There has been a lot in the media recently about Artificial Intelligence (AI). One of the most difficult tasks for any AI designer will be to replicate the ability to place ethical considerations into the decision- making process. Whilst this might be easier for certain aspects such as determining compliance with a set of rules on auditor independence it will be much trickier in other areas where a real understanding of the circumstances, and possible available courses of action, is required. In order to assist members faced with such dilemmas the following ethical decision making framework has been provided.
This ethical decision making framework gives general guidance only and should not be relied on as appropriate or comprehensive in respect of any particular set of circumstances. It is recommended that users consider seeking further legal or other professional advice in relation to any specific circumstances.
No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the authors or the publisher.
All rights reserved. This ethical decision making framework may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, with appropriate acknowledgement of the publisher.
Often the most difficult action is recognition that you have an ethical dilemma. Once recognised or identified you can start to determine the course of action. Does something not feel right? Is there a potential conflict of interest? Are
you being asked to do something you are uncomfortable with? Would you be happy to defend your actions? Is there any reason you should not do what is being proposed or considered? Do you have an interest in the proposed action, or will you benefit from it occurring? Are you undertaking an audit in the UK? Comply with the requirements of the Financial Reporting Council's Ethical Standard. Part 4A of the 2020 Revised
and Restructured ICAS Code of Ethics (“2020 Code”) deals with independence in relation to audit and review engagements. However, this is redundant from a UK perspective as auditors in the UK have to comply with the FRC's Ethical Standard. There is no requirement to also comply with Part 4A of the Code. Do you have an ethical dilemma?
Does your ethical dilemma relate to independence on an audit or other type of assurance engagement?
Are you undertaking an overseas audit?
Comply with Part 4A of the 2020 Code.
Are you undertaking an independent examination of a charity?
You are specifically scoped out of the requirements of Part 4A of the 2020 Code.
Comply with the independence requirements of the respective charity regulator (section 280 of the 2020 Code).
Are you undertaking a review assurance engagement?
Comply with Part 4A of the 2020 Code (taking into account the fundamental principles)
Are you undertaking an assurance engagement which is not an audit or review engagement?
Comply with Part 4B of the 2020 Code (taking into account the fundamental principles)
Ascertain all the facts to the extent they are available
A professional ethical judgement can only be made once all relevant information has been collected and analysed.
- Determine the parties involved or likely to be affected
- Read all relevant documentation, including contracts, agreements, correspondence, etc .
- Identify if there are any related or linked matters which need to be considered
- Consider the uncertainties and how some of these might be removed
Consider the five fundamental ethics principles in the ICAS Code of Ethics
The ICAS Code of Ethics (“the Code”) applies to all members of ICAS, affiliates, students, employees of a member firm or an affiliate, and member firms.
The Code establishes the five fundamental principles of professional ethics for all professional accountants:
- Integrity
- To be straightforward and honest in all professional and business relationships.
- Objectivity
- Not to compromise professional or business judgements because of bias, conflict of interest or undue influence of others.
- Professional Competence and Due Care
- To: (i) Attain and maintain professional knowledge and skill at the level required to ensure that a client or employing organisation receives competent professional service, based on current technical and professional standards and relevant legislation; and (ii) Act diligently and in accordance with applicable technical and professional standards.
- Confidentiality
- To respect the confidentiality of information acquired as a result of professional and business relationships.
- Professional behaviour
- To comply with relevant laws and regulations and avoid any conduct that the professional accountant knows or should know might discredit the profession.
Failure to follow the Code may lead to a professional accountant becoming liable to disciplinary action.
Is there a specific section within the Code which relates to your scenario?
The 2020 Revised and Restructured ICAS Code of Ethics is divided into the following parts; but any of them may be useful in relevant circumstances:
- Guide to the Code – non-authoritative guidance on how the Code is structured and how to use the Code
- Part 1 - Complying with the Code, Fundamental Principles and Conceptual Framework - applicable to all Professional Accountants (Sections 100 to 199)
- Part 2 – applicable to Professional Accountants in Business (Sections 200 to 299)
- Part 3 – applicable to Professional Accountants in Public Practice (Sections 300 to 399)
- Part 4 – International Independence Standards:
- Part 4A – Independence for Audit and Review Engagements (Sections 400 to 899).
- Part 4B – Independence for Assurance Engagements Other than Audit and Review Engagements (Sections 900 to 999).
- Part 5 – applicable to Insolvency Practitioners
The use of the word “shall” in the Code imposes a requirement to comply with the specific provision in which “shall” has been used.
- Do not simply “tick the boxes” – challenge yourself from all directions.
Does your ethical dilemma relate to tax?
Does your ethical dilemma relate to insolvency?
Are there any legal or regulatory requirements that must be complied with?
These will be jurisdictional specific. For example, in the UK:
- Anti-money laundering legislation;
- Refer to ICAS anti-money laundering page
- and CCAB Anti-money Laundering Guidance
- The Bribery Act 2010
- Refer to the ICAS publication - A Common Sense Guide to the Bribery Act
- The Companies Act 2006
Look to other available authoritative accounting texts for additional guidance
Have you considered your responsibility to the public interest?
Professional accountants have a responsibility to take into consideration the public interest and to maintain the reputation of the accountancy profession. Personal self-interest must not prevail over those duties.
Consider:
- Who is your client?
- Who are the key parties who can influence your decision?
- Who will be affected by your decision? Please note that there is a need to consider all potential relevant stakeholders.
- Is your public interest at local, regional, national, or global level?
- Are there geographical or cultural issues which need to be taken into consideration?
- Is there a “social responsibility” aspect which needs to be taken into consideration?
- Is your advice or work uncorrupted by self-interest and not influenced by the interests of other parties?
- Is your decision “fair” and “balanced”?
- Could you justify your decision to others?
- What could be the “reasonable and informed public perception” of your actions? (para 120.5 A4 Code of Ethics)
- How could the repercussions from your decision affect your personal or corporate “brand”?
- What could be the reputational damage caused by your involvement with your client, or the outcome of your decision?
Are there reporting or tipping off requirements that need to be considered?
Is there an internal reporting mechanism?
Is there a corporate Code of Ethics?
Is there approval/escalation procedures that have to be endorsed, for example, by the audit committee or board?
Is there an internal whistleblowing policy/Speak Up policy?
Are there reporting or tipping off requirements that need to be considered?
Refer to the ICAS Anti-money laundering page
and the CCAB Anti-money Laundering Guidance.
Consider (where possible) discussing with a member of your professional network or ICAS
It may be useful to discuss your dilemma with someone that you trust. However, please ensure adherence to the ethical principle of confidentiality and consider any "tipping off" requirements that may be applicable.
Allow sufficient time to consult.
ICAS contacts:
ICAS Technical Helpdesk
Alternatively, members with a query on the Code of Ethics which is not audit/assurance related may also contact the Institute at or by telephone on + (44) 0131 347 0271.
For the Institute’s money laundering helpline, telephone +44 (0)131 347 0100. The Institute provides guidance on general issues concerning the regulations e.g. the extent of identification procedures required, and also guidance for specific instances.
Make your decision and document your decision making process
Make your decision:
- Consider and assess the range of alternative courses of action.Identify any self- interest and conflicts of interest to ensure the objectivity of the judgement. Consider the possibility of bias in the judgement process and reassess the judgement as appropriate.
- Ensure that you act ethically when making your decision and are not subject to undue pressures.
- Consider whether your proposed course of action is one which you would be happy to defend against any possible reputational risk.
- Inform the client, or relevant parties, of your course of action (being alert to any “tipping-off” requirements)
Document your decision making process including:
- An overview of the issue.
- Relevant ethical standards/Codes considered.
- The final judgement made/decision reached.
- Information known at that point in time.
- The timing of the decision.
- The alternative options considered and why the final solution was chosen and the reasons the other options were discounted.
- Any uncertainties in the decision.
- The process followed in making the decision: sources used and relied upon, discussions held and with whom and date of the decision.
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