In part 2 of this article, Bob Souster looked at how ethical behaviour is promoted. In the final part Bob looks at the practical ways in which ethical standards can be reinforced.

    The role of the regulatory and professional bodies

    Ethical behaviour can be promoted, or even enforced, in several ways.

    If specific unethical practices are considered to be widespread and detrimental to the public at large, a national government or supra-national authority may take action to curtail such practices by making them illegal. The most obvious examples are discrimination in the workplace and selling consumer loans. Many governments have outlawed various forms of discrimination by passing national legislation, and have introduced disclosure requirements at pre-application stage when personal borrowers are considering taking out loans that many not be in their best interests.

    Another example has arisen in the banking profession, where despite the widely reported failings of high profile directors and executives, very few people have been called directly to account. In response to this, new regulations will be introduced in 2016, including the introduction of new criminal offences for the failures of senior bankers arising from recklessness.

    It is not possible to legislate on every matter of concern, however, so professional bodies have a vital role to play in controlling unethical behaviour. Professions are characterised by offering specialist services that are underpinned by certain minimum educational standards. Unfortunately, although it is possible to teach ethics, this does not ensure that those who learn about it will necessarily become ethical as a result. For this reason, most professional bodies set ethical standards to which all their members are expected to adhere. Failure to do so may result in censure or even removal from membership.

    The accountancy profession has to consider ethical issues not only nationally but also in a global context. It is in this regard that the International Federation of Accountants (Ifac) has a role to play. Ifac is a global representative body for accountants, with 164 members and associates from 125 countries.  It develops international standards on ethics, auditing and assurance, education and public sector accounting standards. Under the auspices of Ifac, the International Ethics Standards Board for Accountants (IESBA) develops ethical standards and guidelines. In turn, the work of IESBA is overseen by the Public Interest Oversight Board.

    The Ifac Code of Ethics is available free of charge at It sets out internationally agreed standards, starting with a definition of fundamental principles and going on to elaborate on specific matters relevant to accountants in public practice and accountants in business. When preparing for the FAB paper, it is useful to refer to this code. It is also relevant to several other papers, including F8, P1, P3 and P7.

    Another breakthrough initiative was introduced by the Chartered Banker Institute with its launch of the Professional Standards Board. The board has the support of several major banks, some with an international profile, who have signed up to its Code of Professional Conduct.

    If anything, the banking industry has to fight harder to maintain ethical standards. In terms of the total number of people working for banking organisations, only a tiny percentage are members of professional bodies, and of these institutes, only the Chartered Banker Institute actively pursues an ethics agenda.

    Ethical conflicts and dilemmas

    As the number of human interactions in business is infinite, it follows that professionals will be faced with conflicts of interest and ethical dilemmas that they have to address.

    Conflicts of interest arise from various sources. The individual may be asked to:

    • take a decision on a matter in which the individual has a personal involvement, such as where the person has a family or personal relationship with the client,
    • advise a company that is in direct competition with an existing client, and
    • support two clients who are in competition with one another.

    Individuals should not accept engagements in which such conflicts arise, or even where there is a possibility of such conflicts arising. Members should evaluate the treats arising from conflicts and apply relevant safeguards against the threats materialising. If in doubt, the conflict should be disclosed to the relevant parties.

    Ethical decision taking frameworks

    The Ifac Code offers a framework though which ethical dilemmas may be addressed. When faced with ethical conflicts the decision taker should consider:

    • The facts of the situation
    • The ethical principles involved
    • Related fundamental principles
    • Relevant internal procedures
    • The alternative courses of action
    • Consequences of each alternative course of action.

    Tucker proposes a simple set of five questions that should be asked when faced with an ethical issue:

    1. Is it profitable?
    2. Is it legal?
    3. Is it fair?
    4. Is it right?
    5. Is it economically and environmentally sustainable?

    However, it is sometimes difficult to differentiate between ‘fair’ and ‘right’. However, this can be an important distinction. In 2013 the Greek government enacted some measures that would create immense difficulty for the Greek people, including reducing the tax-free income tax allowance to less than half of its value only four years earlier. The prime minister of Greece conceded that they measures would rightly be seen as unfair by many low income earners, yet at the same time stated that it was right to implement them as there war little option other than to do so if Greece wishes to remain in the eurozone.


    Ethics is not an easy subject but one that has become critically important in a business environment in which failure to adhere to proper standards can have a devastating effect on organisations, investors, suppliers, employees and, of course, customers. Looking back over the last 25 years, there have been several high profile corporate scandals that have all involved the human ethical failings to some degree. They include Enron and WorldCom in the USA, Parmalat in Italy and Maxwell Communications, Polly Peck and Barings Bank in the UK.

    Arguably, the revolution in information communications technology has meant that more people know about these issues, and more quickly than ever before, and that such events are nothing new.  Perhaps this is one of the very reasons why professions must constantly reaffirm their commitment to ethical values and high standards of moral behaviour.

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