Common characteristics of the accounting ethical principles among IMA, AICA and CIMA
Accounting and auditing information is used for decision making by internal and external users like managers, shareholders, government, potential investors, investors, capital lenders among others. This raises the need for accountants to act with a high level of professionalism and uphold acceptable accounting ethics. Realising this important role played by accountants, international and national accounting bodies have developed accounting professional ethics which their members are expected to respect always. Failure to comply leads to harsh punishments from these bodies. AICA, IMA and CIMA, are management accounting bodies which require their members to uphold some ethical characters in the way they conduct their affairs (Institute of management accountants official website, 2010). Though the wording used may be different, they have the same fundamental background. The following are common ethical principles required by all the three bodies;
Competence
Before someone is registered as a member of any of the organisations, one must have attained a certain minimum level of education and professional training. This forms the entry point. There are changes in the accounting field initiated by local policies like finance bills (mostly on matters relating to taxation) and international bodies like International accounting bodies (IFRS and ISA). For competency, an accountant is expected to be up to date with such changes. An example of a change in international accounting standards is the change in new ways of accounting for SMEs in 2008 and change in accounting for leases (ISA 17) in 2010. A member of these bodies must be up to date with such changes. Furthering one’s education and practicing is highly recommended as it increases competence (Institute of management accountants official website, 2010).
Integrity and professionalism
Management accountant report is used by both external and internal customers; the three bodies require their members to act in a professional manner and uphold integrity. When reporting, he is expected to report the case as it is and maintain an ongoing concept of accounting. He should be honest and manage finances effectively. The three bodies emphasis that an accountant should be acting for the interest of the general public and thus he has a task to give the true standing of a company (The chartered institute of management accountants official website, 2010).
Confidentiality
Management accountants have access to crucial and sensitive company’s information. Some of these information can be used by competitors to outdo an organisation or cause panic to the public especially investors. This places a burden of confidentiality on accountants. When determining what to disclose and what not to, management accountants are expected to be guided by international accounting standards and reporting standards. The need for confidentiality is to avoid insider dealings.
Credibility
A management accountant is expected to be creditable and can be accountable for all his actions. He should not perform duties which he is aware that he is not qualified to perform or offer misleading advice or limited advice as per his level in an organisation. When called upon to act against his professionalism, he should have the courage to say no and keep his integrity intact. When working, he should ensure that there is no conflict of interest and does his things in a straight forward way. Need for annual membership renewals is seen as a move towards ensuring that there the bodies control their members conduct. If a member has had ethical issues, there are suspended or their membership withdrawn all together (The chartered institute of management accountants official website, 2010).
Resolution of Ethical Conflict and due Care
Many are the times that management accountants have information that can injure a company or one that can be of great assistance to the public. When faced with such a challenge, he should always act in the best interest of stakeholders. This calls for his independence and need not to bow to pressure from either his company or the public. He should make high standard decisions and should not knowingly cause a company trade whilst insolvent. when it comes to statutory requirements like making tax returns, he should ensure that the legal requirements of the nation he is working in are complied with; compliance is in terms of giving correct information without being late (American institute of certified public accountants official website , 2010).
Main aspects of ethics in management accounting in my local organisation (let’s call it Company A)
Accounting is part of the whole organisation, thus for the department to be able to uphold high ethical standards, the environment it is operating in should be favourable, despite the fact that conditions are favourable or not, management accountants should uphold ethical behaviour. Each organisation has an organisational culture which acts as an unhidden force which controls business conduct. To have a strong organisational culture the organisation should;
- Develop a code of conducts/ethics to be followed by all staffs
- Develop mechanisms to monitor and train all employees on ethical expectations that the company expects from them
- Monitor adherence to the ethical code and
- Review the codes effectively.
In accounting, the start point should be internal controls as support for ethical conduct. There should be checks and balances kept to ensure that controls are affected. When recruiting accountants, human resource department recruiting team should ensure that they employ accountants who uphold ethical conducts, to get such people, Company A should recruit members from recognised accounting bodies and those that go a step further by monitoring the conduct of their members. Interviews should be skewed to gauge the level of integrity of a potential employee. Psychometric tests should be embraced in company A.
After deployment, an employee should be given at least a six months probation period where during this time, he is monitored closely. In case he is found to have unethical conducts, he should be dismissed from a company immediately. Periodical integrity tests should be undertaken without the knowledge of staff mostly the accounting staffs to ensure that if there was an employee who had started being reluctant is known and kept on his/her toes.
To uphold good behaviour in an organization, it is always good to motivate employees. Company A, as a whole or accounting department, should devise means to motivate employees to uphold ethical conduct. These motivational methods include having an integrity ambassador for the month or the year, paying subscription fees on behalf of their employees, making integrity and upholding of high ethical conduct as parameters in employees appraisal among other motivational methods.
When contracting external auditors, Company A should be guided by internal accepted contracting mechanisms and ensure that it contracts qualifies auditors with a good track record. Before contracting it is important to consult registrar of companies for advice whether a particular company is a listed company and if in the past it has had ethical issues. The company should also avoid contracting “freelance” auditors but go for recognised companies.
In the modern technologically advanced world, computers are increasing being adopted in accounting. There are sophisticated software, these include quick books, Sage, Paste and sun system. There are both commercial and others are internally developed. Company A should embrace a system which will work for its benefit. The system may be commercial with adequate checks and balances or the company can contract and IT expert to develop one. This will increase accountability in the accounting staffs since when one does a thing, the system records. Passwords should be used to limit access and control access of people.
Data in an organisation has different levels of confidentiality and sensitivity. Despite having an accounting department working as a team, the company should have a level of confidentiality with some information. These information may land in the hands of internship employees or people on attachments and used against the organization.
The accounting fraternity is changing rapidly; to keep up this pace, the organization must participate by giving its employees the exposure they deserve. For example in case there is a change in taxation policies, the government calls for public awareness policies which may be at a cost. The company should pay for all or representatives to such seminars to ensure that they develop knowledge. Internationally, there are sensitization programs conducted by international accounting bodies; the company should ensure that their accounting staffs have access to such programs to retain their competence. Knowledge management is another tool that the company should employ. This is to ensure that intellectual asset that the company have is maintained. Maintain experienced employees calls for deliberate actions and they should be undertaken accordingly.
References
American institute of certified public accountants official website. (2010). Web.
Institute of management accountants official website. (2010). Web.
The chartered institute of management accountants official website.(2010). Web.