The Institute of Management Accountants is commemorating Global Ethics Day by highlighting the work it’s been doing to improve ethics for accountants, while acknowledging that more needs to be done.
The organization has been operating an online IMA Ethics Center where members can find continuing professional education courses, information about ethics case study competitions and a statement of ethical professional practice. Global Ethics Day is an annual event on Oct. 20 initiated by the Carnegie Council for Ethics in International Affairs that’s been around for seven years.
The accounting profession has long promoted ethical conduct, and groups such as the American Institute of CPAs, the International Federation of Accountants and the International Ethics Standards Board for Accountants have their own code of ethics or professional conduct. However, widely publicized scandals involving auditing and accounting fraud, as well as persistent calls for greater auditor independence and objectivity, have called attention to the shortcomings of many organizations.
The IMA hopes to raise more awareness of ethics in the accounting profession.
“We’ve got a lot going on with respect to ethics,” said IMA president and CEO Jeff Thomson. “The Ethics Center on our website offers access to educational programs. We’ve made all of our ethics courseware free to members. We’ve got case competitions that we run around the world just to make it real in terms of real-case scenarios, gray areas, actions and things of that sort. We have a committee on ethics that’s been doing incredible work for us over the years in advocacy, education and awareness. For example, they have been working more recently on conflict of interest policy.”
“All IMA members are guided by the Statement of Ethical Professional Practice, which is very much an ongoing commitment to ethics and trust,” he continued. “We try to model appropriate ethical behavior from an IMA brand and reputation perspective. After all, we’re guardians of our brand and reputation. Foundational to our relevance and the sustainability of our profession is trust, ethics, integrity and core values. Before you get to the cool stuff like strategy and digital technologies, it is the hallmark of our profession.”
Accountants can come under pressure to cut corners, but having a written code of conduct can help provide guidance. “There are pressures and the risk of ethical violations, whether it’s moving to a digital age, an algorithmic bias or remote work,” said Thomson. “Competition, of course, has always been a part of the fraud triangle. Sadly, incidences of fraud are still fairly high, much higher than we’d want them to be.”
Fraud, when it’s uncovered, often garners the most attention and negative publicity. “Not a week goes by that we’re not reading about ethical lapses within the papers and seeing the impact that has not only on individuals but on organizations,” said IMA CFO Russ Porter. “A lot of people think that accounting is just about tallying up numbers, but there’s an ethical focus in making sure that we’re reporting accurately and with integrity in the numbers.”
Stavros Thomadakis, the outgoing chairman of the International Ethics Standards Board for Accountants, told Accounting Today in a podcast this week timed to coincide with Global Ethics Day, about the challenges faced in setting ethical practices in accounting over the past six years. “Clearly ethics is a very difficult topic,” he said. “There are many challenges, and in order to do our work, we had to navigate many national differences, many rising public perceptions about the duties of accountants and changing circumstances. Crisis, scandals, failures — in short, a complex and dynamic global environment a global standard-setter has to operate within and reach the production of global operable standards.”
The IMA has worked with the International Ethics Standards Board for Accountants and its parent organization, IFAC, on aligning their ethics standards.
“Generally speaking, we’re very supportive of the work IFAC has been doing, especially in their Professional Accountants in Business Committee, where we’re very active members,” said Thomson. “We’re looking at making sure we understand the risks and biases, inherent and otherwise, as we make incredible advances and leaps forward in digital technologies.”
Modern ethics for modern problems
The pandemic has forced many accountants to use technology to operate remotely away from their offices, giving them access to their companies’ financial systems day and night, and making them rely even more on their ethical code of conduct. Various forms of technology can also prompt ethical concerns as the software takes greater control over processes.
“As you get into those advanced topics like strategy, digital implementation and robotic process automation, there are ethics involved even more heavily in those areas,” said Porter. “Algorithmic bias has implications for both the financial profession as well as the greater society. It’s one of the areas where management accountants can lend their skills in terms of control implementations and process auditing in order to help ensure that as organizations implement technologies, they’re doing so without some of the defects that we’ve read about in the application of technologies today.”
Some algorithms can have an unconscious racial bias, as in the so-called “race norming” sometimes used in legal settlements that may lead to discrimination.
“When we talk about algorithmic bias, it’s not something that’s new that’s suddenly developed,” said Porter. “Rather, it’s the application of existing biases into more automated routines. Accountants have always had a responsibility to act ethically and ensure that their work products reflected the ethics of the organizations to which they belonged. As we introduce algorithms that automate the thought process, if people are encoding their biases, either from the standpoint of the design of the project or the base data that gets used to create the algorithms, that can create problems down the road. That’s an area where management accountants can really affect, identify and provide guidance on how to diminish the effect of any biases that are embedded within an algorithm.”
CFOs in particular have taken on a greater role in the technology used by their organizations.
“As our profession has become more connected to the value chain, more interdisciplinary, with respect to operations, IT and data science, it raises the obligation and the opportunity for the CFO and the CFO team to watch those risks very carefully,” said Thomson.
In recent months, the IMA has offered a new course on ethics in the digital age. “It talks about algorithmic and other types of biases that we have to be on the watch for,” said Thomson. “The power of technology and all that it brings with respect to automation and innovation is wonderful. But just like every other phenomenon, there’s opportunity and risk. Who is more appropriately situated in the organization than the CFO?”
He cited the Association of Certified Fraud Examiners’ 2020 Report to the Nations, which estimated a total of 2,500 cases of occupational fraud across 125 countries, and over $3.6 billion in economic losses (see story).
“We’ve got to be vigilant,” said Thomson. “When we do our training, whether it’s ethics training or data security cyber type of training for our staff, we have a very simple catchphrase: ‘Be vigilant, stay vigilant.’”
Education will play an important role in ethics training for accountants. “I can’t emphasize enough the need for ethics education, not just in the academic sphere, but in the workplace as well,” said Porter. “We teach ethics sometimes in academia as a side topic when I think it really should be more integrated into almost all of our courseware in the accounting and finance profession. A focus on ethics throughout an organization and to all employees on a regular recurring basis really does reemphasize the role of ethics within an organization’s culture and how that fits into how an organization operates. I really would love to see an even greater emphasis on ensuring a reiteration and a reinforcement of companies’ ethical principles throughout their organizations.”
A call for feedback
Separately on Wednesday, the IMA opened a public comment period on an exposure draft, “Essential Management Accounting Competencies for All Entry-Level Accountants,” which identifies some of the main management accounting skills needed by entry-level accountants today. The IMA’s Management Accounting Competency Task Force developed the proposal in response to new and emerging technologies, the increased importance of data analytics and the changing role of the professional accountant. The exposure draft identifies the necessary competencies and learning outcomes for entry-level management accountants and suggests course topics on them.
“The management accountant’s role is going through immense change, due to both technological advancements that are rapidly eliminating routine tasks and rising volumes of data combined with more sophisticated analytics,” said IMA Research Foundation Committee chair Raef Lawson in a statement. “Changes to the accounting curriculum at colleges and universities should reflect these developments, regardless of whether students are planning on entering public accounting, industry, or some other field of accounting. It’s crucial that they develop competencies in the areas of strategic management accounting and analysis; revenue, cost and profitability management; technology, analytics and data management; and professional ethics.”