Ethics in action: Misleading reporting

What’s a management accountant to do when faced with pressure to fudge the numbers?
Ethics in action: Misleading reporting

The modern workplace can be an ethical minefield. This new monthly column helps you tackle the thorny, but very real, challenges that management accountants face in the workplace.

Written by the CIMA professional standards team and based on realistic situations, the following is a practical guide to using the CIMA Code of Ethics to guide good decision-making.

The scenario

You are the finance director at a business with 500 employees. The company has been under a lot of pressure recently, and everyone knows that it’s important for the future of the business that the annual report shows a healthy financial performance. The CEO approaches you and tells you that you should leave a large outgoing bill off this year’s report and include it next year; the report goes out on 20 March, so it’s only moving the bill back by a couple of weeks. The CEO informs you that a poor financial outlook could threaten jobs at the company, including your own.

Ethical issues and guidance

The CEO is asking you to produce misleading reports and if you were to produce the report in the way the CEO has asked, falsely moving a bill into the next financial year, you would be in breach of the Code of Ethics.

Producing the misleading reports would also create a major risk to the company. It would be fraudulent, and the company could face legal action if discovered.

You should raise these points with the CEO and explain that you are not able to move the transaction into the next financial year. When explaining the reasons you cannot produce the report as you have been asked, you could frame it in terms of risk to the company. This will help the CEO to understand the danger of the misleading reporting. There may be procedures or protocols within the company which direct how reports are created that may support your arguments. Equally, you should highlight the fact that you are a CIMA member and therefore are bound by the Code of Ethics, which prohibits producing false or misleading statements.

All CIMA students and members must follow the Code of Ethics. The section on Integrity can offer guidance in this situation.

Specifically, Section 110.2 states:

“A professional accountant shall not knowingly be associated with reports, returns, communications or other information where the professional accountant believes that the information:

(a) Contains a materially false or misleading statement;

(b) Contains statements or information furnished recklessly; or

(c) Omits or obscures information required to be included where such omission or obscurity would be misleading.”

The CEO’s comment about your job potentially being at risk if you do not do what they have asked could be intimidation. Section 100.12 of the Code covers threats, and states that intimidation is:

“[T]he threat that a professional accountant will be deterred from acting objectively because of actual or perceived pressures, including attempts to exercise undue influence over the professional accountant.”

If you do feel that the CEO is putting pressure on you, you should consider using a speak up or whistle-blowing hotline if you are being threatened or coerced into acting unethically.

Throughout the process, there are some practical steps you can take to protect yourself and help you make the right choices. You can use the CIMA Ethics checklist to help guide you towards making the right decision. It is always a good idea to keep a record of everything you are asked to do. If you have a conversation with someone, reflect this conversation back to them in an email so you have a written record.

Ultimately, it may become necessary to disassociate yourself from the situation, which may mean walking away. It is important that you do not become involved in the unethical behaviour, as you could face disciplinary action from CIMA and potentially legal action if the fraudulent reporting were discovered. You may feel it is necessary to take legal advice and report the company to the relevant authorities.

If you decide you would like further guidance on the CIMA Code of Ethics, you can get in touch via the Ethics inbox or helpline, where CIMA staff will be able to guide you towards specific sections of the Code of Ethics. All the contact information can be found here.

The guidance above is based on the current CIMA Code of Ethics, which applies until 31 December 2019. From 1 January 2020, an updated Code of Ethics takes effect. More information including the new Code is available online now.

Bryony Clear Hill is the associate manager–Ethics Awareness for CIMA and is based in the UK. To comment on this article or to suggest an idea for another article, contact Drew Adamek, an FM magazine senior editor, at