of prescribed limits, withholding the client’s money without a solid reason, disclosure of records of the client (except those that are allowed), the acceptance of the fees offered. per customer that is less than the prevailing market, etc.

After discussing in detail the importance of ethics in the accounting profession, we will conclude with this final note that accounting as a profession is acceptable and relied upon only when the ability to exercise professional judgment is based on a basis of ethics; A professional accountant exercises broad but deep technical excellence and strategic awareness. Only then can the general public trust the integrity of this profession.